Trends for 2009: #18. Survival of the fittest (i.e. cheapest)

Over the last 10-20 years it has been relatively easy to get into business and stay in business. In general the North American economies have been running in overdrive. To be profitable almost all you had to do was actually produce something of reasonable quality at a reasonable cost.

In 2009 that isn't enough. The two types of companies that will prosper in 2009 are:

1. Those who have low-cost in their cultural DNA. You are already thinking "Wal-Mart", "Costco", "Ryanair", "Southwest Airlines", and perhaps some Indian call centers or IT development shops. AND,
   
2. Companies who can provide innovative ways to deliver greater productivity to other businesses.
   

Today, I'm blogging about the LOW COST STRATEGY.
If you look back at the classic definition of a low-cost strategy by Michael Porter, you look at business tactics like:

• Opportunity to capture considerable market share
  
• Natural advantage or preferential access to inputs
• Process engineering skills - which grind every wasted nickel out of product design, manufacturing, and distribution
  
• "Standard" products with relatively little differentiation that are easy to manufacature
• And also that are perfectly acceptable to the majority of customers
• Technology that will reduce costs
• Sustained access to inexpensive capital
• Close supervision of labour
• Tight cost control
• Incentives based on quantitative targets.
  
• Efficient distribution channels.
  

It is very important to note that Low-Cost does not necessarily equal Low-Price or Low-Quality. Low-Cost only means that a low-cost provider can produce the same product as another supplier at a lower cost. They can still sell it at the same cost and therefore make a bigger margin, or they can get into a price war, sell above their cost while their competitors are forced to sell at a loss, and consequently come out the winner.

What is a Marketer to do in 2009? Strategies to follow include:

• BE a Low-Cost company. If you are already a low-cost company, get reacquainted with the strategy basics. If you aren't a low-cost company and you haven't already memorized the list above, then I suggest you buy Michael Porter's book. You can't become Low-Cost overnight. It requires a fundamental change in business strategy and culture. If you are prepared to go this route, be prepared for a challenging yet ultimately rewarding journey.
• DISCOUNT your wares, and prepare to eat your margin. Why? Because your low-cost competitor is about to stick it to you!
  

Will I be right? The year will tell!

• Follow this blog and watch for the next marketing trends I'm forecasting for 2009.
• Feel free to contact Market GoGo to discuss this further.