COST LEADERSHIP Group 9

Group 9

• Asha Nachi

• Kritika Prabhakar

• Nitesh Kumar

• Raunaq Chawla

• Seshu Pinnamaneni

• Vijay Pal Singh

Cost Leadership

• Cost leadership is one of

the 3 viable basic types of
competitive advantages
according to Michael Porter.

• Others Being Differentiation

and Market Segmentation.
Cost Control

• Effective Budgeting

• Standard costing.

• Balanced Scorecard
Cost Leadership
as a Strategy

• process engineering skills

• products designed for ease of

manufacture

• sustained access to
inexpensive capital

• close supervision of labour

• tight cost control

• incentives based on
quantitative targets.
Cost Leadership
as a Strategy

• Success of Cost Leadership

depends on:

• RARE

• COSTLY TO IMITATE

• CONSIDERABLE MARKET
SHARE ADVANTAGE
TATA Steel
FACT FILE: TATA STEEL
• Established in 1907 under the vision of JRD TATA

• Formerly known as TISCO now India’s largest steel company

• World’s 6th largest steel company by capacity after Tata-Corus deal

• One of the least cost makers of steel in the world- COST LEADER

• Caters to sectors like Auto, consumer durables, construction and capital goods.

• Won various awards like:

• Deming Application prize, 2008- Excellence in Total Quality Management

• Prime Minister of India’s Trophy- Best integrated steel plant (5 times)

• Asia’s most admired Knowledge Enterprise Award ( 5 times in a row)

MAJOR
COMPETITORS

• ARCELOR MITTAL

• NIPPON STEEL

• JFE

• POSCO

• BAO STEEL

• In addition to this there are

various domestic competitors
including SAIL, Jindal steel.

• Essar Steel
FACTORS CONTRIBUTING TO TATA STEEL’S
COST LEADERSHIP
• Strict Cost Control Program

• Cost Reduction- Total Operating Performance

• Use of modern technology, Benefit of Innovation, Continuing Modernization &

• Modern Infrastructure

• Low raw material cost as it owns coal/limestone mines in Australia, Oman, Mozambique

• Low operating costs, Ongoing cost cutting, high domestic market growth rate,

• Domestic sales promotion

 TATA Steel

• India is among the least

cost producers of rolled
Steel.

• TATA is able to tap the low

production cots in India.

• Cost Of raw materials

amongst the lowest in India.

• The nearest competition

comes from SA, Brazil and
Russia.
Cost Factors: TATA

• Labour costs

• But productivity is a
concern.

• Comparative costs.
Cost Factors: TATA

• Freight and Transportation

costs come into play in
Global companies like TATA
Steel.

• It sources Raw Material

from Australia,
Mozambique(Africa) and
Europe.

• Margins are decreasing due

to the recessionary
conditions.

• Good news is that profits

are still intact.
Reliance Industries Ltd.
Polyester Industry

• Introduction

• Polyester & India

• Reliance’s Contribution

• Present Scenario
Reliance: Cost
Leader in
Polyester

•Strategies
Employed

• Targeting masses

• Efficient Production

• Economies of scale

• Innovation

• Low cost labor

• Raw material
Current Scenario
• RSCM-Reduced and Sustained Cost
Management.

• Category:

• Winners

• Mediocre

• Losers

• Dual focus:

• Strategic advantage

• Operational Advantage
Winner’s Strategy

• Carry out cost reductions

that aim to be optimal &
Sustainable.

• Reduce cost diagnostically,

not indiscriminately,
through an end to end
process driven approach.

• Identfy cost drivers with the

goal of optimising cost
value relationship and
minimising negative
impacts to the growth of
the business as a whole.
Methodology

• Secondary sources of information like D&B,

Edelweiss, Annual reports.

• Other literature on cost and management

accounting

• Webster, Williams. CPA. Accounting for Managers,

Mc Graw Hill, 2005

• Porter,. E. Michael. Competitive Strategy, Free Press,

1980

• Grant,.M. Robert. Contemporary Strategy Analysis,

Blackwell publishing, (wiley), Fifth Edition, 2007

• Homgren, Charles. Datar, Srikanth. Foster, George.

Cost Accounting. Pearson Prentice Hall, 2005
Thank You