Cost leadership

Porter formulates the general strategies for the value chain of cost leadership and differentiation to reach competitive advantage (Porter 1985, pp. 62-163). These cross-value chain strategies established a principle that competitive advantage can be reached only by managing the entire value chain as a whole including all involved functions. 

These companies have created core capabilities in areas other than production. They have, for example, used superior deal-making and human resources skills to expand rapidly. Moreover, they have focused their businesses by acquiring and merging business units from less focused competitors. With these, they have built up powerful positions in product innovation or cost leadership - hke that of Nova, for example, in polystyrene. 

This industrial demonstration of the Spherizone process prompted commercialization of the technology, which was then made available for licensing to third parties. The development of units with capacities of up to 450 kta, presently under construction, represents a world-scale size for PP plants Spherizone maintains industry cost leadership with the capacity of the Spheripol technology. Up to the end of2007, nine Spherizone licenses, for a total capacity near 3 million ton per year, have been granted. 

Meyer, M., and Lehnerd, A. P. (1997), The Power of Product Platforms Building Value and Cost Leadership, Free Press, New York. 

Overall Cost Leadership,(e.g., total cost reduction, efficient and reliable supply, basic service) versus Differentiation (e.g., unique and value-added service)... 

Table 9.5 provides an overview of the general objectives behind the use of tools and techniques by the managers surveyed. The Table summarises the respondents overall views about why any particular tools or technique was used by making an initial broad distinction between strategic (defined as a choice from the development of uniquely differentiated products, cost leadership advantages or to assist with competitive market repositioning for the firm as a whole) and operational (all other functional process and transactional improvement) objectives. 

It is interesting to note, however, that in the Project/Combined and Project/Services groupings managers did believe that procurement and supply tools could provide them with a strategic competitive advantage, but once again this was primarily focused on cost leadership considerations rather than differentiation or market repositioning. This trend was most evident for Construction (27%) and Oil Gas (35%) in the Process/ Combined and for Media Entertainment (40%) and Tourism Leisure... 

Michael Porter analyzed the successful companies and provided three generic strategies cost leadership, differentiation, and focus. The focus strategy has two variants cost focus and differentiation focus (Porter 1985). 

Cost leadership is the strategy that the company wins in the market by appealing to price-sensitive customers. Michael Porter defined the two types of competitive... 

He regarded A P Company and cornflakes in USA as a typical example the use of countervailing power (Levi 1954). When the rate of the concentration in the food market increases, large food retailer gets to extend price concession from the manufacturers. The countervailing power of downstream company enables low price. The company with high market share can take the cost leadership strategy. 

Sparks (2010) explained about Tesco s transformation. Tesco and other big supermarket got the cost leadership in the UK. We described about Tesco s transformation in Sect. 2. 

Tesco tried to sell the differentiated goods by PB. The distrihutor s margin was reduced by direct dealings with a manufacturer. The manufacturer could have the merit stability of sales volume by PB. Tesco and other big supermarkets got the cost leadership. The market share of big supermarkets (Tesco, Asda, and Siansbury, etc.) as well as the profit rate of those became high. 

The number of PB item orders made by Tesco and Seven-Eleven to manufacturers has been increasing. PB items match consumer demand, and the market share of Seven-Eleven and Tesco has grown rapidly. The penetration of PB items enables a retailer to establish customer loyalty. Tesco and Seven-Eleven got cost leadership and differentiation by PB and the IT. 

The multi-temperature type of warehouse and delivery enables to hold the quality of goods. If the grocery retailer aimed to achieve cost leadership in the retail industry, they had to win a sale competition in the retail indushy. Logistic strategy supported a cost strategy and a differentiation strategy. 

The following generic strategy model by Porter shows that a company either focuses on product differentiation or product cost leadership as a core element. Focus strategies address a niche market and have to distinguish the company from other competitors in the market segment the strategy either makes it a cost leader or differentiates it substantially from competitors in the niche market. 

Porter (1998) USA Strategic Alliances Alliance between firms in response to competitive pressure in order to achieve competitive advantages through low-cost leadership, differentiation or focus strategies... 

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