Advantages Of Cutting Cost Strategy

Cutting costs strategy is one of the general type of competitive advantage that a company tries to gain within it’s scope of activities to achieve a level of efficiency that exceeds the average in the industry. There are two main forms of cutting costs strategy - gaining leadership in cost minimization and focusing on costs (Michael E. Porter, 1985). Each of these common strategies involves a fundamentally different route to obtaining competitive advantages, depending on the choice of a particular type of desired benefits and the scale of strategic objectives, within which these benefits are planned. The strategy of leadership in minimizing the cost and differentiation usually is aimed at obtaining competitive advantages in a broad array

A company that chooses a differentiation strategy, should not set prices at significantly higher level for it’s products or services than it’s main competitors. But on the other hand, a company which implementing a differentiation strategy, will achieve high performance and efficiency only if the margin on its goods will exceed the cost of

Many researches of expenses are devoted to too narrow issues in this area, and the conclusions received as a result of these researches have only short-term value. Such popular theories as an experience curve, are often applied far not adequately while researching and analyzing expenses. The curve of experience can be taken as a starting point of the analysis, but it can not be its only tool; in such analysis many meaningful factors that have an influence on expenses are not taken into account and the relations between these factors are not considered in any way. Besides, the analysis of expenses often leans on the existing accounting systems. These schemes may contain the valuable data for such research, but generally they can even prevent the analysis of expenses: systems of the account demand rigid classification of expenses according to structure of the database — in such categories as, for example, costs of the main and additional work or overhead costs. Such use of terms of accounting systems leads to the fact that in one category considers the costs of implementing activities with radically different economies. On the other hand, the artificial differentiation of the cost of labor, raw materials and overhead costs relating to the same activity takes