Cost Leadership strategies are designed to bring the lowest cost of operation or construction in the industry to the beneficiary. This makes the owner competitive and successful than their immediate competitors. Practitioners implementing cost leadership usually focus on staff efficiency, project size, scale, scope and professional experience.
Inflation has a serious impact on firms that maintain cost leadership in an industry. As a result, strategies should be implemented to reflect market changes. Leadership should diagnose changing cost economics from the raw materials acquisition stage to the final price paid by the end buyer. It should be done by constructing a value chain diagram that shows the value added at every step of the entire market process to expose shifting cost components. Further assessment should follow on the long-run shifts in the cost position of your competitors. Lastly, factor the implication of future inflation into your costs and those of competitors in the industry.
The challenging question is to inquire if it makes sense to set low prices when you enjoy cost leadership. In a competitive capitalist environment, does it make sense to price high like competitors despite low overhead and successful value chain strategies? Or, do you price low and attract more clients? Which way to go?