Reduction of Costs to Maximize Profit Returns

Typically, net profit is measured on a quarterly or annual basis. When compared with a company net profit during other periods, it can provide a useful measure for how profitable a company is over time and the overall performance of the company & management team.

Which of the following factor(s) is (are) likely to be significant for a firm with a successful cost leadership strategy?

Cost leadership is also an important key to success in any commodity industry since it is one of few areas where any true profit can be squeezed out of markets defined by undifferentiated products. ADM’s vertical integration

Operational excellence. Many industry players are facing strong competitive pressure, so cost leadership is another key to success.

By following the patterns of these established low cost leaders, we were able to model our company by implementing the following key steps to ensure low costs while gaining market share:

The costs of the company has to be minimized so as to minimize the cost for the customer without deceasing the profits. The company has applied

How valuable a low-cost leader's cost advantage is depends on A. whether it is easy or inexpensive for rivals to copy the low-cost leader's methods or otherwise match its low costs B. how easy it is for the low-cost leader to gain the biggest market share C. the aggressiveness with which the lowcost leader pursues converting the cost advantage into the absolute lowest possible costs D. the leader's ability to combine the cost advantage with a reputation for good quality Correct! The correct answer is: A. Concept: OBJECTIVES AND GOALS Concepts Mastery OBJECTIVES AND GOALS 0% Questions 8 8.

Cost leadership (Johnson et al., 2013, p194) strategy involves becoming the lowest-cost organisation in a domain of activity. In this case, NiMH battery prices were reduced to remain competitive in the market considering the fact that NiMH batteries represented the Cash Cow of the company.

Cost has traditionally being a major influence on all business as all businesses desire to achieve maximum efficiency as it is a vital factor for businesses in order to reach the ultimate goal and success. Businesses sees cost as the key value to success and aims to become as much cost efficient as possible, by implementing a cost-leadership style approach to the operations variable cost or fixed cost ,while maintain the expected profit margin, business is able to gain a competitive advantage over their competitors in their target market. This is called cost-based competition. By determining the break-even point and applying cost saving strategies, to reducing cost, businesses who apply cost-based competition in their operations is able to maximize the profits and lead business to success.

A cost leadership strategy focuses primarily on “producing products and/or services that are the lowest in the industry” (Turban, Rainer, & Potter, 2003). This type of organization forms business alliances that support their inventory management through computers and computerized purchasing. A differentiation strategy focuses on being unique within the industry and provides high-quality products at a competitive price (Turban, Rainer, & Potter, 2003). These types of companies “provide their customers with a

Low cost leadership is pursued by Amazon by differentiating itself primarily on the basis of price. Amazon’s goal is to become customer – centric, aiming to offer a wide range of products with lower prices and convenience to its customers. It can be seen that the company believes offering low prices and focusing on customers are fundamental to Amazon’s success. Over the time, Amazon seeks to mitigate the costs in order to lower the prices through achieving higher sales volumes. The company also finds many ways to negotiate to obtain better terms with their suppliers, and achieving better operating efficiencies. Amazon always ensures that they maintain

6. What lessons can we draw from this case about the challenges of pursuing a cost leadership strategy?

In other words, customers are willing to purchase low-tech products as long as their prices are relatively low. As a result, Niche Cost Leadership seems to be the most appropriate strategy for these two segments.

The organizations that endeavour to wind up the least cost makers in an industry can be alluded to as those taking after a low cost procedure. The organization with the least expenses would gain the most elevated benefits in the occasion when the contending items are basically undifferentiated, and offering at a standard business market cost. Organizations taking after this methodology place accentuation on cost diminishment in each action in the value chain. Note that an organization may be a cost pioneer however that does not inexorably infer that the organization 's items would have a low cost. In specific occurrences, the organization can for occasion charge a normal cost while applying the low cost leadership strategy and put the earnings made back into the business

A successful cost leadership strategy usually provides the entire firm with high efficiency, low overhead, limited perks, intolerance of waste, intensive screening of budget requests, and wide span of control efforts. However, some risks of pursuing this strategy are that competitors might imitate the strategy, thus, driving overall industry profits down; that technology breakthroughs in the industry may make the strategy ineffective; or that buyer’s interest may swing to other differentiating features besides price.