Best Cost-Leadership Strategy Examples
Cost-leadership does not mean selling inferior and poorly made products and services at the lowest prices. We have seen low-cost leaders with poor quality disappear quickly. Think of the Yugo vehicle that sold in the United States for about $4,000 in the 1980s and the fact the car company left North America in the early 1990’s and then shut down entirely in 2008. An inexpensive car that didn’t have reliability didn’t make it.
Let’s look at a few cost-leaders who understand that their products and services must be good quality at a low price and not just low price. One example is Payless ShoeSource which sells name-brand, high-quality shoes at low prices. They have figured out that people want good quality shoes and they want them at a discount.
Certainly, when discussing cost-leadership you must also look at Walmart which has become the largest company in the world selling low price and high-quality goods. Walmart buys what they sell at the lowest prices due to their high volume and then passing the savings to their consumers. This is an example of a company using economies of scale. Walmart has mastered efficient operations and is able to function with smaller profit margins very well.
In some markets, consumers prefer to pay a little more to enjoy the name brands they are familiar with. Think of Coca-Cola and Budweiser as examples.
Cost-leadership can be an effective business strategy if your company can provide low prices while maintaining good quality.