Low Cost Strategy Essay

Low cost outline is one of the three generic commercializeing strategies. Companies use this strategy to offer low price in its products/ run by focusing on various points in its value chain of mountains activities. In baseball club to be a self-made inexpensive rival in a competitive environment, companies focus on several(prenominal) issues which all(prenominal) pass from the ways of margin improvement (in terms of increasing tax income and reducing cost) and asset effectiveness (in the sense of minimizing working capital and maximise winning on asset).In separate words, we can say that inexpensive competitors focus on efficiency in its all activities by redefining and groovy costs in their value chain. Here are different attributes which cheap strategy focused companies make or follow in order to be competitive and have sustainable low-cost strategies Forming partnership in any(prenominal) activities which is too costly for the come with to do by itself and/or ou tsourcing manufacturing activities to low-cost countries.For example, Huawei Technologies (which is importing and go uping PBX telephone products) made partnership with 3Com and south so enter bracing markets and also by using its some otherwise competitive strengths it out contests Cisco (well-known global network manufacturer) within 5-6 years. Minimizing mazy and expensive activities such as, research and development, product design and marketing and standardizing products and designs. Having no-extra dish out but with the best use of asset utilization.For example, Southwest Airlines lowers its costs by no-frill goods but also achieve to maximize its profits by returning the plane from the gate to the air within very dead time (about 20 minutes). Combining low-price with product differentiation. For example, Japanese retailer Muji as a competitor to Wal-Mart and IKEA. It is very important for a low-cost strategy focused company to identify and deal with other low-cost competitors as early as possible before they become strong and successful competitor in market. in that respectfore, companies should consider their external environment especially its competitors in order to be able to become more competitive and view more market share as a low-cost provider. There are 4 ways of analyzing competitive environment 1) Identifying companys low-cost rivals Possible by detecting and responding emf low-cost competitors on time based on focusing low-cost strategies against to the company. 2) Performing a total cost abridgment Made by identifying a potential threats from companies which are more efficient in their product and value costs. ) maturation all potential scenarios Company makes what-if scenarios by clear understanding of the market and competitors sustainable capabilities in order to prepare remediate for future. 4) Determining companys best strategical moves In this lineament company uses its what-if scenario understandings in a way to be able to compete and beat its low-cost rivals. While developing companys strategic moves to gain higher market share and sustainable competitive edge, managers should develop both short-term tactics and long-term strategies.Short-term tactics drop out company to make stronger its strengths and also gain time for the needed analysis to be able to develop long-term strategies while keeping low-cost rivals in a position that does not threats the company. These tactics include whirl low-price product/services or providing some other sale incentives, several legal accomplishs such as patent infringement lawsuits, product/service differentiation and lastly focusing more attractive and profitable customers by letting unprofitable ones to rivals.These short-term tactics also, allow company to take hold market share as well as gain sustainability in its actions. Long-term strategies adjust companies to changing market conditions and also allow them to act on after new market opportuniti es. These strategies might be riskier than short-terms but take away more profits. Long-term strategy includes offering differentiated products, expanding products/services, unveiling into new geographical areas, becoming low-cost leader or having low-cost subsidiaries, expend in technology and lastly improving customer services.As an example, IBM was selling personal computers as a first mover but because it started to sell differentiated product of software by offering service solutions as well when Dell and Gateway started to sell lower priced personal computers. Overall, in order to be able to successfully compete with other low-cost rivals and have sustainability as a low-cost competitor in the market Firstly, company must analyze its internal and external environment by defining its own and also competitors market positions and potential threats to the company.Secondly, company must be action oriented by using its strengths and competitive advantage to eliminate early det ected potential threats for the company in future. Lastly, company must develop a strong plan of action to support its successful competition in the market by entering into the new markets and developing new products on the time and also adapting other necessary tactics as quick as possible.