Barney maintained that for resources to hold potential as sources of sustainable competitive advantage, they should be valuable, rare, inimitable and non-substitutable (VRIN). Barney categorized resources as either being tangible or intangible. Tangible resources, such as technology, can be bought by other competitors to gain a competitive advantage. Intangible resources, such as positive brand recognition, however, cannot be bought and are the main source of sustainable competitive advantage.
In a cost leadership strategy, the objective is to become the lowest-cost producer. This is achieved through large-scale production where companies can exploit economies of scale.
If a company is able to utilize economies of scale and produce products at a cost lower than competitors, the company is then able to establish a selling price that is unable to be replicated by companies. Therefore, a company adopting a cost leadership strategy would be able to reap profits due to its significant cost advantage over its competitors.
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