Additionally, efficient distribution channels, optimal outsourcing and vertical integration, bargaining power to negotiate the lowest price for production inputs as well as high buying capacity all participate in making cost leadership a go-to strategy for high return on investment and profitability. The possible downsides of this strategy can vary from low workers remunerations to exploitation of unskilled workers. The advantages of cost leadership are often threaten by external business environment threats such as higher minimum wages laws. Examples of successful cost leadership organisations: WAL-MART.INC (ASDA), Costco, MCDONALD 'S, IKEA. Cost advantages stem from the fact that a company can quickly reap higher profit margins despite selling products or services at competitors price due to lower production costs.
Barriers of Entry – Low The risk of entry from potential competitors is low, due to the barriers of entry. The barriers of entry are high, traceable to the cost of starting the business and what it costs to remain successful. Perdue also has a cost advantage over potential new entrants that is credited to superior production operations. Perdue has control of their inputs required for production, such as labor, materials, equipment, or management
A low turnover implies excess inventory, a high ratio shows good sales. High inventory levels are unhealthy because they represent an investment with a rate of return of zero. In the case of copper mining there is a unlikelihood of a high ratio for inventory turnover because as it’s mined it goes out the door. The industry average is 41.66day for inventory turnover, Newmont is a faster turnover at 21 Days and Freeport is slightly longer at 52days. In the case of this industry specifically the faster they are able to turn over inventory the more money the company is able to free up allowing for a better working capital for the
Consumer income Consumer income is in the wider field of economic factors that affect the sales level of the enterprise. Consumers with high income are likely to possess the power and the ability to purchase products from the company in large quantities. Often, individuals with higher income have flexible regarding purchases considering that they have enough financial power to use on basic needs and to save. As a result, such individuals are expected to buy the company products in bulk or more frequently irrespective of the price of the products. On the other side, low-income earners are not expected to purchase the company products in bulk or frequently.
One of the notable challenges was lowered capacity in both low-end and traditional segment. There were opportunities to invest in the automation, but the team collectively decided to settle the long-standing debts. Other competitors issued low strategy that aided their acquisition of large part of automation and lowered variability costs. Competitions One of the biggest competitors were Andrews and Ferris because of the well-managed companies. Andrew, in particular, was the biggest competitor for its ability to work with different strategies concurrently, Low-end and High-end.
What happens when any country has high income inequality? If the separation of nation’s wealth is based on the rule where a little group of people keeps the majority of a nation’s capital, the balance of pоwer in this state is skewed or deformed. Therefore, low and middle classes of society have less access to capital and less access to nation’s resources, consequently, they have low chance for breaking out the cycle of poverty. While economists all over the world think on what optimal wealth distribution actually is, many inhabitants of different countries agree that the Gini index is the most real indicator of the health and vitality of a country. The Gini index represents the main principle, which based on income distribution between country's citizens.
The average cost of producing one product gets smaller as output increases. This thus means that there are decreasing marginal costs. (Besanko & Dranove & Shanley & Schaefer, 2017). Nevertheless, there is also the phenomenon called diseconomies of scale. When a firm has a larger output, the firm is also hard to manage and this brings extra costs.
It is not always as good for the economy, as we think it is, because it creates surpluses, wasteful increases in quality, lost gains from trade and misallocation of resources. Minimum wage is one of the examples of a price floor. It is the lowest wage an employer may pay an employee and it is determined by law or contract. Increasing the minimum wage might seem like a great idea. However, it comes with many disadvantages.
However, low skill jobs have many people who can work and therefore the result of this is low wages for such tasks (Gerhard, 2009). The impact of this on the economy is expected to be such that where the wages rise then companies would reduce costs by reducing the number of workers thus increasing the unemployment rate. However, this depends on the nature of the jobs. In a state where the jobs created require high