1. Home
  2. Docs
  3. Running a Business
  4. Business Model
  5. Low-cost Provider

Low-cost Provider

Striving to be the industry’s overall low-cost provider is a powerful competitive approach
in markets with many price-sensitive buyers. A company achieves low-cost leadership
when it becomes the industry’s lowest-cost provider rather than just being
one of perhaps several competitors with comparatively low costs. A low-cost
provider’s strategic target is meaningfully lower costs than rivals-but not
necessarily the absolutely lowest possible cost. In striving for a cost advantage
over rivals, managers must take care to include features and services that
buyers consider essential – a product offering that is too frills-free sabotages
the attractiveness of the company s product and can turn buyers off even if it
is priced lower than competing products.