Low cost strategy is usually centered on company’s ability to produce and deliver competitive products at a lower cost. Cost leadership strategy is an initiative that gets a lot of eminence in strategic design and review sessions of any company in order to improve the company’s efficiency (Winer & Marketing Science Institute, 2005). Most companies use low cost strategy structures to protect their markets from the competitors. This is usually done by responding to the competitors’ move in the market through price reduction. Such response makes the company be predominantly inward focused (Winer & Marketing Science Institute, 2005).
Cost leadership strategy allows the firm to be the lowest cost producer. Through this, company is able to attain a larger market share, thus allowing the firm to realize higher gross profits through high volumes of low marginal profits. This strategy has been replicated by Wal-Mart (Winer & Marketing Science Institute, 2005). The company has focused on earning marginal profits by the cents as compared to its competitor who focused on earning profits by the dollars. This has helped the company to draw a large number of thus achieving a large customer base.
For instance, Wal-Mart has strategically positioned itself as a cost-advantageous through raising a market share. This has been achieved through transformation of market share from the lowest cost producer to the lowest cost supplier of products. Through this, company has managed to transform its cost advantage into a price advantage for its entire customer hence improving the market share over its competitors. In addition, the prospects of increasing the market share for Wal-Mart have provided an opportunity to leverage the economies of scale that has been coupled with aggressive cost-cutting measures (Winer & Marketing Science Institute, 2005).
Wal-Mart has continuously struggled to reduce costs in the market place. This has created Wal-Mart an image as a supplier of low priced products compared to its competitors. This is how Wal-Mart has managed to capture the market while edging out its competitors (Winer & Marketing Science Institute, 2005). In addition, this has helped the company to improve its investment returns and the market share. This strategy has propelled Wal-Mart to be among the leading companies in the globe. It has also transformed the way customer businesses interact with each other in the retail environment in order to deliver products to the consumer. (Winer & Marketing Science Institute, 2005).