Cost Leadership Strategy
Memorandum To: The Managing Director Kiddy Toy Company (KTC) Re: Cost Leadership Strategy Date: As postmark We refer to the recent intent shown by US retail chain in Boston to buy Panda toys with appropriate adaptations for the American culture. The Kiddy Toy been supplying range of toys in the China market and is looking to expand in US market should follow the Cost Leadership strategy, below are our points to support this strategy: 1. Kiddy Toy can offer their product at a low cost to the broadest possible market.
Economies of scale will result in cost savings that can be partially passed to consumers.
The strategy involves making a “fairly standardized product and underpricing everybody else. 2. Relying on the Experience Curve to Underprice Competition Risky: Kiddy Toy is already in the business and can rely on their experience to reduce the cost. The Chinese Panda is most popular for small children in China and the same can be customized using the existing experience of the company for US market using the US Flag. .
Kiddy Toy can achieve cost reduction efforts of cost leadership strategy in three main categories: (1) reducing unit manufacturing costs through higher unit volume, efficient scale facilities, and experience curve; (2) exercising strict cost control over engineered costs; and (3) minimizing discretionary costs like service, sales force, advertising, quality control, and so on. 4. Kiddy Toy needs to pay a great deal of managerial attention to cost control to achieve these aims.
Low-cost relative to competition becomes the theme running through the entire strategy, though quality, service and other areas cannot be ignored. In the lieu of above points we believe Kiddy Toy Company can use the cost leadership strategy and launch the Panda for the US market and achieve economies of scale by capturing the broadest market.
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