In fact, cost leadership strategies are most suitable in situations characterised by markets that allow high production volumes of standardised products for customers that are price-sensitive and have low switching costs. Low cost and price as a competitive advantage can thus be achieved in a variety of ways such as selling cost-effective products and services that satisfy customer needs, resulting in higher market share than that of rivals enhancing profit margins through economies of scale, lower unit costs and organisational efficiencies basing cost effectiveness on the organisation's core competencies The advantages of cost leadership strategies include the following: an increasing in competitiveness and market through sustainable cost advantages protection for the organisation against competition as a result of its durable cost advantage protection against powerful suppliers because of large-scale purchases and the resultant potential of discounts protection against the power of buyers because of the low-cost advantage and competitive pricing possibilities durable cost advantages serving as barriers to imitation, barriers to the threat of substitute products and barriers to the threat of new entrants to the market, which should be evident from analysis of the organisation's competitors The potential disadvantages of cost leadership strategies include the following: not keeping up with changes in the external environment, for example, where core competencies relate to and are sensitive to changes in technology which are not recognised (e.g. the fuel-efficient aircraft of Mango Airlines that have put other low-cost airlines that have not adapted at a competitive disadvantage) not being aware of changing consumer needs and preferences with regard to products and services in the low-cost market sector that could seriously affect competitive market position
In fact, cost leadership strategies are most suitable in situations characterised by markets that allow high production volumes of standardised products for customers that are price-sensitive and have low switching costs. Low cost and price as a competitive advantage can thus be achieved in a variety of ways such as selling cost-effective products and services that satisfy customer needs, resulting in higher market share than that of rivals enhancing profit margins through economies of scale, lower unit costs and organisational efficiencies basing cost effectiveness on the organisation's core competencies The advantages of cost leadership strategies include the following: an increasing in competitiveness and market through sustainable cost advantages protection for the organisation against competition as a result of its durable cost advantage protection against powerful suppliers because of large-scale purchases and the resultant potential of discounts protection against the power of buyers because of the low-cost advantage and competitive pricing possibilities durable cost advantages serving as barriers to imitation, barriers to the threat of substitute products and barriers to the threat of new entrants to the market, which should be evident from analysis of the organisation's competitors The potential disadvantages of cost leadership strategies include the following: not keeping up with changes in the external environment, for example, where core competencies relate to and are sensitive to changes in technology which are not recognised (e.g. the fuel-efficient aircraft of Mango Airlines that have put other low-cost airlines that have not adapted at a competitive disadvantage) not being aware of changing consumer needs and preferences with regard to products and services in the low-cost market sector that could seriously affect competitive market position