New Home Builder Bowen Family Homes

The strategy of low-cost versus high-quality production has guided businesses for centuries, though it was formalized in 1980s by Michael Porter, who claimed that competitive edge was achieved by either focusing on cheap manufacturing or on quality products sold at a premium price, but not both (Porter himself used the term differentiation instead of quality. The application of quality in this article is the author's simplification). The key for Porter was to choose the strategy that enabled a business to specialize in one market segment only, instead of trying to be everything for everybody at the same time. In other words, for a business to succeed, Porter argued, it needed to specialize in supplying products that were either qualitatively indifferent but were affordable for low-budget consumers, or products that were qualitatively differentiated but targeted consumers willing to pay premium prices for them (see discussion on generic strategies in Competitive Strategy: Techniques for Analysing Industries and Competitors, The Free Press 1980).

With a rapidly growing population and little competition from abroad, the obvious strategic choice for American businesses in the beginning of the twentieth century was mass production of cheap goods. Many new-comers to America were poor and had few resources. Thomas C. Cochran noted that the immigrants brought with them relatively little household goods. They wanted new supplies fast and at low cost, and were not in the position to haggle about quality (see: Challenges to American Values, Oxford University Press 1985, page 7). American businesses strategically positioned themselves to cater this growing market by supplying large volumes of affordable goods.