Exon Low Cost Strategy - Lean

Alex Exon

2/12/13

MKTG 335G

Professor Anderson

Low Cost Strategy- Benefits of Lean Production

Applying lean production allows companies to effectively implement and benefit from a low cost strategy; which can help them gain a competitive advantage in the global market. A lost cost strategy is when a company offers relatively low costs to gain market share. For example, Wal-Mart has been able to market themselves in a way that consumers perceive them to have the lowest prices, which has led to a tremendous market share world wide. When you apply lean production to this strategy, meaning you are able to decrease excess inventory, decrease assembly time, and reduce defective production while lowering costs, it is possible to gain market share globally. For instance, Toyota has been able to create a lean production system and implement it internationally. This has allowed them to produce a quality product for a competitive price in each of the international markets they do business.

The difficulties that arise from a low cost strategy when implemented globally are minimal. If a company uses the low cost strategy, then they have the resources and capabilities to manufacture and acquire goods at reduced costs. However, if they have to deal with new laws and regulations the limit their resources, then it may become more difficult for them to keep costs down.

A company’s ability to keep a low cost strategy, without modification around the world, can be the primary key to success. It allows them to develop core competencies in their domestic market, and then carry those over to the international market. A lean production system is a great way to utilize those core competencies in when trying to gain market share around the world.

Toyota has been able to market low costs in international markets since they began lean production. They have been able to achieve efficiencies of about 50 percent over mass production systems. They have reduced assembly time,...