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Organizational Innovations for Modern Enterprise

3   The Essence of Competition


COMPARE The Myth The Truth

Being competitive means cutting costs.

Being competitive means improving quality.

Objective To attract more customers by lowering prices. To attract more customers by improving quality.  
Method Delivering "one size fits all" products and services, with the bare minimum support needed to get the customer to buy. Focus is on the one-off sale. Deals are cinched with low sticker price. Delivering customized products and services, with as much support as is feasible. Focus is on developing customer loyalty. The spotlight on quality attracts ready buyers.  
Inputs & Outputs The cheapest available materiel, equipment and labour are used. Outputs have few features. Customers receive low level service and minimal support. The best reasonable materiel, equipment and labour are used. Outputs have many features. Customers receive enhanced service and extended support.  
Result for Internal Systems The high volume strategy puts greater stress on equipment and personnel, while there is less reinvestment money for maintenance or pay raises. The low volume, high value added strategy earns a premium price, while equipment is used less and better maintained. Employees receive greater rewards for more challenging work.  
Competitive Outcome This company comes into direct competition with lower-cost producers who are also competing in terms of price. This company raises the level of competition, on its way to becoming the best in the world. Others play "catch-up".  
Market Outcome Customers who buy according to price are never brand-loyal. Customer base erodes as competitors offer even cheaper products and services. Customers who buy according to quality are very loyal. Customer base grows as reputation for excellence spreads.  

 

 
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