The title of this article causes me anguish. It should read "IPad's Rivals Can't Beat it on Cost." Businesses compete on value and on cost. Value is the benefit to the customer (value proposition) and cost is the fixed and variable expenses to the firm for producing that value (cost structure). Value and cost are strategic, and price is a tactical choice that follows from your value-cost position and the competition. If a business offers more value at a given price, relative to a competitor, it will gain market share. If a business has a lower cost at a given price, relative to a competitor, it will have higher margins.
Confusing price and cost has caused the downfall of established companies. For instance, in 2003, Delta launched its Song subsidiary to compete with Southwest Airlines and Jet Blue. Delta conceptualized Song as a "low-price airline," while Southwest and Jet Blue are low-cost airlines. What happens when you compete with low-prices, but are burdened by the high-cost structure of a legacy airline, such as Delta? Song was disbanded in 2006, after considerable losses.
> What happens when you compete with low-prices, but are burdened by the high-cost structure of a legacy airline, such as Delta? Song was disbanded in 2006, after considerable losses.
Actually, Qantas in Australia did pretty with Jetstar. They avoided cannibalization of existing customers by running from non-mainstream airports, being a lot stricter with check-in times (trading time for money), having cheaper flight staff, and doing most of their businesses online.
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>iPad's Rivals Can't Beat it on Price
The title of this article causes me anguish. It should read "IPad's Rivals Can't Beat it on Cost." Businesses compete on value and on cost. Value is the benefit to the customer (value proposition) and cost is the fixed and variable expenses to the firm for producing that value (cost structure). Value and cost are strategic, and price is a tactical choice that follows from your value-cost position and the competition. If a business offers more value at a given price, relative to a competitor, it will gain market share. If a business has a lower cost at a given price, relative to a competitor, it will have higher margins.
Confusing price and cost has caused the downfall of established companies. For instance, in 2003, Delta launched its Song subsidiary to compete with Southwest Airlines and Jet Blue. Delta conceptualized Song as a "low-price airline," while Southwest and Jet Blue are low-cost airlines. What happens when you compete with low-prices, but are burdened by the high-cost structure of a legacy airline, such as Delta? Song was disbanded in 2006, after considerable losses.
> What happens when you compete with low-prices, but are burdened by the high-cost structure of a legacy airline, such as Delta? Song was disbanded in 2006, after considerable losses.
Actually, Qantas in Australia did pretty with Jetstar. They avoided cannibalization of existing customers by running from non-mainstream airports, being a lot stricter with check-in times (trading time for money), having cheaper flight staff, and doing most of their businesses online.
United tried to do the same thing with it's Ted (http://en.wikipedia.org/wiki/Ted_(airline)) subsidiary.