Product Value Proposition and Business Process Re-engineering

Success of Business Managers and Marketing Managers depends largely upon short term goal of achieving targeted sales as well as focusing continually on long term strategies to grow and retain the leadership in the market. Becoming a brand leader and continuing to retain the leadership calls for the Organization to continually be in touch with the markets, external environment, to readjust its product delivery and value proposition to meet with the Customer expectations consistently.

The process of re-engineering business processes of the organization to augment the efficiencies begins first with scanning the market, understanding the dynamics, analyzing the trends and working internally to choose the best solution that is sustainable and helps to innovate with the chosen value proposition. For example, costs of production are always rising but dropping prices has become the acceptable practice in the market for most of the products. Economic and Lower pricing is often a chosen mode for the Organizations to increase their market share and grow the market.

The decision to lower the prices is alright as long as it is clearly understood that the lowering of prices does not affect the product or the quality and serviceability to the customer. Internally too, the price reduction should not affect the bottom line and this costly mistake should never be made by the Business Managers. Those who work methodically to realign the value proposition and the product offering with lower pricing will find ways and means to lower its cost by re-engineering production and other business processes including procurement, vendor management as well as logistics.

Thus, when the cost reduction is driven by increasing effectiveness and efficiency of organizational and business processes, and the bottom line is maintained intact, the organisation succeeds in the right way.

Most often you find multinational companies closing their plants in developed countries and shifting their manufacturing bases to developing Asian countries or outsourcing their manufacturing in order to cut down on their overall product cost and be able to offer higher volumes at lower prices while retaining their profit margins intact.

Companies like American Power Conversion, Eaton etc have continually invested in setting up facilities in new countries and managed to kill competition by offering superior product at highly competitive prices.

Take the example of computer and laptop industry. When the competition began to increase, most of the market leaders quickly moved in to establish manufacturing hubs around China, India, Singapore and Thailand etc to be able to increase their focus on the Eastern markets and this helped them bring down the prices of their product and retain healthy margins.

If you study the way Dell has managed to redefine the value of their product offering to the customers, you can see that they have focused on ensuring higher value proposition to their customers.

Dell customers know that the laptops they buy at competitive prices are built with high end system architecture that makes the laptops more secure and sturdier than the rest of the laptops in the market.

Once a Dell customer continues to be a loyal customer lifelong because Dell offers increased value to the customers continually with better product innovation and configurations while continuing to compete in the highly price sensitive market.

Focus on enhancing product technology as well as re-engineering its supply chain and leveraging on technology to bring down its operational costs is helping Dell maintain its leading position.

At the same time, the major competitor IBM has hived off its Laptop and Desktop business to Lenovo with the clear understanding that its focus lies in delivering high end servers and other business solutions. IBM has chosen different set of value proposition that it would like to operate with and has accordingly re-aligned its business model.