Final answer:
While being a low-cost producer can be crucial for competitiveness, it is not the only strategy for businesses to remain competitive. Firms may need to match low prices from imports, risking potential losses, but competition can also spur innovation and quality improvements, as seen in America's car industry. Therefore, manufacturers must balance cost, profitability, and market presence.
Step-by-step explanation:
To answer the statement 'To remain competitive, manufacturers must be low cost producers', it is largely true; however, being a low-cost producer is not the only way to remain competitive in the market. When imports are sold at extremely low prices, domestic firms may need to match these prices to maintain competitiveness.
This action may lead to selling products under cost, potentially causing losses that are not sustainable over time - a scenario that can result in domestic firms exiting the industry, thus allowing importers to dominate the market and eventually raise prices.
Moreover, competition from firms that offer better or cheaper products can significantly reduce the profits of a business, endangering its survival. This adversity can also impact the workforce, with loss of income or jobs. Consequently, businesses must balance the need for competitive pricing with maintaining profitability and market presence.
However, competition also fosters innovation and improvement, as evidenced by America's car producers, who now make much higher quality cars due to the competitive pressure from international carmakers. This implies that manufacturers can also differentiate themselves through innovation and quality improvements rather than simply cutting costs.
Ultimately, while being a low-cost producer can be an essential factor for competitiveness, it is not an exclusive strategy and businesses can find other successful ways to compete.