CHAPTER 4: Cost Advantage

Low price (cost) is one way that firms can offer unique value to customers. A firm that chooses a cost advantage strategy wins by appropriating greater profits at the same price as competitors, or pricing below competitors to gain market share. A company that wins by providing low-cost products or services must focus its resources and capabilities on keeping its costs as low as possible. In this chapter, we explore the sources of cost advantage, including economies of scale and scope, learning and experience, proprietary processes, lower cost inputs, or a different business model.