Cost Leadership Dell

Topics: Strategic management, Porter generic strategies, Management Pages: 2 (778 words) Published: December 11, 2010
Cost Leadership
Cost leadership that attempt to become the lowest-cost producers in an industry can be referred to as those following a cost leadership strategy. The company with the lowest costs would earn the highest profits in the event when the competing products are essentially undifferentiated, and selling at a standard market price. Companies following this strategy place emphasis on cost reduction in every activity in the value chain. Ideally, low cost strategy is centered on the capability of Dell to produce and deliver products of competitive quality at lower costs. Cost leadership strategy is much more than cost reduction initiatives that get lot of prominence in strategic planning and review session of Dell as a means to improve the bottom line of a company by improving its efficiency. Dell uses efficient cost structures to protect their markets from the competitors by responding to competitors’ move of making in-roads in the market space by reducing prices. Such reactive response may makes Dell inward focused. Better way to strategically position Dell on advantage of cost is to increase market share by transforming from lowest cost producer to lowest cost supplier of products. This way the company translates its cost advantage into price advantage for its customers and thereby improves the market share. The prospect of increasing the market share provide great opportunity for Dell to leverage the economies of scale coupled with the ruthless cost cutting measures it plans to execute. More the competitive space it occupies which also means that more competitors eliminated effective are economies of scale and as a result the costs are driven still lower. When Dell is able to transform the efforts of cost reduction into cost advantage for customers Dell can be said to be successfully pursuing low cost leadership strategy as there continuously strives to reduce costs and in the market place it has got the image of supplier of products at the lowest...
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