Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 1

In addition to changes in trade restrictions, fluctuations in currency have had a large effect on global competitors. The fall of the U.S. dollar relative to most currencies in recent years has created an opportunity for increased exports for U.S.-based multinational companies. The changes have also caused non-U.S. manufacturers such as BMW and VW to locate plants in the United States where the cost of doing business is relatively low due to the rise in the Euro and relatively high wage costs in parts of Europe. For example, a recent study of the cost of doing business in selected countries shows the United States to have an advantage relative to many countries (the survey did not include China and other Asian countries nor the recent rise in the U.S. dollar):

Other issues concern the degree of global integration—multinational companies operating simultaneously in many countries. Just as BMW and VW locate plants in the United States for strategic reasons, U.S.-based manufacturers such as Boeing use parts made overseas (in one Boeing plane, 70 percent of the parts are sourced from non-U.S. suppliers).

Some companies deal with global competition by becoming more competitive. For example, the tire maker Bridgestone Firestone, to achieve cost advantage in its U.S. plants, focuses on developing employee skills. In one North Carolina plant, applicants for the local tire plant must complete a series of specialized courses at the nearby community college. Another way to succeed is to pursue differentiation, as at PendletonWoolen Mills in Portland, Oregon. The mill, built in 1910, is one of the last functioning woolen mills in the U.S. Pendleton succeeds by specializing in upscale fabrics, such as vintage baseball uniforms and commemorative blankets and dance shawls for Native American Tribes.

Step 1 of 2

Cost leadership is a strategy adopted by company where they sell products at lower price than the competition. Differentiator is a strategy where the company try to produce goods and services which are considered different and unique in some aspects in eyes of the customer.