Lower Delivered Cost Vs Superior Delivered Value
By: Amit Bhushan Date: 23rd Nov. 2016
The global geo-economics and geo-politics tracking is holding itself with bated breath on likely direction of Trading actions & resultant fund movements in the aftermath of the US elections. While for some, the World’s second largest economy is almost already a winner. This is on account, that it is perhaps the only country that is still globalizing defending its currency, offering investments & liberal credit, trading cheap widgets while at the same time trying to bolster domestic education and innovation sectors. By contrast, almost all other major economic powers had turned pusillanimous towards investments and credit especially towards emerging economies. However their strength to participation from across the globe by pulling in human and often risk capital resources remained intact especially vis-à-vis China. Now the political headwinds depict that the same strength may also not remain intact and thus drive emerging countries even more towards those powers which may be perceived as more accommodative. On the part of World’s second largest economy, while it has been able to attract Goods Trader and Deal Structuring professionals from emerging as well as developed markets, it has failed in getting wider human resource participation or a thriving international capital since its control on capital as well as the industry would not be supportive of such a thing and they require greater liberalism to thrive.
As the Global economy seems increasingly looking for a re-set of order. While most analyst would try to make it to be a keen contest between the two behemoths and would like to paint others as irrelevant or miniscule, however that seems to be the most unlikely scenario. The reason is that it neglects the politico-economic wave in emerging markets as well as in other developed markets. While most of the other developed markets, have shown resolve to maintain activity levels and jobs, even if by lowering currency value, the emerging markets are actually keen in acquiring new capabilities and developing infrastructure, institutions and processes. The participation by virtue of mere export of raw materials and being a client for finished products seems to be giving way towards greater value addition at the time of export as well as localization of manufacturing to the extent possible especially in case of imported widgets. There has also been a rise of regional behemoths who would set trading terms for the entire regions increasingly united by geo-politics, cultural acclivity and economic integration. Besides, such regions have not only been successful in negotiating trade and infra deals with global players but also have been active in negotiations of trade terms with other similar regional trading groups, which at times might be in contravention with some of Global player’s interests.
On the consumer side, the perceptions for higher productivity leading to lower cost of goods seems to be changing as customers move towards ‘high value’ paradigm. The Value may be derived by making goods and services available on demand (or short delivery period), with desired specs and features (as opposed to standard specs or high modularity to incorporate custom specs for specific markets), pricing and payment terms, warranties and after sales support etc. The regionalization trend, tends to be supportive in terms of better addressing these consumer demands and global investments is increasingly moving in to accentuate and fulfill such market needs. The centralized innovation centers that would change everything in a product/brand and ensure complete revamp to the satisfaction of the markets in different regions, is a thing of yore. What seems to be in is regional Centers of Excellence driving product in line with the market. Take the example of the mobile phone segment. The global players have been investing heavily on product innovation in hope for an expanded market or market share. But those who really seem to be gain are niche players innovating for the region. This may not be just on account of cost as large players would like to believe (since they may have seen sales growth even if their market share shrank). What is important to notice is that regional players may have gotten much more value for their rather minuscule investment research. What this may call for is what I have described as Regional Centers of Excellence to research what kind of innovation might be more suited for such global players keen to capture an expanded market.
On the infra side the Regional Connectivity as well as Regional trade protocols are being strengthen on the back of strong politico-cultural relationships. Often the security paradigm of the nations is also supportive of such relations on the back of argument for stability. With the rise in prosperity in emerging markets the cultural acclivity has actually gone up as people have started to realize benefits of own cultural rigmaroles, rather than blindly following other cultural values. The value of different features in product and service offerings are being increasingly perceived from this angle and often such adulations are being voiced in business discussions. Since the share of emerging markets is rising fast, so it is important that the manufacturers keen about the markets take initiatives like Regional Center of Excellence to keenly evolved the products much more suited for these markets rather than seeing them as some homogeneous units or some small adage to a large market with little importance of their own. What this may imply is much more consumption of design engineering skills and may be small batches of production. It would have better participation and greater satisfaction as well as deeper markets since the capability to consume of a lot of markets may rise simultaneously.
The customer value delivery process
Understanding of customer value concept
Actions that entrepreneurs can take
The entrepreneur’s advantage
Points of value that matter to customers
Develop market offer based on points of value that matter to customers
Create customer value proposition with a resonating focus
Dimensions along which value is perceived
Identify opportunities for new value creation propositions
Compete based on points of value other than just cost
Customer’s desired needs change over time
Observe customer environment to better understand changes in customer requirements
Deliver value proactively by anticipating changes in customer’s desired needs
Customer feedback
Combine existing organizational capabilities (market orientation, knowledge management, customer relationship management)
Improve value proposition of existing products and services