The Cost Leadership Strategy For A Company

A Company is a world leading manufacturer of electric motors for air compressors in the global refrigeration and air-conditioning industry. Its business scope covers the global market and its customers include all major players in the world industry of refrigeration and air-conditioning equipment or compressors. Over the years, it has been following a differentiation strategy by which it provides the highest quality motor products for customers in the commercial hermetic and semi-hermetic compressor market and achieved market leadership through its competitive advantages in engineering and quality control. Under this strategy, it has kept its business profitability level higher than the industrial average. However, A Company now faces serious challenges in uncompetitive cost position in the market which results in its slow business growth and low market share in the fast growing mid-and-low-end markets. Meanwhile, as the industry becomes more and more mature the compressor motor market changes to be a buyer market where A Company faces increasing price pressure from both customers and competitors. If it does not adjust its business strategy, it will be at a risk of losing its market leadership position and market shares. In response to this situation, therefore, A Company must transforms its business strategy from differentiation to cost leadership by which it will lower its cost structure to build a competitive cost advantage so as to maintain its leading position in the high-end market and achieve a fast growth in the mid-and-low-end market. To this end, it must adopt effective measures to its core business functional areas in sales and marketing, procurement, manufacturing operations and human resources so that it can gain competitive advantages in cost, quality and customer service.