As the Strategic Manager of CutRite Scissors, You Are Tasked

question 69

Multiple Choice

As the strategic manager of CutRite Scissors, you are tasked with producing a strategy for introducing a new line of premium scissors. Your competitor produces a line of similar scissors at a cost of $1 and sells them for $12. Because your company has inferior production capabilities, your scissors will cost $3 each to produce. However, your handle is proven to be more comfortable than your competitors'. Assuming you are guaranteed to sell the same number of units as your competitor, which of the following strategies is most likely to achieve a competitive advantage?

• A) Reduce the quality of materials used in CutRite scissors to bring unit costs down to $1, then sell the scissors for $12.
• B) Continue to produce CutRite scissors for $3 but set the price at $10.
• C) Offer a buy-one-get-one-free sale on CutRite scissors.
• D) Market CutRite scissors as a higher-quality alternative and sell them for $15.

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Definitions:

Discount Factor(s)

A multiplicative factor used to determine present value of future cash flows, reflecting the time value of money and risk of the cash flows.

Straight-Line Depreciation

A technique for distributing the expense of a physical asset across its lifespan in uniform yearly sums.

Straight-Line Depreciation

A method of allocating an asset's cost evenly across its useful life, resulting in a consistent annual depreciation expense.

Simple Rate of Return

A calculation that measures the gain or loss on an investment over a specified period, expressed as a percentage of the investment's cost.