Low-Cost Producer

DEFINITION of 'Low-Cost Producer'

A company that can provide goods or services at a low cost. In general, low-cost producers utilize economies of scale in order to execute their strategy of low prices. Consumers that are sensitive to price changes will more likely shop at the stores that offer the lowest prices, if the good or service is relatively homogeneous. Alternatively, low-cost producers could even price the goods or services at the same level as their competitors and maintain a wider margin.

BREAKING DOWN 'Low-Cost Producer'

Becoming a low-cost producer requires enough capital to achieve economies of scale large enough to provide a distinct price advantage over competitors. This requirement is one reason why many companies are not able to be low-cost producers. Wal-Mart is likely the best example of a low-cost producer with massive economies of scale.

RELATED TERMS
  1. Net Margin

    Net Margin is the ratio of net profits to revenues for a company ...
  2. Large Cap - Big Cap

    A term used by the investment community to refer to companies ...
  3. Core Competency

    A narrowly defined field or task at which a company excels. A ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at ...
  5. Green Economics

    Green economic theories encompass a wide range of ideas all dealing ...
  6. Environmental Economics

    An area of economics that studies the economic impact of environmental ...
Related Articles
  1. Stock Analysis

    The Biggest Risks of Investing in Qualcomm Stock (QCOM, BRCM)

    Understand the long-term fundamental risks related to investing in Qualcomm stock, and how financial ratios also play into the investment consideration.
  2. Investing Basics

    How To Be A Conservative Investor

    It may not be the most exciting path to take in the investing world, but conservative investing is an extremely safe bet.
  3. Economics

    A Practical Look At Microeconomics

    Learn how individual decision-making turns the gears of our economy.
  4. Active Trading

    Why You Can't Influence Gas Prices

    Don't believe the water-cooler talk. Big oil companies aren't to blame for high prices.
  5. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  6. Retirement

    Investing Books It Pays To Read

    We provide some classic and lesser-known titles to add to your collection.
  7. Economics

    Economist Guide: 5 Lessons Milton Friedman Teaches Us

    Find out what can still be learned from the late economist Milton Friedman, a Nobel prize winner and champion of free market economics.
  8. Economics

    Economist Guide: 3 Lessons Karl Marx Teaches Us

    Read about three lessons that modern economic thinkers can learn from German philosopher Karl Marx, the founding father of communism.
  9. Term

    The History and Purpose of TQM

    Total quality management explores processes to enhance quality and productivity.
  10. Fundamental Analysis

    The 3 Best Investments When Bull Markets Slow Down

    Find out why no bull market lasts forever, and why investors should shift their assets away from growth and toward dividends when stocks slow down.
RELATED FAQS
  1. What's the difference between microeconomics and macroeconomics?

    Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and ... Read Full Answer >>
  2. How do you make working capital adjustments in transfer pricing?

    Transfer pricing refers to prices that a multinational company or group charges a second party operating in a different tax ... Read Full Answer >>
  3. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  4. Does working capital include inventory?

    A company's working capital includes inventory, and increases in inventory make working capital increase. Working capital ... Read Full Answer >>
  5. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  6. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
Hot Definitions
  1. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  2. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  3. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  4. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  5. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center