A low-cost position permits buyers to exert power to drive increasing prices only to the level of the next most efficient producer.
In a low cost strategy, company with the actual lowest cost is the true winner in the market place. The low cost company is able to do a number of things to maintain or to increase its market share. It can invest more in marketing.
It can also pay more for better positions in retail stores in relation to its higher cost competitor. It can lower the price, thus it will squeeze its competitor’s margins and profits. It can invest more in research and the development, which allows it to improve the performance of its product.
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