Best cost strategy is the strategy of increasing quality of products while reducing costs. This strategy is hybrid. It balances a strategic emphasis on differentiation which is understandable from the following figure:
Precaution for company to become a best cost provider
It must have the resources and capabilities to achieve high quality at lower costs than the competitors.
It must incorporate appealing (attractive) features at a lower costs than competitors.
It must match product preference and at a lower cost than competitors.
It must provide good to excellent customer service at a lower cost than competitors.
Although Toyota Motor Company is known for its low cost strategy, it applied best cost strategy when it manufactured its luxury car Lexus models. To compete against such luxury car makers as BMW and Mercedes Benz, Toyota management started making Lexus a car with premium quality at low costs below its competitors.
Market situation: where best cost strategy works well
Buyer diversification: Best cost strategy works well in a market where product differentiation becomes the norm because of buyer diversification. And also a substantial number of Byers are sensitive to price quality.
2. Positioning advantage: With a medium quality product at below average price or with a very good product at a medium price
3. Resource and capabilities: it will work best when the company has the resource know how and capabilities to incorporate upscale product attributes at a lower costs.