Question

What are the cost cutting methods when using low cost strategy?

Answer 1

Many companies use low-cost strategies to attract consumers and gain market share in the industry. However, a low-cost strategy is not easy to apply as it requires strategic planning at every step and efficient methods to reduce the cost of production. Let us discuss various ways in which companies reduce their cost of production.

Bulk purchases - Often companies try to form deals with suppliers to make bulk purchases which helps them in buying raw materials at a lower cost which helps in bringing down the cost of the final product.

Effective working policies - Many companies adopt strict working policies that monitor the time, efficiency, and performance of their staff and link it with their promotion/bonus of the year. This helps the company in getting the most out of its employees and motivates the employees in doing more work in less time. This helps in reducing the time of production which brings down its cost.

Digitalization - Many companies nowadays are using technology to reduce their cost of operations and production. Companies are shifting towards cloud storage and computing which reduces the stationery and printing costs and helps the company in bringing down the ultimate cost of production.

The above steps can help a company in bringing down its cost of production which helps them in using low costs taregy to attract consumers in the amrket.