Magazine article Management Today

Everything You Know about Business Is Right: Efficiency

Magazine article Management Today

Everything You Know about Business Is Right: Efficiency

Article excerpt

Is there any strategic life left in continued striving for efficiency gains?

Probably not. Simply being efficient was never a recipe for success anyway. What was important was being more efficient than the competition. So if most of your competitors were good, you needed to be excellent. On the other hand, if your competitors were abysmal, mere mediocrity was more than enough to best them.

Think of Japanese cars in the 1970s - poor by today's standards, but far superior to the contemporary offerings of British Leyland. But what happens when all your rivals are about as efficient as it's possible to get? It's brilliant for consumers, who enjoy a wide choice of high-quality, low-priced offerings. Rotten news for producers, however, as they struggle to distinguish themselves in any way other than by price.

In the PC market, both Dell and HP are efficient producers of good products, but Dell makes very little money in its consumer business, and HP has a meagre operating margin on its PCs.

Contrast these struggling players with Apple. Apple may or may not be as efficient as Dell or HP, but efficiency has little to do with its runaway success and 25% operating margins. …

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