Australian businesses must start competing on price

Australian businesses still practicing high-growth, high-cost habits may need to refocus on cost control and strong price competition, a senior business adviser has warned.

Australian businesses still practicing high-growth, high-cost habits may need to refocus on cost control and strong price competition, a senior business adviser has warned.

In a Grant Thornton survey of more than 250 Australian business conducted late last year, only 45% cited cost management and 41% low price as key sources of competitive advantage.

Most considered them a much lower priority than quality, a focus for 72% of business, and ethical business practices, considered a central focus by 66% of Australian firms.

Tony Markwell, Grant Thornton’s national head of privately held business, says the results reflect the boom-time mentality held throughout much of the Australian business community last year.

“I was surprised at how low cost and price were rated, but it reflects that fact that we’ve just come out of a strong period and people haven’t been that cost conscious,” Markwell says.

But times are very different now, he warns, with only those businesses plugged into the resources sector are likely to be able to continue with a growth-at-all-costs approach.

“The market is now completely different and price competition should be coming up on a daily basis and be a part of daily business routines,” he says. “You need to ensure you are extracting maximum value from each transaction in the current environment.”

But the focus on ethical business practices is likely to stay, Markwell says, particularly as Australian businesses seek to sharpen their differentiation with overseas competitors.

“Ethical business practices have taken on a much wider interpretation and now include environmental policies. There is a perception among consumers that overseas firms may not as ethical as local companies, so that may become a source of competitive advantage.”

Strong corporate social responsibility practices could also help companies attract and retain staff, Markwell says. A relatively high 61% of businesses cited staff retention as a priority.

Read more on corporate governance