What are the potential benefits or shortcomings of employing Porters 3 Cost Leadership

What are the potential benefits or shortcomings of employing Porters 3 Cost Leadership strategies in your industry? Where would you find these methods to be the most effective?

Expert Answer

Porters cost leadership strategies can be defined as a strategy that a company uses to create advantage against its competitors by maintaining a low cost position.In simple words the cost in this strategy is comparitively low to its competitors so that it survives with success.Its potential benefits are

1.It controls its cost through effective and efficient production and waste management as a resource.

2.It must effectively manage its value chain and supply chain management.

3.One shortcoming is that it should not compromise on its quality even when the cost should be on the minimal.

4.Sometimes the production should be the maximum to balance the cost and production.

Examples of cost leadership strategies

1.Walmart- Walmart store uses this strategy of low price on a daily basis.People are attracted to these discounts and lowering of price.This is possible because of huge production and the sales also increases.Walmart is able to survive all its competitors by applying this strategy.

2.McDonalds again a huge chain of food supply has its franchisee throughout the world.Again it targets its customers with its cost minimization but it never compensates on its quality at any cost.

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