Question

Rapidly developing economies (RDEs) are having a significant impact on the global economy, both as attractive new markets but also as new competitors for firms in highly developed economies. Explain the three forms of competitive advantage that firms can achieve by moving operations to and marketing in RDEs. What products or services make the most sense to relocate to RDEs?

Answer 1

Let us first understand the meaning of Competitive Advantage :-  A competitive advantage is the attribute that allows an organization to outperform its competitors. In simple words competitive advantage is what makes an entity better than opponents. Three forms of competitive advantage that firms can achieve by moving operations to and marketing in RDE (Rapid developing economics) are as follows : 1 - A company can reduce the cost of production :- By moving the company to RDE a company can reduce the cost of production and this can be achieved through large scale production where companies can exploit economies of scale. If a company is able to utilize economies of scale and produce products at a cost lower than that of its competitors the company is then able to establish a selling price that is unable to be replicated by other companies. Therefore a company moving to RDE would be able to reap profits due to its significant cost advantage over its competitors. 2 - A company can create a new product which is different from its competitors :- A company moving its operations to RDE can create a different product from its competitors by delivering high quality products or services to customers or innovating products or services. If a company is able to differentiate successfully the company would then be able to set a premium price on its products or services. Which will create competitive advantage. 3 - A company can build huge customer base :- A company who is moving its operations to RDE can build huge customer base by focusing on a narrow target market segment. If the company is able to successfully create products or services that can cater to these customers then it will create a massive customer which will leads to competitive advantage over other businesses.