IMPACT OF COST LEADERSHIP AND DIFFERENTIATION ON PROFITABILITY IN INDONESIAN CONSUMER GOODS

Abstract

The intense competition in the consumer goods industry requires companies to implement appropriate and effective business strategies to enhance profitability. This study aims to analyze the effect of cost leadership and differentiation strategies on the profitability of consumer goods companies listed on the Indonesia Stock Exchange (IDX) during the 2019-2023 period. The research sample consists of 31 companies selected from a population of 49, using purposive sampling based on predetermined criteria. Data were analyzed using linear regression with IBM SPSS 26. The cost leadership strategy is measured using the Total Sales to Total Assets ratio, while the differentiation strategy is measured using the Sales to COGS ratio. Profitability measured by Return on Assets (ROA) and Net Profit Margin (NPM). The results show that the cost leadership strategy has a significant effect on ROA but not on NPM. In contrast, the differentiation strategy has a significant effect on both Return on Assets and Net Profit Margin. When applied simultaneously, both strategies significantly influence company profitability, with the differentiation strategy having a stronger impact than the cost leadership strategy. Therefore, companies are advised to combine both strategies to improve their competitiveness and profitability. Investors should consider companies that implement a differentiation strategy and those that adopt a combination of cost leadership and differentiation strategies when making investment decisions.