STRATEGIES TO FIGHT LOW-COST RIVALS

STRATEGIES TO FIGHT LOW-COST RIVALS.
By: Kumar, Nirmalya,
Harvard Business Review,
Dec 2006, Vol. 84, Issue 12


Companies have only three options: attack, coexist uneasily, or become low-cost players themselves. None of them is easy, but the right framework can help you learn which strategy is most likely to work.


Low-cost players will continue to mushroom, and some will succeed. However, there will always be two kinds of consumers: those who buy on the basis of price and those who are partial to value. Therefore, there will always be room for both low-cost players and value-added businesses. How much room each will have depends not only on the industry and customers' preferences, but also on the strategies traditional businesses deploy. If incumbents don't take on low-cost rivals quickly and effectively, they can blame no one for their failure but themselves.

Nirmalya Kumar (nkumar@london.edu) is a professor of marketing at London Business School, where he is also the director of the Centre for Marketing and codirector of the Aditya V. Birla India Centre. He is the author or coauthor of two books, including, with Jan-Benedict E.M. Steenkamp, Private Label Strategy: How to Meet the Store Brand Challenge (Harvard Business School Press, forthcoming in February 2007).