9780470742976

Beating Low Cost Competition : How Premium Brands Can Respond to Cut-Price Rivals

by
  • ISBN13:

    9780470742976

  • ISBN10:

    0470742976

  • Edition: 1st
  • Format: Hardcover
  • Copyright: 2009-03-23
  • Publisher: Wiley

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Summary

Low cost competitors, who offer "good enough" products and services at very attractive prices, are currently significantly impacting the businesses of many leading companies, and some are starting to "move up" to challenge the traditional companies in their core markets. It's only a matter of time before most companies will feel the pressure from these aggressive, cut-price competitors. Beating Low Cost Competition offers a step-by-step structured approach to help executives in traditional companies with premium brands think through the options for responding to their low cost rivals and select the most appropriate strategy to win in their chosen markets.By examining a wide-ranging group of companies from around the world, Adrian Ryans provides numerous examples of how different companies in different industries have responded to low cost competitors and analyses the effectiveness of their strategies. He also discusses the leadership and cultural challenges that many companies are facing as they take steps to respond to their low cost rivals.Ultimately, the insights gained from this book will lead to better and more profitable business decisions.Adrian Ryans is Professor of Marketing and Strategy at IMD, Lausanne, Switzerland. He has designed and taught on executive programs for organizations in North America, Europe, Australia and Asia, including GE, Bank of Montreal, Medtronic, Deloitte, Borealis, Saurer, Vestas, IBM, Boeing, National Semiconductor, BioWare, ASML, Holcim, Varian, Hoechst, Amgen, Fluke, LSI Logic, Hutchison Port Holdings and Qualcomm. He has also acted as a consultant for a number of leading global corporations.

Author Biography

Adrian Ryans is Professor of Marketing and Strategy at IMD, Lausanne, Switzerland. He has designed and taught on executive programs for organizations in North America, Europe, Australia and Asia, including GE, Bank of Montreal, Medtronic, Deloitte, Borealis, Saurer, Vestas, IBM, Boeing, National Semiconductor, BioWare, ASML, Holcim, Varian, Hoechst, Amgen, Fluke, LSI Logic, Hutchison Port Holdings and Qualcomm. He has also acted as a consultant for a number of leading global corporations.

