Case studies in "Cost Leadership"

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Competitive Advantage > Best Practices > Case studies in "Cost Leadership"

Case studies in "Cost Leadership"
Girish Ketkar
Are there any recent case studies to demonstrate how firms can compete on the basis of cost leadership?

A Common Cost Leadership Strategy Error
Joao Viggiani, Consultant, Brazil, Member
Undeveloped countries often fall into a trap: entrepreneurs confuse low cost strategies with slave-like labor conditions - absurdly low wages and stressing working conditions - to allow for the practice of low prices. This is really wrong.
Low cost is obtained by a highly productive work force and installations, highly efficient processes and large production and sales scales. These conditions are seldom found in companies in low developed countries such as Brazil, India and specially African countries.
These misleading ideas end up in poverty, not in the creation of wealth, which is the utmost objective of effective managers.

Cost Leadership Examples
Amit S Verulkar, Manager, India, Member
Air Deccan, Mahindra & Mahindra.

Kenyan Cost Leadership Example
George Ocarl, Project Manager, Kenya, Member
In Kenya we have an excellent example of cost leadership in the telephony industry where one service provider (Airtel) lowered the cost of making calls drastically and outdid their competitors (Safaricom and others) within months. By applying the cost leadership strategy it gained 86% popularity within months and is still ahead. It is effective if you don't compromise the quality.

Becoming the Cost Leader Might Be Seductive But Rarely Works
Bernhard Keim, Business Consultant, Germany, Premium Member
Mobile phone companies have one thing in common: high set-up costs. But once the set-up has been done there is little to no costs involved on the calls.
Even in emerging countries quality leadership might be the better strategy, especially if everyone else is going for the lowest price. The lowest price takes away the margin and deteriorates the quality one can provide.
Georgia - Caucasus, is a country with low income. The market leader on garages was the one that never compromised on quality. As he was the largest at the end, he could take advantage of better prices from suppliers as well. He ended up being price and cost leader at the same time.

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