There are a number of risks associated with being a low cost operator.
- A cost leadership strategy may have the disadvantage of lower customer loyalty, as price-sensitive customers will switch between operators if they offer a better price.
- A reputation as a cost leader may also result in a reputation for low quality, which may make it difficult for a firm to rebrand itself or its products if it chooses to shift to a differentiation strategy in future.
- Technological change may nullify past investment or learning.
- Low cost operators may be so focused on cost and their specific business model, they may be unable to modify their offer and respond to changes in the market.
- The business model is highly dependent on the costs of the raw materials and labour, over which there may be limited control.