Strategic responses to low-cost-country competition

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Over the past decade, the economic growth of low-cost countries has significantly outpaced that of Western nations. With stagnant domestic markets, Western firms have turned to China, Southeast Asia, and Eastern Europe for growth opportunities. However, as these economies mature, new competitors emerge, expanding beyond their domestic markets and benefiting from lower factor costs, which gives them a competitive edge in exports to Western countries. This situation raises a critical question: how should Western manufacturers respond to the rising competition from low-cost countries? Despite its increasing relevance, this question remains largely unexplored. Based on a survey of 210 German and 213 US manufacturing companies, this research project conducted at the WHU – Otto Beisheim School of Management in Germany provides valuable insights. The findings are aimed at academics, managers, and consultants interested in understanding: i) the most effective strategies for responding to low-cost-country competitors and the national differences in these responses between Germany and the USA, ii) the environmental and company characteristics influencing strategy choices, iii) the environmental factors that can intensify or mitigate low-cost competition in specific industries, and iv) the impact of chosen strategies on financial performance in the face of low-cost competition.