Table of Contents

Prefacep. xiii
Acknowledgmentsp. xv
The Growing Challenge from Low Cost Competitorsp. 1
The Challenge is Real and It is Here to Stayp. 3
Retailingp. 5
Airlinesp. 6
Bankingp. 6
Fast-moving consumer goodsp. 7
Consumer electronicsp. 8
Business-to-business products and servicesp. 9
In Many Industries the Major Threat is Coming from Asiap. 11
Many Customers Prefer Good Enough Products and Servicesp. 13
Low Cost Competition is Not All Bad Newsp. 14
Understanding and Responding to the Challenge of Low Cost Competitionp. 16
Why the Threat from Low Cost Competition is Intensifyingp. 21
Value Propositions Have Three Core Elementsp. 22
Performance valuep. 23
Price valuep. 24
Relational valuep. 25
One core value proposition is usually emphasizedp. 25
The relative size of the different value segments may evolve over timep. 26
Product category life cycles are getting shorterp. 29
The Traditional Integrated Business Model is Disintegratingp. 30
Three core processes underpin any businessp. 32
Giving balanced attention to all three core processes can lead to conflictp. 34
Companies are leveraging the specialized playersp. 38
Companies with focused business models are playing a much bigger role in many industriesp. 41
Many more companies are opening their business modelsp. 43
But there are significant risks in relying more on strategic partnersp. 45
Total solution coordinators are helping some companies leverage these networksp. 46
Growing Support for Low Cost Competitorsp. 47
Low cost entrants sometimes have powerful supportersp. 47
Customers are increasingly willing to buy from low cost playersp. 49
Challenge Questionsp. 50
Understanding How Low Cost Competitors Play the Gamep. 51
Ryanairp. 51
Performance has been outstandingp. 51
Value proposition is crystal clearp. 52
Business model is innovative and focusedp. 53
Extreme focus on cost controlp. 57
Created a virtuous cyclep. 58
So far ... so goodp. 60
ING DIRECT USAp. 61
Borrowed with pridep. 61
Appealing value propositionp. 62
Early successp. 64
Competition finally responds and ING DIRECT raises the stakesp. 65
Learning from Low Cost Competitorsp. 66
Question every element of the traditional business modelp. 66
Have very simple and straightforward value propositionsp. 68
Avoid complexity at any costp. 69
Break through the communication clutterp. 71
Be a cost innovatorp. 73
Remember that the customer is not always rightp. 76
Have the courage to drop prices significantly below competitionp. 77
Traditional Players Can Learn from Low Cost Competitorsp. 78
Challenge Questionsp. 81
Realistically Assessing the Threatp. 83
Some Industries Are Less Vulnerable to the Low Cost Threatp. 85
Why Companies Fail to Respond to the Low Cost Threat in a Timely Mannerp. 86
The low cost threat is underestimatedp. 86
The low cost threat often takes time to gain momentump. 88
Sometimes it is the second-order effects that have the biggest impactp. 91
Realistically Assessing the Threat ... and the Opportunityp. 98
"Beat My Business" exercises can be a useful toolp. 99
Identifying actual and potential low cost competitors is keyp. 100
Understanding what is driving the strategy of the low cost competitorsp. 101
Core capabilities, distinctive resources and major gaps are often key drivers of a low cost competitor's strategyp. 103
Low cost competitors can overcome critical gaps in creative waysp. 104
How might a low cost competitor significantly enhance its position?p. 106
Low cost competitors often follow similar strategies to improve their positionp. 108
It is a challenge to anticipate the moves of unconventional competitorsp. 110
Most Business Models Have Limited Reachp. 113
Developing a Worst Case Scenario Can Provide a "Burning Platform"p. 116
Framing the Financial Analysis as a Comparison of Two Futures is Criticalp. 118
Challenge Questionsp. 120
Confronting Low Cost Competitors in the Price Value Segment of the Marketp. 123
Competing at All Levels in the Market is Usually Not Necessaryp. 125
The Challenge Decision Requires Thinking Through Many Issuesp. 127
Arguments for Entering the Price Value Segmentp. 127
Good enough products can meet a real market needp. 127
Opportunity to engage price value customers and develop better solutions to their needs over timep. 128
Opportunity to grow with customers as their strategies evolvep. 128
May provide an opportunity for "up-selling"p. 129
Opportunity for synergiesp. 130
Gives traditional players some "control" over low cost competitorsp. 132
Arguments For Not Entering the Price Value Segmentp. 132
Conflicts with the traditional value proposition of the businessp. 132
Encourages cannibalization of high-end productsp. 133
Lacks resources and capabilities to successfully competep. 133
Value Chain Members Can Impact Decisionsp. 135
An Alternative Way to Provide a Price Value Solution to the Marketp. 136
Making the Decision in a Timely Mannerp. 137
Should the Price Value Business Be Independent?p. 138
Integration has several potential advantagesp. 139
Advantages of independence often outweigh the advantages of integrationp. 141
Some Major Tactical Decisionsp. 145
Make versus buyp. 145
Brand choice is a critical decisionp. 147
Developing new sales and distribution channels is often necessaryp. 149
Need to evolve channels over timep. 150
Nokia Developed a Strong Position in the Entry Mobile Phone Segmentp. 151
Local Chinese competitors emerged quicklyp. 152
Nokia responded rapidly to the threatp. 152
Nokia's results to date in the entry-level business have been very goodp. 153
Dow Corning Decided to Compete Aggressively for Price Seeking Customersp. 153
Dow Corning faced a very tough situation in 2000p. 154
Dow Corning launched a new business unitp. 155
And the strategy seemed to work wellp. 156
Aer Lingus Played a Price Value Game in a Different Segmentp. 156
Competing in Ryanair's home marketp. 158
A difficult balancing act between cost cutting and differentiationp. 158
Some initial successes but is it sustainable?p. 160
Challenge Questionsp. 162
Avoiding Head-to-Head Competition with Low Cost Competitors by Playing a Different Gamep. 165
Enhancing Performance Valuep. 166
Electrolux was not well positioned for the emerging market environmentp. 167
Electrolux responded to the challenge on multiple frontsp. 168
Electrolux has made some progress but the challenges still loom largep. 170
Maintaining Performance Leadership is a Challenge Todayp. 172
Rising costs and shortening windows represent a significant issuep. 172
Using open business models can helpp. 174
Performance value leadership requires constant innovationp. 176
Getting beyond the strategic breakpoint can create real competitive advantagep. 178
Stressing Relational Valuep. 180
Orica was facing total commoditization of its core productsp. 183
Orica began moving towards providing solutions for its customersp. 184
Orica leveraged its global leadership position to stay aheadp. 185
Tesco built relational value in a mass-marketp. 186
Tesco combated the threat of the hard discounters by creating customer valuep. 187
Tesco also managed its costs very effectivelyp. 189
Tesco is the clear leader in the UK and is expanding aggressively into new marketsp. 191
Challenge Questionsp. 192
The Leadership Challengep. 193
Compaq Failed to Make a Successful Transitionp. 195
Meeting the Challenge of Low Cost Competition Often Requires a Corporate Transformationp. 197
Numbers can support the need for changep. 201
Building and Managing a Successful Price Value Businessp. 202
Product and service design challengep. 202
Marketing, sales and distribution challengep. 203
The cost control challengep. 205
Creating and Managing a Relational Value Businessp. 206
Designing an organization that will encourage building relational valuep. 208
Developing and using deep customer and market knowledgep. 210
Inculcating a customer focused culture throughout the organizationp. 211
Building relational value is not a quick fixp. 213
Challenge Questionsp. 216
An Even More Challenging Futurep. 219
Cost Innovation Must be Part of Everybody's Gamep. 220
The Threat From Low Cost Competition Will Intensifyp. 221
Traditional Companies Can Leverage Networks to Try to Stay Aheadp. 223
Low Cost Competitors Face Their Own Challengesp. 224
Anticipate Possible Future Competitive Moves and Proactp. 226
Be Willing to Re-think Traditional Business Wisdomp. 227
Put the Customer on Center Stagep. 228
Referencesp. 231
Indexp. 243
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