Question

Describe and explain the two logically opposing forces of cost reduction and adaptation to local markets that firms must successfully manage when they enter a new global market.

Answer 1

While entering a new global market, a business has to manage between two forces. One is cost reduction and the other is adaption to local markets.

Cost Reduction: Cost reduction generally involves carring out the same process in the other countries and earn revenues. Carring out the same same process prevents new cost to be incurred and the same expertise is used. Thus, this reduces cost to a great extent.

Adaption to local markets: A business while entring a new country has to ensure that it's products are suitable to the local needs. Since a lot of diversity is present in the world, thus, it is very likely that choice of the people from one country may differ to that of others. Also, the marketing strategies, product orientation, etc may differ a lot. Thus, same business model cannot be exactly copied. Thus, it involves increasing cost.

Thus, it is seen that both are logically oppossite to each other. But a business has to deal with both of these while entering a new market.

Therefore, in order to successfully carry out a global expansion, a business has to manage these two factors effectively so as to have a positive effect.