• Examples Of Cost Drivers

Examples Of Cost Drivers

A Cost Globalization Driver. Cost drivers depend on the economies of the business and so on can vary by industry. For example, global economies of scale are a cost globalization driver when they can only be realized with sales in many countries as opposed to one. Industry globalization conditions can be summa- rized as market, cost, government and competi- tive drivers (Yip, 1989). Each set of drivers has its proponents.

Globalization is driven by four factors: • Cost • • • Cost: Maximizing their investment is a motivator for many global companies. Single-nation markets might not be large enough to offer a company’s country subsidiaries all possible economies of scale and scope, especially given the dramatic changes in the marketplace.

The goal, then, is to get the most mileage from the investment cost. At the same time, advertising and promotion can bleed across borders, so it makes sense to make the product available where people are going to hear or learn about it. A realistic, objective assessment of global opportunities and costs will probably lead to tough decisions about which markets, customer segments, or product positioning to focus on and which ones to bypass as well as appropriate strategies. In pursuing price leadership, for example, the global marketer offers a product or service that is nearly identical to the competition’s, but at a lower price. This often means investing in scale economies and controlling costs that typically include overheads, research and development, and logistics. The alternative strategy, product differentiation, takes advantage of the marketer’s real or perceived superiorities on value elements such as design or technical support.

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