Saturday, January 16, 2010

Overall Cost Leadership

Overall cost leadership is when a company produces its goods and services at the lowest cost compared to its competitors. It is able to achieve low cost by increasing the overall efficiency of the company. It may be do that by decreasing its production and distribution costs.

This also may be achieved by expanding the size of the company. In economics, when firms are able to decrease their average costs by increasing their size, it is called economies of scale. A good example of overall cost leadership is Walmart.

The production concept also focuses on reducing the cost of the company. Hence, it is also connected to overall cost leadership.


syed hassan raza said...

Taha, my opinion is that overall cost leadership is extremely beneficial for those companies who want to charge penetration pricing or those who want to start a price war.