 | Value-for-Money Strategies for Recessionary Times |
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Harvard Business Review
Heft 03, Jahrgang: 2009
66 – 74
Peter J. Williamson / Ming Zeng
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| Schlagworte: |
| Strategy, Competition |
Value-for-Money Strategies for Recessionary Times
The authors use the recent changes in the global business environment to build their case for value-for-money marketing. The changes include: deregulation, lowering of trade barriers, demographic shifts and greater urbanisation.
Along with the current severe downturn (and its predecessor in 2000) these changes have resulted in the following: A third of companies in the first quartile of their industries before 2000 fell from thier positions and only 10% had returned five years later; US consumers are tightening their belts as the credit squeeze really takes hold - value-priced store brands saw their market share rise 2% while premium labels fell by the same amount.
Those companies that came out stronger after the 2000 recession had a common thread - they developed value-for-money strategies to get them through the downturn and emerged stronger than competitors. This technique has been a way of life for companies operating in emerging markets and the authors believe that Western companies could learn from them as well as from those companies at home who grew stronger after recent downturns.
The simplest way to deliver value-for-money is to cut costs. The authors argue however that COST INNOVATION rather than COST CUTTING is the key. They cite three dimensions to COST INNOVATION:
- Selling high tech products at mass-market prices
- Offering choice and customisation to value customers
- Turning premium niches into mass markets.
At first sight all of the above strategies are counter-intuitive to executives and managers brought up on the idea that if you have a premium product/service, you ’skim’ with your pricing - I.E. charge as much as possible. However - after giving multiple examples of how companies in emerging markets have profited from the above strategies - the authors show how Western multinationals can carry out counter-strategies.
- They go beyond using emerging markets for sourcing low cost materials – they move their R & D teams there. (CISCO and, INTEL have made moves in this direction).
- They develop products in emerging markets and then bring them back home to the Western hemisphere. (Diageo, Unilever and Hewlett-Packard have done this).
- They invest in brands as if they are emerging markets. (Acer of Taiwan and the Target-Haier promotion of the Haier air-conditioners are examples).
- They combine Western capabilities with those of emerging giants. (Example: 3Com with its Western network of customers and Huawei of China with its inexpensive product line, engineering capacity and service capabilities took market share from CISCO).
- They invest in growing mass markets in developing countries. (Nokia has made great inroads into China by investing in low cost phones for the mass market, becoming a leader in the low-end segment while still dominating the higher-priced segments).
The article is filled with examples of companies using value-for-money strategies to fight for market share in low-cost environments and compete in difficult times. It should be noted however that none of the examples quoted were small companies - all were large enough to be able to operate at both ends of their markets or to move large parts of their business overseas. Perhaps a manager of a small-to-medium company/business unit may gain some insights into improving his/her pricing strategies by reading the article but in the main it highlights the successes of major world players.
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(Laurie 23.03.2009) |
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