Cost Effectiveness

9 The Nature and Significance of address-Effectiveness Cost leadership in an attention was identified in chapter 7 as one realizable generic strategy for competing success generousy in a market. Where a firm possesses superior raw material supplies, low- represent plant lifes, more efficient distribution systems etc., this gives it a competitive edge everyplace rival suppliers. Such speak to-effectiveness enables the firm to meet and beat competitors on price. Cost advantages are a crucial factor in markets for `standardized intersections, exhibiting little product differentiation and where contender is primarily price-driven. More specifically, low- hail producers are in a mend position to survive adverse trading conditions such as cyclical downturns in market demand and market main course by new suppliers which tend to exacerbate price competition and in the extreme lead to cut-throat `price wars. More pro-actively, cost advantages may enable a firm to exercise vast influence over its rivals in setting prices, in officially by means of price leadership or more formally by setting prices for a cartel.

Finally, even in markets where product differentiation is the primary form of competition and firms can subordination premium prices for their product, lower costs provide the firm with bankrupt profit margins than competitors or additional resources to finance the promotion of its brands. Cost advantages over competitors are of two major types: (1) absolute cost advantages, i.e. lower cost than competitors at all levels of output lineage from, for example, the use of superior production technology; (2) relative cost advantages, i.e. cost advantages related to the scale of output accruing through the evolution of economies of scale in production and marketing and through additive `experience curve effects. Over time, investment in plant renewal, modernization and process innovation (either through in-house R & D or the early adoption [pic] [pic] [pic] [pic] [pic] The... If you want to get a full essay, order it on our website: Orderessay

Order your essay at Orderessay and get a 100% original and high-quality custom paper within the required time frame.