ProfJorge Entrep
The cost and quality initiatives of the Japanese and Chinese Manufacturers ran circles around the Western competitors.
The formula for most of these firms is: +Sales - Cost= GP. We must and can only increase sales if we are low cost producers.
Indeed, you can not have high profit if your competitors are low cost producers; they will take away your market share.
Thus, Southwestern and Cebu Pacific caused many of their competitors bankrupt, because they took away their passengers. And in period of rising fuel prices, they were were able to stay afloat. The heavy pension costs and labor cost of PAL weighed heavily on their competitiveness.
One way to beat the cost curve is to be differentiated just like SIA. But not everybody can be differentiated just like SIA. For most commoditized goods and services, the only way to be competitive based on price value tradeoff is to manage costs well.
Read more Cost Management: A Lesson from American Airlines
The cost and quality initiatives of the Japanese and Chinese Manufacturers ran circles around the Western competitors.
The formula for most of these firms is: +Sales - Cost= GP. We must and can only increase sales if we are low cost producers.
Indeed, you can not have high profit if your competitors are low cost producers; they will take away your market share.
Thus, Southwestern and Cebu Pacific caused many of their competitors bankrupt, because they took away their passengers. And in period of rising fuel prices, they were were able to stay afloat. The heavy pension costs and labor cost of PAL weighed heavily on their competitiveness.
One way to beat the cost curve is to be differentiated just like SIA. But not everybody can be differentiated just like SIA. For most commoditized goods and services, the only way to be competitive based on price value tradeoff is to manage costs well.
Read more Cost Management: A Lesson from American Airlines
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