Definition: Cost leadership is a term used when a company projects itself as the cheapest manufacturer or provider of a particular product or commodity in a competition.It is difficult to deploy the strategy because the management must constantly work on reducing cost at every level to remain competitive. The two basic types of competitive advantage combined with the scope of activities for which a firm seeks to achieve them, lead to three generic strategies for achieving above average performance in an industry: cost leadership, differentiation, and focus. Cost Leadership and Competitive Advantage. Porter's generic strategies describe how a company pursues competitive advantage across its chosen market scope. A key problem with the model is that it actually only contains two factors, one of … A cost leadership strategy therefore aims to exploit scale of production, well defined scope and other economies thus producing highly standardized Cost Leadership Strategy allows McDonald’s to keep production sots and customer prices low; meanwhile, Operational Excellence helps maximize the efficiency of the product development process to minimize costs, but creates a competitive advantage on operational excellence. The focus strategy has two variants, cost focus and differentiation focus. The company’s broad differentiation strategy also helps. The goal is to produce goods or services at the lowest possible cost by organizing every potential resource around the current production methods. advantage. Cost leadership strives towards cutting costs to a minimum possible levels in order to provide customers with lower prices and thus boost their savings. Generic strategies include ‘overall cost leadership’, ‘differentiation’, and ‘focus’. McDonald’s generic strategy of cost leadership enables the company to sustain its market leadership. https://opentextbc.ca/strategicmanagement/chapter/cost-leadership 1. Cost Leadership However, a possible strategic direction for McDonald’s continued growth is to establish more locations in developing economies and in countries where the firm has no market presence. To gain competitive advantage, small businesses can focus on different strategies, including leadership in cost, quality, innovation or customer service. Then, by achieving the lowest possible cost, the leader can place their team or organization into a position where the lowest price in the market is charged for needed goods or services. Cost strategy prerequisites normally relate to high technical capabilities and access to capital for the company to invest in technology and assure economies of scale. 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