BSM600 Week 4 Questions and Correct Answers | Latest Update | A+

Customers choose a product based on: Ans: 1. The price of the product 2. Th way the product is differentiated from other products of its type Companies typically choose between 2 "generic" strategies for offering unique value to customers: Ans: Cost advantage- Similar product at lower cost Differentiation Advantage- price premium from unique product The Cost Advantage Strategy Ans: - A firm reduces its price below all of its competitors, thereby allowing it to gain market share. - A firm may choose the same price as competitors, which results in greater profit rather than higher market share. Strategic choices of cost advantage Ans: - The cost leader does not try to be the industry innovator. - The cost leader positions its product to appeal to the "average" or typical - The overriding goal of the cost leader is to increase inefficiency and lower its cost relative to industry levels. Advantages of Cost Leadership Strategies (5 forces) Ans: - protected from industry competitors by cost advantage. - Less affected by increased price of inputs if there are powerful suppliers - Less affected by a fall in price of outputs if there are powerful buyers. - Purchases in large quantities increase bargaining power over suppliers. - Ability to reduce price to compete with substitute products - Low costs and prices are a barrier entry Disadvantages of Cost Leadership Strategies Ans: - Vulnerability in changes in cost structure - Risk of Qualify sacrif