one way of thinking about organizing to implement cost leadership strategies is that firms that pursue this strategy should be highly centralized, have high elvels of direct supervision, and keep...

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one way of thinking about organizing to implement cost leadership strategies is that firms that pursue this strategy should be highly centralized, have high elvels of direct supervision, and keep employyee wages to an absolute minimum. Another apporach is to decentralize decision making authority- to ensure that individuals who know the most about reducing costs make decisions about how to reduce costs. This, in turn, would imply less direct supervision and somwhat higher levels of employee wages. Why is this?? Which of these two approaches seems more reasonable? Under what conditions would these different apporaches make more or less sense?
Answered Same DayDec 20, 2021

Solution

David answered on Dec 20 2021
3 Votes
Question:
One way of thinking about organizing to implement cost leadership strategies is that
firms that pursue this strategy should be highly centralized, have high levels of direct
supervision, and keep employee wages to an absolute minimum. Another approach is to
decentralize decision making authority- to ensure that individuals who know the most about
educing costs make decisions about how to reduce costs. This, in turn, would imply less direct
supervision and somewhat higher levels of employee wages. Why is this?? Which of these two
approaches seems more reasonable? Under what conditions would these different approaches
make more or less sense?
Solution:
In this competitive highly dynamic environment, it is very essential for a company to
have an edge over its competitors. In order to attain the competitive advantage, cost leadership
strategies are used, i.e. to provide the products at lowest cost of operation within the industry.
The main aim of the strategy is to utilize the available resources and technology in an efficient
manner, and exploit the economies of scale. The strategy is given by Michael Porter, and
involves capturing of the market share by appealing to the price sensitive consumers. The appeal
is made on the basis of lowest prices offered in the targeted market segment. It is a challenge in
front of the company to offer product at lowest price and still be able to achieve profitability
etter than the competitors. In order to attain this objective there are many approaches that a firm...
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