Low-Cost Producer
Categories: Company Management, Financial Theory
Low-cost producers are businesses that can produce a service or item at a lower cost than their competition. They're the companies that have gone above and beyond with technology, lean processes, streamlining, or any combination of these to produce a product the market wants at a price the market embraces.
In highly competitive commodity marketplaces, where there exists almost no qualitative differentiation, price is "everything." So if a producer can make a widget 3% cheaper than its competition, it's kind of a winner-take-all event, where that relatively small 3% difference wins some 80% of the market, in practice.
Think: things like D-RAM (computer memory), coal, airplane travel, windshield wipers, and so on. Big volume usually implies volume discounting up the supply chain, and only supplements the winner's cat-bird seat in owning the world.