Strategic Responses to Multiple Dimensions of Low-Cost-Country Competition

Abstract

Abstract:This paper presents theoretical and empirical analyses of strategic responses to competition from low-cost countries (LCCs). Surveying 423 firms in the U.S. and Germany, we consider the nature of low-cost competition and strategic responses by advanced market incumbents. The theoretical framework develops multiple dimensions of foreign competition, i.e. intensity and quality, and introduces three new strategic responses, relocation, avoidance and deterrence. The results strongly support the hypotheses that firms employ relocation, avoidance, and marketing differentiation strategies when LCC competition rises. As LCC product quality increases, firms increasingly use relocation strategies but reduce their reliance on avoidance and market differentiation. Running headline: Multiple dimensions of LCC competitionKeywords: Import penetration, low-cost countries, business strategy, product quality a 100 Tuck Hall, Hanover, NH, 03755, USA, tel: 1 603 646 0302, fax: 1 603 646 0995,

Design for Next Connected Appliances

“…Before the crisis the entrance of a low-cost competitor was generally followed by companies' differentiation of products, cutting of prices or both (Bernard, 2007). Nevertheless strategic success could be identified on how a manufacturer adapts to changes in a turbulent market (Shyam, 2008).…”

“…The strategy developed lead to economies of scale, product synergies and a strong brand presence (Shyam, 2008). However from the beginning of the new century, this industry has faced several challenges, including the incursion of low-cost-country competitors, which pushed the manufacturers to lowering prices and replacing the production at the expense of quality (Bernard, 2007). Later on, they found at his own expense that relying exclusively on cost reduction strategies in response to foreign competition could not be considered an effective strategy, since it leads to losing market share, undermining their competitive position (Spanos et al, 2004).…”

Designing major appliances: A decision support model

“…Over the last decades competitors from low-cost countries have made considerable inroads into advanced economies. Until now, the entrance of a lowcost competitor is always followed by companies' differentiation of products, cutting of prices or both [1]. However, low-cost-country competition differs significantly to domestic low-cost competition and replicating the cost structure of a low-cost-country rival is in many cases impossible to achieve in high-cost countries.…”