Cost Leadership Concept
Cost leadership corresponds to one of the generic strategies described by Michael E. Porter. In this kind of strategy, the company seeks to become the producer with lower costs on its activity sector. Following this strategy, the company presents a wide performance scope and seeks to achieve several market segments, being the company’s own extent an important advantage factor at the costs’ level (achieving through, for example by scale economies and scope economies).
The sources of costs’ advantage strongly vary with the activity sector and with its own structure, which may include the recovery of scale economies and scope economies, use of patented technologies, preferential access to raw materials and other production factors, etc.
Usually, a producer that chooses a low cost strategy produces a standard product, focusing on the essential of the product and placing the emphasis in the attainment of absolute and scale cost advantages.