Question

Critique the following statement: "A low cost strategy is not effective because it is too easily imitated." (min 200 words)

Answer 1

To make any organisation establish, grow or develop, Strategies are very important to be made by the organisation. It has to make various plans and strategies to introduce themselves & their products, to maintain various operations of the organisation like arranging materials, budgets, processes and delivery of the products. Any strategy must be fool proof for the work it is intended to do.

Low cost strategy means providing the services and products at the lowest cost. Any organisation following low cost strategy sells its products at a price lower than its competitors.

It is wrong to say that a low cost strategy is not effective because it is too easily imitated. An organisation that follows low cost strategy provides lower priced products to the customers than its competitors by maintaining the standards and quality of the product. The organisation reduce the cost by standardizing the various operations of the organisation, by taking initiatives to cut down the cost of value chain activities, by using creativity and innovations to effectively cut down the cost incurred in developing a product. The way an organisation reduces the cost of the product and the sources of cost advantage can be rarely copied or imitable. On the other hand, it becomes very difficult for the competitors to cut down the price of the product while maintaining the quality of the product because it requires creativity and innovation to lower the price of the product. So, we can say that low cost strategies are very effective and are inimitable (i.e. rarely imitable).

Some examples of the organisations using low cost strategy are Whirlpool, Air Asia and Walmart, etc