Do you want to be competitive or cheap?
By Gary Forger, Editorial Director -- Modern Materials Handling, 2/1/2006
For some time now, I (along with a whole lot of other people) thought the two were almost interchangeable. After all, Wal-Mart (and plenty of other retailers, automakers and sellers of just about anything these days) has promoted the idea that unless you have the lowest price you aren’t competitive.
Then I saw a story in The Wall Street Journal with the headline “Can President’s Plan Keep America Competitive?” What caught my eye in particular was a box featuring the World Economic Forum’s competitive index for the world’s countries. Much to my surprise, the United States was No. 2 on the list. And China wasn’t even in the Top 20. Wait just a minute. That doesn’t make any sense. Hasn’t the U.S. lost all those manufacturing jobs to China and other low cost countries because we just weren’t competitive? It was time for a little sitdown with Jim Haughey, Modern’s economist. Fortunately, Jim knew exactly what to say. “Do you want to be competitive or cheap?” Silence was my best response. He went on to explain the difference between the two. Cheap is all about making a product for the lowest cost at a point in time. Jim says any company or country can do that if they choose to overlook the long term. It also requires less of an infrastructure to be in place. China (which is No. 49 on the competitive index) does not have, for instance, the health care or retirement infrastructure and related financial burdens in place that the U.S. does. This lowers costs and makes cheap more easily attainable. Competitive, on the other hand, is a measure of a company’s ability to adjust to conditions over a long period of time. It is built on high flexibility in two key areas—labor and capital. And the U.S. is so competitive because there are few restrictions on either compared to other countries. As Jim says, labor and capital can go anywhere in this country, comparatively speaking. “We have fewer rules on what people can do. That helps to give us more flexibility. And that is critical in international competitiveness because there are no rules in the international marketplace,” says Jim.Now I know the difference between being competitive and cheap. And from where I sit, I’d sure prefer to be the former than the latter. I just wish more people understood the difference. It seems we’ve gotten a little confused about our priorities.
To weigh in on being competitive or cheap, click here to take our online poll.
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