Cost Leadership Strategy

An overall cost leadership strategy involves providing products or services at a lower cost than your competitors and then charging lower prices than your competitors. The Aldi supermarket chain has a cost leadership strategy whereby their costs are lower than Coles and Woolworths and they in turn sell their groceries at lower costs than Coles and Woolworths. This is clearly a profitable strategy for Aldi as at December 2015 they had grown to 12.1% of the Australian grocery market (per Roy Morgan Research).

An accounting practice with an overall cost leadership strategy needs to reduce their costs below their competitors and then charge lower prices for their services than their competitors. This strategy is often employed by small accounting practices which operate with the principal doing the majority (if not all) of the work. The principals charge clients low fees, work long hours, operate with low overheads, and generally eke out minimal profits. For the hours these principals work the majority would be better off with a 9-5 job, but they enjoy being self-employed so continue operating their own practice. Up to 20% of Australia’s accounting practices operate their practice this way.