Lower cost products - Definition and more | The-Definition.com (2024)

FAQs

What is the meaning of low cost production? ›

3. Low cost production means the crop production that utilises less capital. It depends on the natural techniques and resources. For example, organic farming that depends on techniques like crop rotation, green manure, compost, and biological pest control.

Companies with low production costs are able to produce goods and services at a lower price than their competitors, which can make them more competitive in the market. This can also help them generate higher profit margins.

Lower of cost or market is a method of valuing assets where the asset is valued at either the historical cost or the fair market value, whichever is lower. When the value of the inventory has declined below its cost, a firm may choose the lower of cost or market method.

adjective. able to be purchased or acquired at relatively little cost: low-cost life insurance; low-cost housing.

Walmart is likely the best example of a low-cost producer with massive economies of scale. The company operates about 11,443 retail locations under different banners in 24 countries. 1 Walmart has several strategies in place making it impossible for its competition to keep up.

A low-cost provider strategy — striving to achieve lower overall costs than rivals and appealing to a broad spectrum of customers, usually by under-pricing rivals.

Cost reduction has many potential benefits, including improved profitability, cash flow, and competitiveness. When done correctly, cost reduction can also help improve quality and service levels while still maintaining or improving bottom-line results.

In the low cost strategy, a company must have a thorough understanding of costs and how to continually reduce them. The company must be willing to standardize its offerings in order to manage costs, which implies that exceptions requested by prospective customers must be limited or excluded in order to keep costs down.

A pricing strategy in which a company offers a relatively low price to stimulate demand and gain market share.

What is the difference between low cost and cheap? ›

Simply put, low cost is good quality for real money whereas, cheap is low quality for unrealistic low price. Low cost consist on driving price competiveness down by removing non-added value characteristics or functionalities of the product or service without affecting the final customer and consumer experience.

Lower cost: Cheap products are typically less expensive than high-quality products. This can be a major advantage for consumers who are on a budget. More affordable: Cheap products can be more affordable for people with lower incomes. This can help to make these products more accessible to a wider range of people.

The total price paid for the resources used to manufacture a product or create a service, such as raw materials, labour, and others, is called the production cost. The product/service created is to be sold to consumers.

Streamlining Processes

Process streamlining is a fundamental way to cut costs in low-volume production. By carefully analyzing the production flow, businesses can identify and eliminate unessential steps, reduce cycle times, and improve efficiency.

If the cost of production is lower, the profits available at a given price will increase, and producers will produce more. With more produced at every price, the supply curve will shift to the right, meaning an increase in supply.

The Least-cost Combination of Inputs refers to the optimal blend of production factors that a firm uses to produce a given level of output at the least possible cost. These inputs typically include labour, capital, land, and raw materials.