What are some of the possible threats facing the low-cost competitive position?

What will be an ideal response?

There are numerous threats facing firms aiming for a low-cost competitive position. First, the firm may face threats
on the technological front. In particular, the resource that makes it possible for a firm to compete of the basis of
cost--often a certain technology--can be imitated. Efficient production and process technologies can move from
firm to firm by any number of means, such as consultants with clients throughout the industry and the movement
of key personnel from company to company. Granted, even though an imitator may acquire comparable
technology, the original firm may still enjoy the benefits of greater experience and the learning curve.
A more serious threat to low-cost competitors is the possibility that another firm may introduce a new
technology--one which, like minimill technology in the steel industry, supports a different scale and a more
efficient learning process. In such cases, even small latecomers can establish cost positions significantly lower than
those of larger, more experienced low-cost leaders. Second, low-cost leadership means offering an acceptable
combination of price and quality. A real threat to an intended low-cost position is the failure to offer sufficient
quality to satisfy buyers' basic needs.
Over the past decade, for example, Kmart's experiments in low-cost positioning have been thwarted not only by
Wal-Mart's ability to stake out an even lower cost position, but by Kmart's own inability to offer a retail experience
of comparable quality (customers complain of empty shelves, uninviting environments, and less helpful staff).
Recently, another serious threat has arisen to low-cost competitors in labor-intensive industries: increased public
awareness of questionable labor practices in developing countries. Struggling to keep wage costs as low as possible,
many companies (some unwittingly) have entered into agreements with suppliers who enforce excessive work
hours, deny basic employee services, employ children, and violate what, at least in the United States, are
considered acceptable working conditions. Watchdog groups regularly publicize such cases, and reforms push up
costs. Many multinational companies have established codes of ethical conduct for suppliers, but enforcing these
standards--inspecting and auditing overseas suppliers--also increase costs. Managers must be certain that their
foreign sourcing arrangements are in compliance with their corporate values.