A cost leader is a company that operates with the lowest cost structure in its industry. This fundamental advantage allows it to price its products or services lower than its competitors while still achieving profitability. By leveraging its low costs to set aggressive prices, the cost leader can initiate price wars, deter new entrants, and discipline the market. This effectively establishes a price benchmark or 'standard' that other firms must follow to remain competitive. Therefore, a cost leader not only has the ability to lower prices but also significantly influences the overall pricing dynamics of the marketplace.

A: This statement is too absolute. While a cost leader's primary weapon is lowering prices, it can raise them if market conditions, such as a general rise in input costs, allow for it.

C: This is incorrect. The core of the cost leadership strategy is using a low-cost base to exert significant influence over market pricing, often forcing competitors to react.

D: While cost leadership often results in a large market share, the claim that they 'never' reduce prices is the opposite of their strategic capability and primary competitive tool.

1. Porter, M. E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. Free Press. In Chapter 2, "Generic Competitive Strategies," Porter explains that a cost leader's position defends it against competitive rivalry because "its lower costs allow it to continue to earn returns after its competitors have competed away their profits... A cost leader can price aggressively to capture market share, setting the pricing tone for the industry." (pp. 35-36).

2. Grant, R. M. (2016). Contemporary Strategy Analysis (9th ed.). Wiley. In Chapter 7, "The Sources and Dimensions of Competitive Advantage," Grant states, "The cost leader chooses a price at or near the industry average... Alternatively, it can choose to price below its rivals in order to gain market share. The ability to survive price competition gives the cost leader a key advantage in commodity markets." (p. 168).

3. MIT OpenCourseWare. (2014). 15.900, Competition, Innovation, and Strategy, Lecture Notes, Lecture 4: Cost Leadership. Massachusetts Institute of Technology. The course materials explain that a key benefit of cost leadership is the ability to "price lower than competitors to attract price-sensitive buyers" and "better withstand price wars," which demonstrates the firm's role in setting a market price standard.