Rutgers University

• MANAGEMENT 620:301:01

• 6. Award: 10.00 points Problems? Adjust credit for all students. Cost Reductions and Local Responsiveness Choosing the most appropriate strategy for a firm in international business involves two essential dimensions. The firm must examine ways to reduce costs, which can be done in a number of ways. Standardization of products and components plays a very important part. Customers, however, don't always want standardized products, even if it means they will pay more. The balance a firm seeks between the pressures for cost reduction and local responsiveness is one of the most essential determinants of the firm's strategy. Pressures for local responsiveness imply that it may not be possible for a firm to realize the full benefits from economies of scale, learning effects, and location economies. The need to customize a product offering may work against a strategy of producing a standardized product made in a single, low-cost location. Customization may bring benefits but it limits the ability of a firm to realize significant scale and location economies. In addition, pressures for local responsiveness imply that it may not be possible to leverage skills and products associated with a firm's core competencies from country to country without additional changes. The appropriateness of the four main strategic postures–global standardization, localization, transnational, and international–varies with the extent of the pressures for cost reductions and local responsiveness.