Competition Sutra #2: Efficiency is the difference

This is the second part ‘Competition Sutra’ series. This series is an attempt to distill the core learnings of Bruce Greenwald’s seminal book “Competition Demystified”

The lowest cost operator wins

In a market where there are no barriers to entry, efficiency ensures who will survive and who will not. More so in case of differentiated products than commoditized ones.

In commodity markets like copper, steel, wheat it is evident that if a company cannot produce at a cost below the market, it will lose its money and ultimately fail. For such companies, fortunately there is no need of a marketing strategy as well. Hence their entire focus should be on making their production process as efficient as possible.

However in differentiated segments, efficiency matters not only in production costs but also in marketing costs. When there is a firm which has highly efficient operations, it will be able to expand its operations and market at a much lower cost than its competitors.

This is visible in many industries across the world- automobiles, airlines, retailing, appliances even beers.

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