Case Plane Crashes Gladwell
48
The McKinsey Quarterly 2004 Number 1
Ron Chan
When your competitor delivers more for less
When your competitor
delivers more
for less
Value players will probably challenge your company.
How will you respond?
Robert J. Frank, Jeffrey P. George, and Laxman Narasimhan
Companies offering the powerful combination of low prices and
high quality are capturing the hearts and wallets of consumers in Europe and in the United States, where more than half of the population now shops weekly at mass merchants like Wal-Mart and Target, up from 25 percent in 1996. These and similar value players, such as Aldi, A SDA ,
Dell, E*Trade Financial, JetBlue Airways, Ryanair, and Southwest Airlines, are broadly transforming the way consumers of nearly every age and income purchase their groceries, apparel, airline tickets, financial services, and computers.
The market share gains of value-based players give their higher-priced rivals definite cause for alarm (Exhibit 1, on the next page). After years of near-exclusive sway over all but the most discount-minded consumers, many mainstream companies now face steep cost disadvantages and lack the product and service superiority that once set them apart from lowpriced competitors. This “shift to value” had its roots in the 1970 s and
’80 s, when Japanese automakers and consumer electronics manufacturers thrived by selling cheaper and initially inferior products that eventually became more reliable than those of the competition—and remained cheaper.
Today, as value-driven companies in a growing number of industries move from competing solely on price to catching up on attributes such as quality, service, and convenience, many traditional players rightly feel threatened.
49
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The McKinsey Quarterly 2004 Number 1
Ron Chan
When your competitor delivers more for less
When your competitor
delivers more
for less
Value players will probably challenge your company.
How will you respond?
Robert J. Frank, Jeffrey P. George, and Laxman Narasimhan
Companies offering the powerful combination of low prices and
high quality are capturing the hearts and wallets of consumers in Europe and in the United States, where more than half of the population now shops weekly at mass merchants like Wal-Mart and Target, up from 25 percent in 1996. These and similar value players, such as Aldi, A SDA ,
Dell, E*Trade Financial, JetBlue Airways, Ryanair, and Southwest Airlines, are broadly transforming the way consumers of nearly every age and income purchase their groceries, apparel, airline tickets, financial services, and computers.
The market share gains of value-based players give their higher-priced rivals definite cause for alarm (Exhibit 1, on the next page). After years of near-exclusive sway over all but the most discount-minded consumers, many mainstream companies now face steep cost disadvantages and lack the product and service superiority that once set them apart from lowpriced competitors. This “shift to value” had its roots in the 1970 s and
’80 s, when Japanese automakers and consumer electronics manufacturers thrived by selling cheaper and initially inferior products that eventually became more reliable than those of the competition—and remained cheaper.
Today, as value-driven companies in a growing number of industries move from competing solely on price to catching up on attributes such as quality, service, and convenience, many traditional players rightly feel threatened.
49
50
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