This strategy focuses on being a leader within an industry or within a market. By becoming one of the lowest-cost producers within an industry, firms can implement a strategy which can help them to become one of the lowest cost producers within an industry if they are able to cut down their prices and this will help in blocking down the relative increase in market share. By adapting a cost leadership strategy, firms can be highly confident that they are able to achieved and even maintain a competitive advantage within an industry or sector. Companies which have been successful in achieving a cost leadership strategy do have a great risk in being able to pursue a cost leadership strategy because for them cost reduction may not be unique and other competitors may offer them cost reduction strategies in a different manner (Amabile, 1996). That’s why companies find various ways to reduce cost and other expenses. This strategy is only viable for firms who possess the ability in having access to adequate resources and are able to produce large production volumes which are valuable and have a great market share. Businesses which are able to adapt a focus strategy can also enjoy advantages which could be low costs and this also results in having a high level of profitability.
One of the prime examples of Cost leadership is Dell’s business strategy. Dell had been able to initially achieve a market share by being able to keep a relatively low level of inventories and only built computers by applying cost leadership strategies in its supply chain programs. It resulted in low operating expenses and thus Dell was able to manufacture computers at a relatively low cost than its competitors (Chakravorti, 2004). However, this strategy had some inherent consequences attached to it. Dell’s reputation as a low cost leader made customers skeptical of making products with low quality and this also made it difficult for the company to rebrand itself and its products. It was difficult for the company to shift towards a differentiation or focus strategy.