Leg 4. From Melbourne to Hong Kong (II). Do we go for lower-cost or something different?
Good morning to all of you!!!!
Tomorrow is Kings Day (Día de Reyes) or the Epiphany Day.
“Día de Reyes” is a tradition, in which we will share un “Roscón de Reyes” like the one in the picture on your left (this picture is the one I prepared to gather with my family last year). The word epiphany means “manifestation” or “revelation.” Thus, tomorrow’s holiday celebrates the manifestation of Christ to the Gentiles, represented by the three Magi (see Simeon’s prophecy in Luke 2:32). For some, Epiphany also commemorates the baptism of Jesus (Luke 3:21-22) and His turning water into wine (John 2:1-11)—manifestations of Christ’s divinity to the world. Epiphany Day for us is the remembrance of the appearance of the Wise Men or Magi Kings: Balthazar, Melchior, and Caspar to visit Baby Jesus in Bethlehem. I enjoy cooking every once in a while. Particularly for Christmas or special occasions. And tomorrow I will prepare the 2018 version of the “Roscón de Reyes”.
The “Roscón de Reyes” tradition of eating together and sharing this bread with a hot chocolate to remember the Holy Kings, is made as a snack or pre-dinner at an early hour in the late evening so that children are present and can participate by sharing a slice of it. When cooking the “roscón”, a little plastic figure is inserted in the dough, and the figure represents “Baby Jesus”. If your slice has the little Baby Jesus, it is considered a “blessing” or “good luck” year ahead. In Mexico, if you find the Baby Jesus you are entitled to invite the same group of people to tamales, atole, and Mexican appetizers on February 2nd (Día de la Candelaria), and this person has to pay all the expenses of the party. In other countries, if you find the figure of Baby Jesus, you will be the ‘Godparent’ of Jesus for that coming year. There are several meanings of the Baby Jesus figure, but all of them are meant to celebrate the Epiphany.
Let´s continue with the Sailing Strategy Race. This week we will finish Porter´s Generic Strategies. Today is the turn of the Cost Leadership Strategy.
As mentioned before, Michael Porter has defined three generic strategies: Cost Leadership, differentiation, and focus. All firms must make decisions as to where to position their products or services in the market, and this framework helps to know where we are positioned. Adopting a low price and targetting several segments seems to have proven to be a good strategy for companies such as Wal-Mart, IKEA furniture, Costco in the USA or PriceSmart in Central America and the Caribbean.
The Cost Leadership Strategy aims to be the “low-cost producer” in an industry. The Cost Leadership Strategy is realized through gaining experience, investing in large-scale production facilities, using economies of scale and carefully monitoring overall operating costs (through programs such as total quality management and self-service). Grant has stated that adopting a low-cost strategy generally implies a market positioning based upon a single line, limited feature, and standardized offering. However, such a positioning does not necessarily imply that the product or service is an undifferentiated commodity.
For example, PriceSmart, Inc. was founded in 1994 and is headquartered in San Diego, California. With a Market Cap of $2,670.96 Million US Dollars (4-Jan-2018), Price Smart is a U.S-style membership warehouse club retailer located in 40 locations in Central America, South America, and the Caribbean. Before the appearance of Wal-Mart in the region, Price Smart was the only choice we had to buy North American products or imported brands. Local Supermarket chains did not offer those products in the past.
Price Smart value proposition has been at the “top” in every country around Central America when it came to buying “brand recognized” imported products. We did not have other choices but to go to Price Smart if we wished to buy high-quality imported American products at the lowest prices. Price Smart warehouses keep it simple: “All merchandise is displayed in its original packaging on steel shelves, and their reduction of overhead costs represent savings which are passed to all members”. Each annual membership costs between $30 and35 on average per annum. Price Smart is at a full growth pace in Colombia too. The products offered in Price Smart are consistent good brands merchandise including electronics, computers, home appliances, office equipment, hardware, sporting goods, apparel, and fresh items and groceries. Wal-Mart started to offer the same products as Price Smart without the “membership” concept, and I dare to write that if Price Smart wishes to compete with a “Cost Leadership Strategy” against Wal-Mart in the region, they will have to consider removing the “Membership Club” concept. Particularly with e-commerce retailing at our doors (Just to clarify: In Central America and the Caribbean, e-retailing is not locally developed as in developed countries yet. Neither Walmart nor PriceSmart have online sales).
This is all for now. Wishing you a beautiful Epiphany day. Maybe I will receive a beautiful gift for “Día de Reyes” from Alejandro Guillermo Lozano Artolachipi. He is more than invited to eat our “Roscón de Reyes” too. See you tomorrow!
Disclaimer: All the pictures or videos shown on this blog are not mine. I do not own any of the lovely photos posted unless otherwise stated.
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