Question

Increased global competition is placing pressure on companies to reduce costs. TRUE OR FALSE

Answer 1

The assertion that rising global competition forces companies to cut costs is true, as globalization and technological advancements increase competition from firms worldwide, which can lead to decreased profits and pushes businesses to innovate.

Step-by-step explanation:

The statement that increased global competition is placing pressure on companies to reduce costs is TRUE. The forces of globalization, along with advancements in communications and information technology, have intensified competition by introducing more competitors from various regions and countries. This increased competition from firms offering better or cheaper products can threaten the profitability and survival of businesses that fail to adapt or improve efficiency.

Competition can lead to businesses either going out of business or being forced to innovate to stay competitive. While this can result in job losses and decreased income for workers, it can also result in enhanced productivity and development of new markets. The competition from economies with lower costs of living and lower wages, such as those in medium-income countries like Mexico, China, or South Africa, is particularly challenging for firms in high-income countries.

Answer 2

True, globalization and advancements in technology have led to increased competition, pressuring companies to reduce costs to remain competitive. Companies compete more with firms from different regions, making cost reductions vital.

Step-by-step explanation:

Globalization and advancements in communications and information technology have expanded the reach of businesses, allowing companies from different regions and countries to compete with one another more than ever before. This has led to a highly competitive global marketplace where firms that offer better or cheaper products can gain a significant advantage. Companies feel the pressure to reduce costs as a means to compete effectively and maintain or increase their profits. Failure to do so may result in a loss of business and subsequent negative impacts on both the business and its employees.

Moreover, businesses in high-income countries are facing competition from firms in middle-income countries that have lower operational costs owing to lower wages and costs of living, which can often translate into lower-priced goods and services. Thus, to stay competitive in this dynamic market landscape, cost reduction strategies become a vital part of business operations.