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.

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.

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 strategie…