Answer to Question #51772 in Other Economics for rini

Question #51772
Note on pressure of cost reduction and local.
Expert's answer
Firms that compete in the global marketplace typically face two types of competitive pressure. They face pressures for cost reductions and pressures to be locally responsive. These competitive pressures place conflicting demands on a firm. Responding to pressures to reduce costs requires that a firm try to minimize its unit costs. Attaining such a goal may necessitate that a firm base its productive activities at the most favorable low-cost location, wherever in the world that might be. It may also necessitate that a firm offer a standardized product to the global marketplace to ride down the experience curve as quickly as possible. In contrast, responding to pressures to be locally responsive requires that a firm differentiate its product offering and marketing strategy from country to country in an attempt to accommodate the diverse demands that arise from national differences in consumer tastes and preferences, business practices, distribution channels, competitive conditions, and government policies. Because customizing product offerings to different national requirements can involve significant duplication and a lack of product standardization, the result may be to raise costs.

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