Production

Abstract

To remain competitive today, enterprises must make products that are low priced or possess distinctive characteristics. Rising incomes, rapidly changing consumer expectations, increasing global competition and market diversity compel manufacturers to resolve two tensions when devising production strategies. The first source of concern is technology. Demand conditions encourage firms to mass-produce in order to minimise costs or adopt flexible manufacturing methods to accommodate product variations and thus add more value and secure higher margins. Either course presents a trade-off. Standardising products is the best way to lower costs and offer attractive prices, but it leaves firms exposed to the risk that sudden changes in the market will make their goods obsolete. Diversifying output makes it easier to cope with shifting demand conditions, but this strategy increases expenses and poses the danger that more efficient specialised producers will one day undercut prices. Current technological developments are making it easier to contend with these conflicting choices, but manufacturers must still address them creatively.