Low Cost Competitors

Your Low Cost Competitors Want To Eat Your Lunch
By Mike Teng

Your low cost competitors will not just nibble at your low price segment, they want to eat your lunch

Many industry leaders are faced with a sea of changes in the marketplace, particularly the onslaught of many low cost competitors. They are minnows and will grow to become sharks if they are not nipped in the bud. Examples abound on the proliferation of the Chinese products in the world market.

The way to handle these manufacturers is to try to nip them in the bud. It is like war. You must not allow your competitions to establish a beachhead. For once they succeed in doing so, it will be so much harder to dislodge them. You want to knock them out in the waters where they are most vulnerable. When customers try the low cost products and they like them, it will be very difficult and expensive to entice them to switch back to your products. If you cannot beat the low cost competitors in the price game everything else being equal, then better to identify another premium niche.

Johnson and Johnson the health-care multi-national company also faces stiff competition and a long wait for the next drug blockbuster. As part of its strategies to hold off competition, it has gobbled up 34 companies in the past 5 years and will keep acquiring. Johnson and Johnson also put existing drugs to new uses – epilepsy drug Topomax now treats migraine. Workers are made to cross the divisional lines to develop products and drug-delivery systems including treatments for stroke, diabetes and schizophrenia.

Teamwork between pharma and device divisions led to the billion-dollar coronary stent. Cost-cutting on the 200-plus units, merger of the back-office operations and centralized purchasing helped to save $1 billion in two years – funds that it will use in the development of badly needed new pharmaceuticals.