Final answer:
Being the low cost provider in an industry means a company can offer goods or services cheaper due to lower costs. In a decreasing cost industry, this happens as the industry scales and benefits from technological advancements or better-educated employees. Companies can then offer lower prices while maintaining or increasing profits.
Step-by-step explanation:
To be the low cost provider in an industry means that a company can offer goods or services at a lower price than its competitors due to having a lower production or service cost structure. This competitive advantage can arise from various factors such as economies of scale, technological improvements, better supply chains, or more efficient labor usage. Therefore, a company that manages to operate at lower costs can set lower prices which can lead to higher market shares and potentially higher profits if managed correctly.
In a decreasing cost industry, the dynamic of becoming a low cost provider is even more pronounced. As the industry grows, technology improves or employee education increases, the average total costs across the industry tend to fall. This results in firms having the ability to offer their products or services at lower prices while maintaining or increasing profit margins. A real-world example is the high-tech industry, where technology improvements continuously drive down costs.
An illustration of this can be seen in a scenario where a messenger company benefits from falling gasoline prices, enabling them to expand their service area due to reduced costs, thereby increasing their market supply without raising prices – in essence becoming a low cost provider.