MGT 7 Assignment Example | Topics and Well Written Essays - 250 words

MGT 7 - Assignment Example In this case the firm strives to drive down cost for every single production components ranging from labour costs to sourcing of raw materials. To accomplish cost leadership the firm usually requires production on large scale so as to capitalize on â€Å"economies of scale†. Production in large scale means that the company will naturally appeal to a wider aspect of the given market. Cost leadership is therefore a wide scope strategy. A business practicing cost leadership gains competitive advantage through reduction of production costs, thus increasing profit margins on every sale since the company trusts that its trademark can control a premium price. Secondly a firm can reduce production costs and pass on the cost savings to consumers hoping to boost sales as well as market share. Examples of companies practicing cost leadership include Wal-Mart Stores which implements everyday low prices so as to attract consumers. This idea of reduced prices is aimed at providing products at cheaper rate than competition on a frequent basis as opposed to relying to sales. Thus Walmart achieves this due to its efficient supply chain in addition to its large scale. The second example of a firm using cost leadership is IKEA which is a Swedish leader in furniture making. This company provides cheap but classy furniture. IKEA manages to offer low prices by sourcing its materials in countries with low-wage as well as providing extremely simple service level. The third company utilising cost leadership is Southwest Airlines. The airline managed to provide the lowest achievable prices by becoming more effective than conventional airlines. Southwest Airlines thus minimizes the time their planes use while on tarmac so as to have them flying, thus keeping profits up. In addition, they provide very little in terms of extra thrills to their customers, but instead trickle down the