Cost Leadership -  Strategic Goal 

Definition: 

Cost leadership can be the goal of operations within a business. 

The goal is to be the industry leader in cost of production (lowest!). 

The approach adopts an existing business model and removes as many costs as possible (ALDI).

Purpose: 

Being the lowest cost business results in either increased profitability (keeping Price the same and increasing margins) or increasing market share (reduce Price and keep profit margins the same).

This can be achieved through:

• Economies of scale (reducing cost per item by increasing production)

• Supply chain management (finding cheaper suppliers to reduce COGS)

• Using technology to increase productivity and speed

• Minimising waste, developing internal systems and processes

• Use cost-centres to measure costs in different divisions of the firm