Name and Describe the Three Different Types of Cost Advantage

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The Answer is The three types of cost advantage are:
(1)Variable Cost Advantage - Businesses with a lower unit cost are able to achieve the same (or better)unit margin at lower prices than competing businesses.Volume is a key factor in achieving a low variable cost advantage.As volume increases,the cost per unit generally decreases.A larger production volume allows for production and purchasing economies that lower the unit cost of a product,thereby creating a scale effect.Likewise,as a business adds products to its product line that have similar purchased materials and manufacturing processes,it is able to lower the average unit cost of all products,producing a scope effect.Finally,as a business builds more of the same product,there is a greater opportunity for learning effects.These non-scale,non-scope effects contribute to lower costs through process improvements that are the result of learning.
(2)Marketing Cost Advantage - Can be derived from product line extensions.It takes a certain number of salespeople to adequately cover a target market.As the sales force is given more products to sell to the same customers,a marketing cost scope effect is created.Another area of marketing cost advantage is derived from the advertising cost efficiency of a brand extension strategy.
(3)Operating Cost Advantage - Although an operating cost advantage is generally outside the control or influence of the marketing function,lower operating expenses relative to competitors contribute to a cost advantage.

Name and Describe the Three Different Types of Cost Advantage

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Name and Describe the Three Different Types of Cost Advantage

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