Value parity Often refers to the design of matching prices with the mart chief, which is the business that dominates the bazaar for the twin type of product or overhaul.
Achieving Cost Parity
Achieving value parity is a modus operandi that takes age for fashionable firms to accomplish, according to the publication "Systems Approaches to Managing Chicken feed." Firms must first find ways to chop their own production or service costs before achieving cost parity.
Businesses much seek ways to accomplish payment parity with bazaar leaders.Price parity money matching prices. A association has achieved payment parity with another whether it charges the corresponding cost for the identical product or overhaul.
To compete with market leader prices, they typically must learn to become market leaders themselves.
Market Leadership Process
Achieving cost parity with the market leader often means learning leverage economies of scale and using experience to become more efficient. Leveraging economies of scale means gaining cost advantages from producing and selling products in higher volume. The cost of production per unit can decrease dramatically when a firm produces increased amounts of a product. A larger company typically secures materials for a lower cost, For example. Likewise, an experienced company learns to streamline its processes and hires the appropriate number of employees to fulfill the necessary functions. These strategies allow a newer company to grow closer to cost parity with the market leader.
Maintaining Cost Parity
After a company achieves cost parity with a market leader, or holds the lowest market price, the company must continue working to preserve its position. Newer companies are likely entering the market with the same goal of achieving cost parity. While a learning curve exists, it doesn't extend indefinitely, according to the book "Strategic Management Theory." Thus, these newer companies might soon achieve parity, too. To preserve an advantage and keep prices from lowering because of market competition, a firm should cultivate additional competitive advantages such as customer service.
Considerations
The concept of cost parity loses meaning when the products or services being compared have significant differences. For instance, the essential differences between "clean energy" and energy derived from fossil fuels complicate the concept of cost parity in this context. Thinking of costs in a non-monetary sense, or in terms of future cleanup and restoration efforts, is essential. The price per liter of gasoline is not the true cost of this fuel, in other words.
