Successful Broad Differentiation Allows a Firm to

question 89

Multiple Choice

Successful broad differentiation allows a firm to

• A)be the industry's best-cost provider.
• B)set the industry ceiling on price.
• C)avoid being dragged into a price war with industry rivals and not be overly concerned about whether entry barriers into the industry are high or low.
• D)command a premium price for its product, and/or increase unit sales, and/or gain buyer loyalty to its brand.
• E)take sales and market share away from rivals by undercutting them on price.

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Definitions:

Fixed Overhead

Fixed Overhead refers to the consistent, non-variable expenses incurred by a business, regardless of its level of production or sales activities.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the proportional relationship between fixed and variable costs.

Contribution Margin

The difference between the sales revenue of a product and its variable costs, used to cover fixed costs and profit.

Pretax Net Income

The amount of income earned by a business before taxes have been deducted.