“More companies pursuing cost leadership strategy and not simply cost cutting reveals Atos Consulting”
Utrecht, 18 October 2005
Ever more firms are embracing cost leadership as a prerequisite for anticipating new market conditions
An increasing number of Dutch firms are embracing ‘Cost Leadership' as a strategy for capitalising on changed market conditions at the right time. To do so, companies are setting their sights not just on cost savings, but investing increasingly often in integrated Cost Leadership strategies. This awareness is becoming increasingly entrenched in Dutch business. It is striking that the choice of Cost Leadership is independent of economic conditions. An overwhelming majority of questioned existing cost leaders embraced the concept well before the economic downturn, and it will be maintained when recession ends. This is the conclusion of Atos Consulting Trends Institute in the survey No ‘cost cutting' instead ‘Cost Leadership'.
Cost Leadership is achieved by an organisation that is in a position to bring a product to market which offers the lowest price and highest quality in a particular segment. According to Atos Consulting, a company must concentrate not just on setting up processes, but must aim at a joined-up, integrated strategy. The investigators say a clear cost strategy is essential at these times of liberalisation, tight financial supervision and increasing shareholder power.
“This requires vision, will and guts. A clear vision of the right strategy and the readiness and courage to push it through. Cost Leadership is a strategy that needs to be pursued consistently, even if an organisation is not always aiming for the lowest price”, says Ed Megens, as Principal Consultant at Atos Consulting, responsible for the survey. “Organisations that have gone for a different strategy can also learn from the experiences of cost leaders. In today's economy, they can no longer do without a strategy aimed at lowest costs, transparency, efficiency and effectiveness. In this way, there are adequate margins on products which can then – depending on the company strategy – be applied for continuous product improvements, and for financing flexible, often relatively expensive production processes.” In this way, each individual customer request can be satisfied. Innovation and integration still remain spearheads for organisations that have implemented Cost Leadership as a pioneering strategy.
In the survey, Atos Consulting gives a representative picture of how Cost Leadership could take shape in Dutch business. The survey includes food and drink companies, the tobacco industry, electronics and utility companies, as well as firms from the pharmaceutical and petrochemicals industries, the transport sector and telecoms and media companies. The researchers aimed at two target groups: companies that claim to be cost leaders in their market, and entrepreneurs who would like to be.
The researchers worked on the assumption that Cost Leadership has not (yet) been explicitly settled on as a strategy. The survey actually shows the opposite. It emerges that many firms regard Cost Leadership as a precondition – alongside cost-optimisation – for achieving improvements in the fields of customer satisfaction, flexibility, quality and continuity, and improving sales and marketing processes. In addition, it seems that the market in which a firm operates, its market position and the product itself, are all decisive in choosing Cost Leadership. For the overwhelming majority of companies, it is also true that the choice of Cost Leadership is independent of economic conditions, regardless of the market segment in which they operate. Thus, almost all cost leaders indicate that they had introduced the concept before the economic crisis, and continued with it after the recession.
Model of growth phases
Atos Consulting's model of the phases of growth describes the course a company pursues when it goes for Cost Leadership. “In doing this, companies must not look blindly at processes, but must also take account of how both people and the organisation can be adequately equipped to grow into a cost leader. An integrated approach is called for which covers other aspects as well as processes: from organisation and management, IT and systems through to staff and the predominant company culture”, says Megens. “What it boils down to is that development in all these fields should be applied systematically, often on the basis of a multi-year plan.”
At cost leaders, their vision and strategy in the field of Cost Leadership are explicitly entrenched at all levels in the organisation. The way in which the firm is run is hallmarked by fully-integrated company processes, such that we can speak of a totally-integrated chain. Reports likewise need to extend right down the chain, whereas mastery of costs must be the result of clearly-defined service level agreements. The vision in the field of IT is aimed at adapting internal and external systems fully to suit the business. Both the people and the organisation need to be properly equipped, meaning they get the resources required to work together in a results-oriented way.
About Atos Consulting
Atos Consulting, the global consulting practice of Atos Origin, is a leading provider of business, process and technology consulting services. With more than 2,500 staff globally, it focuses on delivering proven, pragmatic solutions to the telecom, manufacturing, financial services and public sectors.
Atos Origin is an international information technology services company. Its business is turning client vision into results through the application of consulting, systems integration and managed operations. The company's annual revenues are more than EUR 5 billion and it employs over 46,000 people in 40 countries. Atos Origin is the Worldwide Information Technology Partner for the Olympic Games and has a client base of international blue-chip companies across all sectors. Atos Origin is quoted on the Paris Eurolist Market and trades as Atos Origin, AtosEuronext Market Solutions, Atos Worldline and Atos Consulting.
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