Cost leadership

Question 1

Business-level strategies

Answer 1

Actions firm take to gain competitive advantage in a single market or industry.

Question 2

Corporate-level strategies

Answer 2

Actions firms take to gain competitive advantage by operating in multiple markets or industries simultaneously.

Question 3

Cost leadership

Answer 3

Gaining advantages by reducing its costs to below those of all its competitors. It is a single-minded focus on reducing costs that can lead a firm to make low-cost products that no one wants to buy.

Question 4

Sources of cost advantage

Answer 4

1. Size differences and economies of scale
2. Size differences and diseconomies of scale
3. Experience differences and learning-curve economies
4. Differential low-cost access to productive inputs
5. Technological advantages independent of scale
6. Policy choices: choices about the kinds of products and services they will sell

Question 5

Diseconomies of scale

Answer 5

1. Physical limits to efficient size
2. Managerial diseconomies
3. Worker de-motivation
4. Distance to markets and suppliers

Question 6

Functional organizational structure

Answer 6

The organizational structure of a firm with a cost leadership strategy is also known as a functional organizational structure. This functional structure has few layers in the reporting structure, which leads to simple reporting relationships. There is a small corporate staff, and the focus of the firm is a narrow range of business functions. (Up-form)