Which of the Following Does Not Explain How a Differentiation

question 38

Multiple Choice

Which of the following does not explain how a differentiation strategy leads to superior performance?

• A) It enables a firm to sell their products at a premium price.
• B) Earn above average profits by reducing elasticity of demand for the product.
• C) Creates a barrier to the entry of new competitors.
• D) Price competitiveness leads to greater sales volumes.

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Definitions:

Capital Asset Pricing Model

The Capital Asset Pricing Model is a formula used to determine the expected return on an investment based on its risk relative to the overall market.

Retained Earnings

Retained earnings are the portion of a company's profits that are kept or retained rather than being paid out as dividends to shareholders, used for reinvestment in the business, debt reduction, or other purposes.

Cost of Equity

The return that investors expect for investing in a company's equity, often calculated using models such as the Capital Asset Pricing Model (CAPM).

Floatation Costs

Expenses incurred by a company in issuing new securities, including underwriting fees, legal fees, and registration fees.