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Application of Porter's Competitive Strategy

question 134

Multiple Choice

Application of Porter's Competitive Strategy
Stacie sighed. Her general manager had just left after giving her the latest assignment- readdress the competitive advantage of their company. By Friday's meeting, Stacie was to have developed three differing strategies the business could use in order to maintain its competitive advantage. Its computer business was slowly losing market share to its competitors, and everyone realized something needed to be done. Stacie glanced through the article by Michael Porter that her manager had left with her. According to Porter, there were three differing types of strategies they could choose from. Stacie began wondering if there was a way they could make their computers cheaper, which would allow them to then sell at a lower price. If they could reduce price by $100 a machine, they would be the industry leaders in price. Stacie wondered if they could find any lower- priced suppliers for the more expensive parts of their computers. She knew that their computers appealed particularly to small business owners due in part to price. They were able to offer the lower price because their computers were not as powerful or fast as some machines, but did contain the necessary word processing, database, and spreadsheet capabilities necessary for a typical small business owner. The lack of frills with the solid three program capabilities, plus their known reputation for quality had worked for them in the past. Stacie wondered if perhaps they needed to look at a smaller segment of the market, maybe small businesses with large accounts receivables that would fully utilize their specific database. She knew that would cut their market by 1/8 but maybe achieving a definite market niche would help. Stacie began compiling her report for Friday's meeting.
-As the market for larger desktop computers was replaced by smaller portable hand- held models, there has been a decline in sales of traditional models regardless of how much the price is reduced. At this point, what type of strategy should be pursued by Stacey's group?

Calculate interest payments and understand the impact of market and nominal rates on these payments.

Recognize how gains and losses on bond redemption affect financial statements.

Understand the rationale behind issuing callable bonds and their features.

Comprehend the significance of the time value of money in bond valuation.

Definitions:

Finished Goods Inventory

The stock of completed products ready for sale at the end of an accounting period.

Cost of Goods Manufactured

The total production cost of goods completed during a specific period, including materials, labor, and overhead costs.

Direct Labor Usage

The total amount of labor directly involved in the manufacturing process, often used in calculating production costs and efficiency.

Factory Wages Payable

An account representing the amounts owed to manufacturing personnel for wages that have been earned but not yet paid.