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No company is safe from low‐cost rivals. Almost overnight, nimble low‐cost competitors can exploit their offshore advantage, partnerships, and inexpensive technologies to break down barriers and rewrite the rules of competition. This paper aims to show how to counterattack.

The paper shows that way to beat low‐cost competitors that have the potential to become serious competitors is to identify and deal with them early, before they get a foothold in a market.

The paper finds that the best way to identify and thwart a low‐cost rival is to adopt its mindset, anticipate its next competitive move and measure your costs against its costs. This best practice analysis requires four steps.

“What to do” to defeat low‐cost competitors involves two separate but related tasks: First, “stop the bleeding”, and second, reposition the company for success in the new market. The paper shows how to break down potential moves into short‐term tactics and long‐term strategies.

The paper shows how to win the battle with a low‐cost competitor by identifying the genuine threats, taking on the serious competition, adapting its tactics quickly and hitting back with a well‐placed blow.

As firms, especially manufacturers, seek value‐creating opportunities, many are moving operations to low‐cost labor centers. Can firms in the mature economies seize these windows of opportunity to increase productivity in immature economies before wages rise to make their own profits, thus increasing shareholder value? This paper contemplates the ideas that a knowledge‐focused management philosophy, whether technological, process‐oriented, organization structure focused, or cultural can provide managers with techniques to seize this opportunity to create value by increasing labor productivity with less expensive labor. Measuring the value created after implementation of knowledge‐focused management programs can be hard and usually requires comparison to pre‐implementation metrics.