The enterprise which has the ability to be active at the cost which is lower than competitive other companies relatively, that as a source of competitiveness, inside industry competition the competitive strategy which aims toward state or the actualization which is predominantly. The Michael E porter of the Harvard business college (Michael E. Porter) one among three basic strategies which the professor lectures.

The cost referred to here not only supply and the commodity stock of the raw material, until production, circulation, sale, marketing, service and ???????,it isthe cost the value chain in entirely.

The porter has listed "the control of the cost primary factor" and "the reorganization of the value chain" as the expedient which reduces cost. Control of the cost primary factor, for example the cost primary factor is "scale", if is, doing the investment and the mass branch store etc. to mass production equipment, economical efficiency of scale (the scale merit) it pursues, aiming toward the cost decrease with the improvement of efficiency of process,in order to be able to showthe experience curved line effect, it considers and/or it is the step which was said.

As for enterprise degree of freedom of price policy becomes large low by actualizing cost constitution. Reducing selling price, you aim toward the enlargement of the sale quantity and market share, you sell at the price which is equal to other companies and guarantee relatively high profit ratio and/or, width of selection spreads. As for the porter other than guaranty of this profit ratio, such as the tolerance for the discount required risk of the buyer and the price hike risk of the supplier and it designates that low the point where price strategy becomes the barriers to entry, "you can obtain elbowroom in management" as the merit.

When cost leadership will be actualized with the economical efficiency of the scale such as mass production and the large quantity stock, large-scale investment becoming necessary it is many. Therefore principlly it is the strategy which faces to the number one enterprise at market share and the like. Per unit cost is reduced due to the fact that the production/sale quantity and the like increases with share enlargement, the profit furthermore that the circulation, - - which does cost reduction effort is produced it has designated as the basic shape which it continues maintains the cost leadership strategy in the fund.