The High Stakes of Low-Cost Competition

Low-cost competitors are on the offensive in many industries, from airlines to B2B capital equipment markets, eating away at the market share traditionally enjoyed by premium companies. Dealing with low-cost competition first requires understanding how radically the business model has changed: fewer companies are doing it all, but rather specializing in either product development or delivery or customer relationships. While there may be good reasons for adopting a more focused business strategy, companies need to realize how the interplay between premium and low-cost rivals is, in fact, fuelling the threat, which needs to be craftily managed. Using a multitude of real business examples, the author insists that companies today must learn how to take on low-cost competitors in the good-enough segment, develop hard-to-copy performance leadership products, and build deep and lasting relationships with their customers. A dual-pronged strategy ? one that both challenges low-cost competitors in the good-enough segment, while also competing as a premium player using either performance leadership or relational value options ? can serve to beat low-cost competitors at their own game.