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I think the author misses the point that lower prices can actually be an incredible strategic advantage as long as you have the business model that supports it.
by arnoldwh 15y ago
I think the author misses the point that lower prices can actually be an incredible strategic advantage as long as you have the business model that supports it. You only need to look at a business model like ikea or wal-mart to see this in action. It also creates a Nice barrier to entry as the scale and experience you need in order to achieve thst low cost base is often impossible for new entrants unless some sort of disruption happens.
One way to prevent some sort of disruption in a business is to make it so cheap that it's no longer worth the time and effort to threaten your business...
- tintin 15y agoI think the title is a little misleading. He says: "Cutting costs and only competing on price is a death spiral.". He is talking about competing only on price. Ikea is not only competing on price but also on quality. Making your product/service very cheap is a death spiral when it misses quality. Take a look at the very cheap Chinese Android tablets. They are so cheap it's unbelievable. But after half an hour they run out of power. You have to push the screen in half to make it responsive. That is a death spiral and not a threat to other businesses.