We have all experienced this. Sales that previously looked great start to decrease month after month. Is it because of lower customer demand? Or is it due to issues with distributors? Perhaps there is something about the competitors’ landscape we did not notice? Seeing a new competitor enter your market is never a great experience, but realizing they offer similar products and services at a shockingly-low price is especially scary. But what should a company do after the initial panic?
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The difference between penny-pinching and true low-cost strategies
Happy New Year to my readers! I know it’s been a while; I took a short break from writing during the holidays (and after getting a bad case of Covid), but I am excited to be back with more content.
Over the last few weeks of 2021, I wrote about economies of scale and discussed ways for businesses to improve their bottom line. Of course, every company wants to lower their costs to either improve their profits, pass savings onto their customers to gain market share, or for other reasons. But some companies are going further and excel at reducing costs: these are the successful adopters of low-cost strategies.
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In the last article, we looked at how small businesses can take advantage of commercial, technical, and marketing economies of scale. But there are two more types of economies of scale that I’d like to talk about: network and managerial. Let’s see what small businesses can do to exploit these.
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As you probably already know, economies of scale are cost reductions that occur when companies increase production. When you open an economics textbook and you read about it, you might find examples about company XYZ ordering 1 million units from their supplier instead of 100,000. I remember being a college student and learning about these economics concepts; it did not feel much different than learning about trigonometry in middle school: “When am I going to use this outside the classroom?” was my immediate thought.
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My name is François, I’m the author of this blog. I love writing and talking about business and ecommerce. I hope you enjoy my work, feel free to contact me for any suggestion!