Question

1. Consider companies A and B. If A sells a product to B, and the cost of this product makes up a significant portion of the B’s cost of goods sold (COGS), then B is strongly incentivized to be highly informed about A’s costs and alternatives to buying from A’s. This information can contribute to B having buyer power avoiding the need to "send itself flowers." Do you agree/disagree with the statement above? Provide an example from the Crown Cork and Seal case to support/refute the statement A firm can enjoy overall cost leadership even if the source of a firm’s low-cost position is available to its rivals. Do you agree/disagree with the statement above? Please provide an example from our discussion about Toyota to support/refute the statement.

Answer 1

Answer: I agree to the statements

Explanation: Buyer power also called Buyer Bargaining Power is the ability of a consumer to exert pressure on the service to get it to deliver quality products, lower costs and better customer service.

Company B having alternatives can be used to its advantage to threaten company A to do its abiding or he is forced to move to the alternative. Just as in the case of Cork and Seal, they had more than 1 supplier.

Cost leadership is a strategy in which a company's products are the most lowly priced products making it better position to compete effectively.

Source of strategy for cost leadership may be available to competitors but they may not be willing to go down that line for fear of the unknown. Toyota for instance drive its cost lower by investing in efficient scale facilities, overhead control and minimization of cost.