High Quality vs Low-Cost Bargain: The current dichotomy! (II). Purpose, Philosophy and Rationale of this saga.
The United States of America began a new week of life with a new administration, the democrat formula of Joe Biden and Kamala Harris. I regard my wishes of positive spirit for their decision making and work ethical actions. So much to fix and repair, for the sake of merging the US population as an undivided nation, that requires mending and calm after these last 4 tumultuous years. My sincere congratulations and admiration for their underway mandate that started two days ago.
Today´s topic is all about the beginnings of our saga “High Quality vs Low Cost Bargain: The Current Dichotomy!”. So let´s begin to share the purpose, philosophy and rationale of our epic.
Purpose: The main aim or goal we strive with this saga is extremely simple. We are looking to discover and unveil key elements of the current philosophy of international trade that are triggering the wealth and prosperity imbalance in the global economies. These key elements must be reviewed by economists and economic researchers at universities, by trade gurus in trade organizations, think tanks, consulting houses and so on. In addition, these factors or conditions must be subject to profound investigation in our current and projected context of NAIQIs disruptive technologies. This in order to find the real roots of the issues that are still outstanding when it comes to the implementation of the national competitive theory. All the assumptions that have arisen when applying the free-trade theories to business models formulation need to be re-evaluated. Please note, that all our business models are based on the legacy of comparative advantage (and its further arguments – Blue Ocean Strategy, the new Trade Theory of the 70s-90s, Porter´s Theory, Heckscher-Ohlin theory, and so on).
Philosophy of this saga: The philosophy of this saga is nothing else than to inquiry into the current nature of the international trade, based on reasoning and analysis, rather than data analysis only. We will use the dichotomy of high-quality vs low cost bargain pricing to shake our thoughts. During this saga we will rely on data analysis only around 20% to 30%, because or thoughtful strategic reflections will try to explore the causes of the dichotomy of pricing, and how this dichotomy between high quality and bargain, is affecting our way to think and understand our human condition. Only by finding the exact causes, we can begin to solve correctly. The dichotomy of pricing is only one tiny piece of the value chain formulation that has privileged trade and globalization based on national competitive advantages. Sadly during the last 50 years, our international trade and commerce systems have galloped separately of solving our global common vulnerabilities. Or at least, without the consideration to solve the most outstanding issues of the planet (poverty expressed in the fragility of the global middle-class, climate change and environmental-natural disasters, racism, social inequalities, cyber-terrorism, civil conflicts and wars, lack of elysian education for all, food security and health global emergencies).
In consequence the philosophy of this saga is going to be to open our minds to create a new school of strategic thought that I have coined for all of us during the last 4 years: the new integral strategy theory.
Rationale: The fundamental reasons, causes or the basis for this saga are based on the principles of our integral strategy theory. The dichotomy between high-quality and low cost bargain is nothing new. And we will have a lot of episodes to explore examples from different industries and countries. As an alternative, we also will visit some blue ocean products and services examples, but, if the bottom line of our economic competitive advantage theory needs a careful review and update, beyond shared value, be aware that our rationale for this saga will be specific but ample.
Anyone of us, regardless if educated or not, knows that pricing is key to any entrepreneurial profitability and long term value creation. We design, create and deliver a product, because we gain a margin above our costs of producing it. Otherwise without profits, all our businesses may perish. The price is relative and we will analyze at least 9 alternative pricing strategies and its respective value implications. When we choose different business strategies to compete, or when we don´t fit the type of product with the right combination of quality and price, troubles move up. As I mentioned to you in my last post, low prices with low quality rarely provide a sustainable basis for prosperity, without cannibalizing competitors or creating the own industry self-destruction. on the other extreme, meanwhile high-quality is associated to expensive “mark-ups”, it can stand the winds of time only when the quality is really premium and superior at all levels. When a society that has chosen the low-cost bargain strategy as its pricing strategy for its prosperity, shows at the same time that it is not able to expand its middle class without hurting other societies, then it is a sign that its selected business strategy mix of products and services is not the appropriate one.
During the next 24 chapters, you will be able to see through the theme of pricing strategies, all the fundamental problems that come from the free-trade economic theories that have had no limits in the context of each and all of the risen technologies or our times. The rationale of our articles is required if we wish to pursue our quest for better societies in which no one is left behind. No tagged socialist theories or economic power between the west and the east will be even named, only the strong desire to help to trigger a conscious movement to fix the issues of our economic theories consequences which have started to be perceived; not just by me, a boutique little Salvadoran consulting house, but by many other erudite people who are in the eyes of the economic troubles trying alone to find solutions to it.
Let me finish with the following reflection. This is the time to dig in the underlying causes and repair. And we must be preparing our gears for it. Particularly after the pandemic of Covid19. When systems require a structural reparation, soft or mild symptoms trigger the lights of “troubles ahead”. It is time for all of us, the thinkers whose line of work is related to trade, economics, business modeling, entrepreneurship, commerce, education, technologies, anthropologists, philosophers, sociologists, historians, academics, financing specialists, etc to begin to work all together in how to be tip-top ahead of what may come. Many other industries and sciences depends on us. We can’t be blind to our imbalanced trade situation, and how this may affect us for the long run. It is time to study the real causes or the bottom line of troubles of our privileged economic theories. And it requires multidisciplinary teams not just by discipline but by Geo-localization or region; in addition, specific specialists. For example, a sick patient, many times requires several physicians and different points of views, even from the most humble condition, because wisdom not only comes by studious professors or researchers, but also from practitioners that have learned by prove and error for years.
I will leave this article here, because in some way I began to describe the third theme of the saga: “Unsolved issues of the National Competitive Advantage Theory”, which will be unfolded next Tuesday.
Have a beautiful weekend. See you again soon. Blessings. Thank you for reading to me.
Disclaimer: Illustrations in Watercolor are painted by Eleonora Escalante. Other types of illustrations or videos (which are not mine) are used for educational purposes ONLY. Nevertheless, the majority of the pictures, images, or videos shown on this blog are not mine. I do not own any of the lovely photos or images posted unless otherwise stated.
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