A low cost business strategy is the type of business approach in which a company focuses on low-cost product or service provision as its primary source of competitive advantage. If you need more information on the topic, you’re in the right place. On this page, we’ve collected all the essential facts together with low cost strategy examples prepared by straight-A students. Go on reading to learn more!
🔝 Top-11 Low-Cost Strategy Examples
- EasyJet Airline Company Change Management
- Qantas Airline Company Multi-Brand Approach
- Wal-Mart's Low-Cost Provider Strategy
- Low-Cost Airlines' E-Business and E-Commerce
- The Concept of Activity-Based Costing Systems
- Activity Based Costing and Activity Based Budgeting
- Ryanair in the European Low-Cost Airline Industry
- JIT: Strategic Plan and Implementation
- AI Ain Dairy Company: Strategic Management
- Wal-Mart Incorporation's Low-Price Attraction
- JetBlue Company's Entrepreneurial Transformation
📍 What Is Low-Cost Strategy?
As a low-cost strategy’s definition suggests, this approach in the business allows a company to encourage demand for its offers among a broader population and win a greater market share by ensuring the lowest pricing.
It is not easy to achieve a sustainable competitive advantage by offering the lowest price. As a rule, companies use the following factors to succeed in the lost-cost strategy efforts:
- Availability of significant financial resources for the initial business investment;
- Manufacturing efficiency;
- Availability of suitable outsourcing providers;
- Ability to purchase raw materials at a low cost;
- Availability of cheap labor;
- Top-tier expertise in the arrangement of manufacturing processes.
What Is Focused Low Cost Strategy?
When a firm pursues a focused low-cost strategy, it usually focuses on a specific product or a narrow customer group and targets all efforts on the object of focus. This way, the firm manages to reduce production, promotion, and sales costs due to its concentration on a well-researched, predictable population.
What Companies Use Low Cost Strategy?
Some famous low-cot strategy examples include Air Asia and Walmart. The latter was a pioneer in low-cost business approach, with a disruptive impact on the American market. Each of them will be discussed in more detail below.
📊 Low Cost Business Strategy vs. Differentiation Strategy
Low-cost and differentiation strategies are regarded as the two extremes of the marketing continuum. One of them attracts customers with the lowest possible pricing, while the other one appeals to customers who are not concerned about the price of the product and are interested in its exclusivity and premium quality. Here are the two strategies at a glance.
|🛒 Low-cost strategy||💎 Differentiation strategy|
|If a company pursues a low-cost strategy, it can maintain cost leadership only if its price is indeed the lowest in the market. Otherwise, it will not be able to attain the price-related advantage. Such firms succeed in the market niches with many providers of identical goods and services if they manage to reduce production and distribution costs and offer the most lucrative deal to price-conscious customers.||If the business entity chooses a differentiation strategy, it should understand the end-user very well to cater to their needs and expectations in the best possible way. Customers coming to such companies are not that focused on the price; they come to enjoy an exclusive experience and to get something more than a product. Therefore, a company pursuing a differentiation strategy should offer value and build a strong brand identity to enjoy customer loyalty.|
👀 Top-3 Low Cost Strategy Examples
Now, let’s look at the companies that have tried a lost-cost strategy in their everyday operations and succeeded. What makes them so great, and what lessons should others learn from them?
- Walmart is the world’s best-known company with a lost-cost strategy. The company achieved excellence by saving on human resources via automation and working closely with suppliers to get the best deals for them.
- Primark is another European lost-cost giant. The company maintains low prices with little investment in advertising and promotion, high stock quantity, and reliance on outsourcing.
- McDonald’s. Though many wouldn’t consider McDonald’s a low-cost company, it still is. The company trains staff in-house, utilizes vertical integration, and relies on fast food delivery.