The greatest risk of a low-cost provider strategy is getting lost with overly high price reduction and ending up with lower profit.
Low-cost / low-price advantage
It results in high profit only if;
- (1) prices are reduced by less than the size of the cost advantage or
- (2) the added volume is large enough to bring in a bigger total profit despite lower margins per unit sold.
Therefore, the greatest risk is a low profit.
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