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Business Mistakes 1: Racing for the Bottom

by Roy Chambers (follow)
Business Basics (34)      Business Management (16)     
One way to be more competitive in business is to simply find an existing product or service and offer it at a lower price. This can be a very successful way to do business. However you have to be careful not to end up in a race to the bottom.

Attribution: Flickr - Steve Jurvetson

You can undercut other people's prices by being more efficient or using economies of scale more effectively. Or you could just reduce the quality of the product, reduce services around your product, pay your staff less or try to bully them into doing more work.

When many people in an industry are doing this it can result in a self-destructive race to the bottom where there is little profit and even less customer satisfaction.

You can only go so far until you hit the bottom and everyone fails.

Attribution: Flickr - Steve Jurvetson

Great businesses find cost savings in other ways. Toyota put so much emphasis on quality that they were able to make better cars more cheaply. Henry Ford famously pushed for greater and greater efficiency while paying his workers far more than anyone else.

So avoid the race to the bottom by finding real ways to make your product both cheaper and better. When you really understand your customer's needs and desires you are often able to charge more that your competitors.

#Business Management
#Business Basics
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