In response, Matsushita had to reverse its earlier bias toward standardized global design and place more emphasis on local customization. This includes moving production facilities to low-cost facilities and offering globally standardized products to realize experience curve economies.
They face pressures for cost reductions and pressures to be locally responsive see Figure The result was a worldwide price war with almost all tire firms suffering heavy losses in the early s. In the pharmaceutical industry, the British and Japanese distribution systems are radically different from the US system.
Concessions often have to be made to local conditions. In the next section, we look at the strategies firms adopt to deal with these pressures.
Universal needs exist when the tastes and preferences of consumers in different nations are similar. To address its cost structure in Europe, Bombardier has centralized its engineering and purchasing functions, but it has no plans to centralize manufacturing.
For example, there is a strong demand among North American consumers for pickup trucks, particularly in the South and West where many families have a pickup truck as a second or third car. While some firms, such as Firm A in Figure Chapter 12 Outline Pressures for Cost Reductions and Local Responsiveness Firms that compete in the global marketplace typically face two types of competitive pressure.
Consider Bombardier, the Canadian-based manufacturer of railcars, aircraft, jet boats, and snowmobiles. Many commentators have also argued that the liberalization of the world trade and investment environment in recent decades, by facilitating greater international competition, has generally increased cost pressures.
Thus, retail chains have considerable buying power in Germany, but relatively little in Italy. Pharmaceutical firms are subject to local clinical testing, registration procedures, and pricing restrictions, all of which demand that the manufacturing and marketing of a drug meet local requirements.
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. To sell railcars in Germany, they claim, you must manufacture in Germany. For example, the politics of health care around the world requires that pharmaceutical firms manufacture in multiple locations.
For example, Christopher Bartlett and Sumantra Ghoshal have observed that in the consumer electronics industry, consumers reacted to an overdose of standardized global products by showing a renewed preference for products that are differentiated to local conditions.
This requires a firm to try to lower the costs of value creation by mass producing a standardized product at the optimal location in the world to try to realize location and experience curve economies.
Thus, pharmaceutical firms have to adopt different marketing practices in Britain and Japan compared to the United States soft sell versus hard sell. Also, because governments and government agencies control a significant portion of the health care budget in most countries, they can demand a high level of local responsiveness.
British and Japanese doctors will not accept or respond favorably to an American-style high pressure sales force.
Some argue that the duplication of manufacturing facilities leads to high costs and lowers profit margins, but Bombardier managers say that informal rules in Europe favor companies that use local workers.
The same goes for Belgium, Austria, and France. The need to customize the product to local conditions may work against such a strategy.Cost Pressures and Pressures for Local Responsiveness • Firms that compete in the global marketplace typically face two types of competitive pressure Pressures for cost reductions Pressures to.
You just clipped your first slide! Clipping is a handy way to collect important slides you want to go back to later. Now customize the name of a clipboard to store your clips. Cost Pressures and Pressures for Local Responsiveness Pressures for Costs Reduction Cost reduction pressures are greatest when: a commodity type product is a universal need major competitors are located in low-cost locations there is constant excess capacity consumers are powerful and face low switching cost Pressures for Local Responsiveness Local responsiveness pressures arise from %(3).
COST PRESSURES AND PRESSURES FOR LOCAL RESPONSIVENESS A) Firms that compete in the global marketplace typically face two types of competitive pressures.
Pressures for cost reductions are greatest in industries producing commodity type products where price is the main competitive weapon. where there is persistent excess capacity.3/5(2). Cost Pressures and Pressures for Local Responsiveness o Leveraging Subsidiary Skills Implicit in earlier discussion of core competencies is the idea that valuable skills are developed first at home and then transferred to foreign operations.
While some firms, such as Firm A in Figureface high pressures for cost reductions and low pressures for local responsiveness, and others, such as Firm B, face low pressures for cost reductions and high pressures for local responsiveness, many firms are in the position of Firm C.Download