Firms that compete in the global marketplace typically face two types of
competitive pressure that affect their ability to realize location economies
and experience effects, to leverage products and transfer competencies and
skills within the enterprise.
They face pressures for cost reductions (1) and pressures to be locally
responsive (2) (see next figure). These competitive pressures place
conflicting demands on a firm. Responding to pressures for cost reductions
requires that a firm try to minimize its unit costs. But responding to pressures
to be locally responsive requires that a firm differentiate its product offering
and marketing strategy from country to country in an effort to accommodate
the diverse demands arising from national differences in consumer tastes
and preferences.