Page 14 - Cost

Cost Competitiveness

single leakage can sink a mighty ship! frms to consistently and constantly innovate
and invest wisely. Historically, it has been seen
Q. How can India become globally competitive that cost leadership is not permanent and is
lost in the long run because of innovation,
by implementing cost competitive strategy? or process reengineering by the competition.
Also competition tries to focus on product
A. Ever since industrial revolution, we saw diferentiation to take the market away from
the emergence of pockets around the world with your comfort zone where you have a cost
global dominance in the trade that they would leadership; thus, decimating your competitive
do. Cotton felds in Americas, coal mining in advantage. Consider assessment of nine Asia
Pittsburgh, handlooms in Manchester, etc. Pacifc countries as potential ofshore service
locations - India is the clear global leader
Tese were majorly resource based. But as by revenue, while China is the most serious
resource capacity becomes globally available challenger by scale. Bangladesh, Indonesia
at low cost, its competitive value declines. and Vietnam are continuing to gain regional
Te standard metrics of competitiveness that traction for ofshore service delivery as they are
emphasize cross-border trade in goods no cheaper destinations. To beat the competition
longer capture how and where value is created India cannot rely only on cost competiveness,
in the 21st century. Also due to technological it requires diferentiation (build on quality
advancement and human intelligence quotient resources etc.) and focus (refocus on the core
today one can gain global competitiveness capabilities of higher-end IT infrastructure,
even if one does not possess proximity to the business process services etc.) As far as India
raw materials. Jack Welch, ex-CEO, General and its future in global competitiveness is
Electric once said, "Te real treasure of India concerned it can be said that
is its intellectual capital. Te real opportunity of
India is its incredible skilled work force." “We have to continually be jumping of clifs and
developing our wings on the way down.”
India has already improved by leaps and bound
in various sectors like Information Technology, Q. How does cost competitiveness cater to
Diamond processing industry, Textile, etc.,
where it now commands a global presence and create the economic wealth of an organization?
respect. Looking back at why India succeeded
in these businesses, one cannot ignore part that A.Economic value addition is both a measure
was played by cost leadership that India had to of value and also a measure of performance.
ofer all along. Labour cost arbitrage was just Te value of a business depends on investor’s
one part of it. But this was on ofer by many expectations about the future profts of the
other countries as well. Once India began to enterprise. A sustained increase in economic
make its presence felt and then subsequently value addition will bring an increase in the
went on to build a strong brand through market value of the company.
value addition, adeptness in providing out of
box solution, profciency to customization to As a performance measure, economic value
fortress its stronghold over cost efectiveness. added forces the organization to make the
creation of shareholder value the number
Tus, it would not be prudent to just look at one priority. Stif charges are incurred for
being cost competitive to achieve dominance in the use of capital. Organizations focusing on
market all over the globe. Cost is just one of the economic wealth addition are changing the way
factors - an important one.Te winning nations managers run their businesses. When business
today are the ones that apply a 3-pronged decisions are aligned with the interest of the
strategy – cost leadership, diferentiation and stakeholders, it is only a matter of time before
focus. Tis requires nations and thereby its these eforts are start refecting into better

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