Q

Is it possible for a company to be the lowest cost producer in its industry and simultaneously have an output

Home, - Discuss Lowest Cost Producer

Question: Is it possible for a company to be the lowest cost producer in its industry and simultaneously have an output that is most valued by customers? Discuss this statement.

ANSWER:
It is possible for the company to become the lowest-cost producer and deliver the product in the right way to become the most valuable brand for the customers. When the brand is serving the customer's products at a very low cost compared to their rivals, it enjoys high demand from the customers. High demand for the product enables the brand to the enormous amount of economic scaling of the production. Even low-cost producers can also require high capital for technological advancement (Masiulevicius and Lakis, 2018, p. 115(2)). It can help in gaining a higher profit margin if it is successful in becoming the most valued brand for the customer.

The famous policy of cost leadership strategy indicates earning a competitive advantage for an increased amount of sales in the market. When the customers see their desired brand is giving highly-priced products, they tend to find a cheap substitute for the products. If any company which prefers to make mass production cracks the policy of the lowest-cost producer, it can deliver high-quality products to the customers with the right technological investment. The marginal cost of the production tends to be low for mass production and this is helpful for becoming the lowest cost producer in the market(Danso et al., 2019, p. 887(2)). The set price is important for any type of business and target the high demand product in the market helps in increasing the sales amount for the market. The high demand industry uses the effectiveness of the modernising market effort and acquires a strong base of customers for providing the right amount of services and goods. For example, Unilever is a mass production FMGC brand in the UK and it delivers low-cost production in food, personal care and household items. Across the globe, 2.6 billion people use the products of this brand every day and it is clear that Unilever is one of the most valued brands among the customers in spite of making low-cost products. This brand buys raw materials and supplies from the farming and forestry industry and this is helpful in delivering sustainable growth to the company with a lower cost amount (Panmore Institute, 2022). The broad differentiation strategy has helped Unilever to have a competitive advantage with a low-cost production strategy.

Leave a comment


Captcha

Related :-