An overall low cost position enables the firm to achieve above average returns despite strong competition.
It protects a firm against rivalry from competitors, because lower costs allow a firm to earn returns even if its competitors eroded their profits through intense rivalry.
Buyers can exert power to drive down prices only to the level of the next most efficient producer, because there are relatively few competitors that can provide a comparable cost/value proposition.
Because the cost advantage can be applied across all operations, a low-cost position puts the firm in a favorable position with respect to substitute products introduced by new and existing competitors.Improving Competitive Position:
An Overall Low Cost Position