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Cost Leadership Strategy and Joint Ventures

Please help answer the following:
1) Characteristics of a successful cost leadership strategy.
2) Common problems that cause ventures to fail.

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Cost Leadership (Defining Points)

Cost leadership is a business strategy with the goal of reducing its operations costs below its competitors. Three sources that lead to the cost advantage are economies of scale, low cost structure, and the learning curve.

1. Economies of Scale - This concept is the point where managers develop and implement cost reductions in operations. The goal is to improve marginal cost using this source.

2. Low-cost Structure - A cost structure is basically the expenses an organization assumes when producing a product or performing a service. The expenses to consider are fixed cost, variable cost, transaction cost, and so forth. The goal of this source is to create a structure that promotes the lowest cost for the product or service.

3. Learning Curve - This is generally when historic expenses are evaluated to create reduced present and future cost without compromising quality.

Once a company is ...

Solution Summary

This solution discusses cost leadership and joint business ventures.