Question

When organizations endeavor (1) to keep their costs (and hence the prices of their products or services) below those of competitors and (2) to target a wide market, they are utilizing a _____ strategy.
a) focused-differentiation
b) differentiation
c) cost-leadership
d) reinventing
e) cost-focus

Answer 1

Answer:

The correct answer is c) cost-leadership

Explanation:

It consists of looking for and maintaining a position of low costs with respect to the competition, this will allow the company to obtain returns above the average of the sector.

There is a relationship between the leadership strategy in costs and the possession of a high market share, this is because having a high market share, allows the emergence of economies of scale and economies of experience, both contribute to the reduction of unit costs.

Economies of scale refer to the reduction of unit costs by increasing the production of a given product. Economies of experience refer to the reduction of unit costs as a result of accumulated historical production (due to the greater experience of workers, for example).

The cost leadership strategy requires the construction of large facilities, capable of producing large volumes. The use of rigid productive equipment is also required, which are those specialized in the production of a single product.