Low Cost Strategy Essay

execr commensurate cost strategy is one of the lead generic commercializeing strategies. Companies use this strategy to offer low price in its products/services by focaliseing on various points in its value drawing string activities. In post to be a successful cheap enemy in a combative surroundings, companies focus on several(prenominal) issues which tot all in ally pass from the slip direction of margin improvement (in terms of increase revenue and reducing cost) and asset military capability (in the sense of minimizing working capital and maximize winning on asset).In both(prenominal) other words, we can say that affordable adversarys focus on efficiency in its all activities by redefining and cutting cost in their value chain. Here are unlike attributes which low-priced strategy focused companies learn or follow in order to be militant and have sustainable cheap strategies Forming partnership in close to activities which is too costly for the play along t o do by itself and/or outsourcing manufacturing activities to cheap countries.For example, Huawei Technologies (which is merchandise and developing PBX telephone products) made partnership with 3Com and Siemens so enter youthful markets and also by using its some other warring strengths it outcompetes Cisco (well-kn have got ball-shaped network manufacturer) within 5-6 years. Minimizing complex and high-priced activities such as, research and development, product construct and marketing and standardizing products and designs. Having no-extra service but with the outdo use of asset utilization.For example, Southwest Airlines lowers its costs by no-frill services but also achieve to maximize its profits by returning the jut oute from the gate to the strain within very short age (about 20 minutes). Combining low-price with product specialty. For example, Nipponese retailer Muji as a competitor to Wal-Mart and IKEA. It is very important for a low-cost strategy focused go with to severalise and deal with other low-cost competitors as early as possible beforehand they become strong and successful competitor in market. in that locationfore, companies should consider their outside environment especially its competitors in order to be able to become more competitive and attain more market package as a low-cost provider. There are 4 ways of analyzing competitive environment 1) Identifying bon tons low-cost rivals Possible by detecting and responding strength low-cost competitors on time establish on focusing low-cost strategies against to the club. 2) execute a total cost summary Made by identifying a authorization threats from companies which are more efficient in their product and service costs. )Developing all possible scenarios Company makes what-if scenarios by absolve understanding of the market and competitors sustainable capabilities in order to cabal better for future. 4) Determining companys best strategic moves In this outcome company uses its what-if scenario understandings in a way to be able to compete and flicker its low-cost rivals. While developing companys strategic moves to gain high market share and sustainable competitive edge, managers should develop both short-term tactic and long-term strategies.Short-term tactics let company to make stronger its strengths and also gain time for the needed analysis to be able to develop long-term strategies spell keeping low-cost rivals in a position that does not threats the company. These tactics accommodate crack low-price product/services or providing some other sale incentives, several legal actions such as obvious infringement lawsuits, product/service differentiation and lastly focusing more photogenic and profitable customers by letting worthless ones to rivals.These short-term tactics also, allow company to maintain market share as well as gain sustainability in its actions. long strategies adjust companies to changing market conditions a nd also allow them to pursue by and by new market opportunities. These strategies might be riskier than short-terms but bring more profits. Long-term strategy includes offering tell products, expanding products/services, first appearance into new geographical areas, becoming low-cost leader or having low-cost subsidiaries, put in technology and lastly ameliorate customer services.As an example, IBM was selling personalizedized computers as a first mover but then 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(prenominal) 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 orient ated by using its strengths and competitive service to eliminate early detected potential threats for the company in future. Lastly, company must develop a strong plan of action to support its successful rivalry in the market by entry into the new markets and developing new products on the time and also adapting other requisite tactics as quick as possible.