In most industries, due to various reasons, the input costs of different enterprises are very different, and often these differences are the important reasons for some enterprises to gain cost advantages. The reasons for the difference in input costs are as follows:
① Different regions. As we all know, due to the uneven economic development of different countries and regions, the labor wage rates in different countries and regions are very different. In some labor-intensive enterprises, the difference in labor wage rates is an important reason for some enterprises to gain cost advantages. In addition to labor costs, the difference in input costs related to regions may also be due to the transportation costs of raw materials or the costs of energy, or due to the exchange rates of different countries.
② Different sources of supply. This is an important way for some enterprises to gain cost advantages. In industries where raw materials are the main input factors, such as furniture companies and printing companies, having cheap raw materials such as wood and paper is an important condition for gaining cost advantages.
③ Different bargaining power. When purchased parts account for a large proportion of the product cost, and there are only a few suppliers of these raw materials and parts, enterprises with strong bargaining power can purchase these factors at a lower price based on economies of scale, thus more easily gaining cost advantages. An important means for IBM to implement the cost leadership strategy is to effectively control the purchase cost. Through the central procurement system, the method of unified procurement, buyout procurement and regular settlement is adopted. Although this will take the risk of some goods being overstocked and unsalable, due to the huge procurement volume and the trust of suppliers, the procurement price is much lower than that of peers, thus reducing the purchase cost.
④ Different relationship with suppliers. With the rapid development of technology and the accelerated evolution of organizational structure, more and more companies pay attention to establishing close and long-term relationships with suppliers. More and more companies are beginning to reduce the number of suppliers and encourage suppliers to directly participate in the production process of the company and share relevant technologies. This relationship can significantly improve product quality and save time and cost. Walmart treats its suppliers with this cooperative attitude and method. Due to the huge procurement volume, it generally purchases directly from the factory; through computer networking, information sharing is realized, and suppliers can understand Walmart’s sales and inventory status at the first time, arrange production and transportation in time, thereby greatly reducing the supply cost, and Walmart can also pass on the benefits obtained from it to customers.
In order to reduce management costs, companies should also stabilize their relationships with partners such as carriers. With the globalization of economic development, the practice of reducing production costs by saving material consumption and improving labor productivity has shifted to non-production areas, especially logistics. ⑤ Shape the corporate cost culture. Companies pursuing cost leadership should focus on shaping a corporate culture that pays attention to details, is thrifty, strictly managed, and cost-centered. While grasping external costs, grasp internal costs; grasp strategic costs while grasping operating costs; pay attention to short-term costs while paying more attention to long-term costs. To make “cost reduction” the core of corporate culture, all actions and measures should reflect this core.