Beating low cost competition : how premium brands can respond to cut-price rivals

Author(s)

• Ryans, Adrian B.

Bibliographic Information

Beating low cost competition : how premium brands can respond to cut-price rivals

Adrian Ryans

John Wiley & Sons, c2009

Note

Includes bibliographical references and index

Description and Table of Contents

Description

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.

Table of Contents

Contents Preface Acknowledgments 1 The Growing Challenge from Low Cost Competitors The Challenge is Real and It is Here to Stay Retailing Airlines Banking Fast-moving consumer goods Consumer electronics Business-to-business products and services In Many Industries the Major Threat is Coming from Asia Many Customers Prefer Good Enough Products and Services Low Cost Competition Is Not All Bad News Understanding and Responding to the Challenge of Low Cost Competition 2 Why the Threat from Low Cost Competition is Intensifying Value Propositions Have Three Core Elements Performance value Price value Relational value One core value proposition is usually emphasized The relative size of the different value segments may evolve over time Product category life cycles are getting shorter The Traditional Integrated Business Model is Disintegrating Three core processes underpin any business Giving balanced attention to all three core processes can lead to conflict Companies are leveraging the specialized players Companies with focused business models are playing a much bigger role in many industries Many more companies are opening their business models But there are significant risks in relying more on strategic partners Total solution coordinators are helping some companies leverage these networks Growing Support for Low Cost Competitors Low cost entrants sometimes have powerful supporters Customers are increasingly willing to buy from low cost players Challenge Questions 3 Understanding How Low Cost Competitors Play the Game Ryanair Performance has been outstanding Value proposition is crystal clear Business model is innovative and focused Extreme focus on cost control Created a virtuous cycle So far . . . so good ING DIRECT USA Borrowed with pride Appealing value proposition Early success Competition finally responds and ING DIRECT raises the stakes Learning from Low Cost Competitors Question every element of the traditional business model Have very simple and straightforward value propositions Avoid complexity at any cost Break through the communication clutter Be a cost innovator Remember that the customer is not always right Have the courage to drop prices significantly below competition Traditional Players Can Learn from Low Cost Competitors Challenge Questions 4 Realistically Assessing the Threat Some Industries Are Less Vulnerable to the Low Cost Threat Why Companies Fail to Respond to the Low Cost Threat in a Timely Manner The low cost threat is underestimated The low cost threat often takes time to gain momentum Sometimes it is the second-order effects that have the biggest impact Realistically Assessing the Threat ... and the Opportunity "Beat my business" exercises can be a useful tool Identifying actual and potential low cost competitors is key Understanding what is driving the strategy of the low cost competitors Core capabilities, distinctive resources and major gaps are often key drivers of a low cost competitor's strategy Low cost competitors can overcome critical gaps in creative ways How might a low cost competitor significantly enhance its position? Low cost competitors often follow similar strategies to improve their position It is a challenge to anticipate the moves of unconventional competitors Most Business Models Have Limited Reach Developing a Worst Case Scenario Can Provide a "Burning Platform" Framing the Financial Analysis as a Comparison of Two Futures is Critical Challenge Questions 5 Confronting Low Cost Competitors in the Price Value Segment of the Market Competing at All Levels in the Market is Usually Not Necessary The Challenge Decision Requires Thinking Through Many Issues Arguments for Entering the Price Value Segment "Good enough" products can meet a real market need Opportunity to engage price value customers and develop better solutions to their needs over time Opportunity to grow with customer as their strategies evolve May provide an opportunity for "up-selling" Gives traditional players some "control" over low cost competitors Arguments For Not Entering the Price Value Segment Conflicts with the traditional value proposition of the business Encourages cannibalization of high-end products Lacks resources and capabilities to successfully compete Value Chain Members Can Impact Decisions An Alternative Way to Provide a Price Value Solution to the Market Making the Decision in a Timely Manner Should the Price Value Business Be Independent? Integration has several potential advantages Advantages of independence often outweigh the advantages of integration Some Major Tactical Decisions Make versus buy Brand choice is a critical decision Developing new sales and distribution channels is often necessary Need to evolve channels over time Nokia Developed a Strong Position in the Entry Mobile Phone Segment Local Chinese competitors emerged quickly Nokia responded rapidly to the threat Nokia's results to date in the entry-level business have been very good Dow Corning Decided to Compete Aggressively for Price Seeking Customers Dow Corning faced a very tough situation in 2000 Dow Corning launched a new business unit And the strategy seemed to work well Aer Lingus Played a Price Value Game in a Different Segment Competing in Ryanair's home market A difficult balancing act between cost cutting and differentiation Some initial successes but is it sustainable? Challenge Questions 6 Avoiding Head-to-Head Competition with Low Cost Competitors by Playing a Different Game Enhancing Performance Value Electrolux was not well positioned for the emerging market environment Electrolux responded to the challenge on multiple fronts Electrolux has made some progress but the challenges still loom large Maintaining Performance Leadership is a Challenge Today Rising costs and shortening windows represent a significant issue Using open business models can help Performance value leadership requires constant innovation Getting beyond the strategic breakpoint can create real competitive advantage Stressing Relational Value Orica was facing total commoditization of its core products Orica began moving toward providing solutions for its customers Orica leveraged its global leadership position to stay ahead Tesco built relational value in a mass-market Tesco combated the threat of the hard discounters by creating customer value Tesco also managed its costs very effectively Tesco is the clear leader in the UK and expanding aggressively into new markets Challenge Questions 7 The Leadership Challenge Compaq Failed to Make a Successful Transition Meeting the Challenge of Low Cost Competition Often Requires a Corporate Transformation Numbers can support the need for change Building and Managing a Successful Price Value Business Product and service design challenge Marketing, sales and distribution challenge The cost control challenge Creating and Managing a Relational Value Business Designing an organization that will encourage building relational value Developing and using deep customer and market knowledge Inculcating a customer focused culture throughout the organization Building relational value is not a quick fix Challenge Questions 8 An Even More Challenging Future Cost Innovation Must be Part of Everybody's Game The Threat From Low Cost Competition Will Intensify Traditional Companies Can Leverage Networks to Try to Stay Ahead Low Cost Competitors Face Their Own Challenges Anticipate Possible Future Competitive Moves and Proact Be Willing to Re-think Traditional Business Wisdom Put the Customer on Center Stage References Index

by "Nielsen BookData"

Details

• NCID: BB08795171
• ISBN:
  • 9780470742976
• LCCN: 2008053896
• Country Code: uk
• Title Language Code: eng
• Text Language Code: eng
• Place of Publication: Chichester
• Pages/Volumes: xvi, 256 p.
• Size: 24 cm
• Classification:
  • LCC : HF5415.15
  • DC22 : 658.8/27
• Subject Headings:
  • LCSH : Product management
  • LCSH : Price cutting
  • LCSH : Brand choice
  • LCSH : Brand name products
  • LCSH : Marketing