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Cost of production is not a factor in how competitive a company's product is.
That's counter-intuitive for most people, so I'll say it again. Cost of production is not a factor in how competitive you are.
Competitiveness is about how one product stands in comparison to another, when a potential customer is considering a purchase. Factors that are relevant include:-
- Brand image/desiraility
- Value for money
- Ease of purchase
- How well the product fulfills the customer's needs/wants
- How well the product reinforces the customer's self-image
Note that price doesn't come into this list either. (To be fair it is sometimes relevant, depending on the product, but in general it only comes in to play as the very last factor.)
The customer almost never knows the cost of production, and certainly never can res.
If you have a competitor, and you want to beat them, then you have to be beater than them at more things than they are better than you. Value for money, marketing, product quality, innovation, reliability, etc.
If you want to make more profit than the competitor then yes, you will have to add cost of production to that list: but that's a point connected to profitability, not competitiveness. It's perfectly possible (and very common) to achieve higher competitiveness simply by being willing to accept a lower return on investment. This is used as both a long term and a short term strategy.
Or to put it another way: if have higher costs, and you want the same return, then you have to persuade the customer that your product is more valuable so that you can charge a higher price. This can be achieved in numerous ways, some of which involve the product actually being more valuable.
