No easy solution to the Asia-Europe rates war

Weakening of demand is not the root but is an immediate cause and the fear of even more weakening only worsens the situation.

Some years ago, for example, Hewlett Packard (HP) made what in retrospect was a poor strategic decision. As the dominant PC maker, it was troubled by smaller rivals snapping at its heels with lower prices. In response, HP decided to become the low cost market leader in the belief that its manufacturing ability, wide scale reputation for quality and its economies of scale would support a price at which the company could sell PCs with profit margins greater than those of the competitors.

Focusing on building good machines at rock bottom cost that didn’t require cutting-edge engineering, design or marketing, allowed the HP to save significant costs from the outset by trimming the numbers of creative personnel.