Own the Future: 50 Ways to Win from The Boston Consulting Group

Chapter 43

The New “Low Cost”

Nicolas Kachaner, Zhenya Lindgardt, and David C. Michael

Low-cost offerings are not new. But there is a new wave of low-cost business models, and they are taking share from traditional players in many industry sectors and locations.

This new wave first appeared in rapidly developing economies (RDEs) where both local and multinational companies have had to design new models to serve a large segment of customers with limited financial means. These new models also have important strategic implications for the developed world. RDE-based market leaders are leveraging their home-market success to pursue global ambitions. And multinationals are disrupting competitors and pioneering new price points and applications in the developed world with low-cost offerings created for RDEs.

Although some traditional firms are riding this wave, too many are at risk of missing it.

History and the Golden Rules of Low Cost

In 1436, Johann Gutenberg invented the printing press. Until then, books had been laboriously and exquisitely hand produced by monks. Gutenberg's invention dramatically reduced production costs and time, and by 1500, nearly 20 million books had been printed—more than had been produced in the whole of human history before Gutenberg's invention.

In 1869, John Sainsbury opened his first self-service supermarket in London. Until then, grocers had competed on the basis of location and sales staff. Sainsbury decided to locate his stores outside city centers ...