View All Articles

Dealing with a Low Cost Competitor

By M. Dana Baldwin, Senior Consultant

Strategic Planning Expert

Strategic Planning Expert

How can you compete with a low cost, low price competitor? Let’s discuss price wars: They usually don’t work! When your company is competing with a lower cost competitor, you must realize they can sell and make a positive contribution to their bottom line at or below a price where you will break even or lose money. All a price war does is to lower the profitability of everyone in the market segment.

So, how can we compete?  If we are serving different parts of the market, and if it is highly unlikely that our low cost competition will enter those segments, we can probably continue to do what we are doing and not worry too much about the low cost entry.

If we assume that this lower cost entity will eventually come after the segments we serve, or, is currently in our chosen markets, what can we do? The answer is essentially the same in either case.

Often, the first line of defense will be building up the differentiation between their products and services and ours.

You must be able to persuade customers to pay for the higher value we provide.

To get these added features and benefits, you must continually introduce new and innovative products/services.

You must bring your costs in line with the level needed to compete effectively and to support the innovation and development you are pursuing.

These three must be pursued in concert with each other.

What will this mean for your company? Start with an objective analysis of where you stand relative to your competition. Knowledge of your markets needs and preferences should guide your future course and direction in your strategic planning.  A good strategic plan is a necessity when a new player hits your markets, so you may react effectively to defend your position, and to determine where you need to go to remain viable and profitable.  We can help you to develop a realistic, actionable strategic plan.  Contact me to discuss how we may help your company.

For more information on how to take your strategic planning to the next level please listen to our webinar: Why Isn’t My Strategic Planning Working?

M. Dana Baldwin is a Senior Consultant with Center for Simplified Strategic Planning, Inc. He can be reached by email at: baldwin@cssp.com

© Copyright 2015 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.