A Cost Leadership Strategy

question 20

Multiple Choice

A cost leadership strategy

• A)requires a commodity product.
• B)requires a firm to commoditize their product - i.e. no frills - even if the industry's product is differentiable (e.g. cars or airlines).
• C)can be achieved with a unique brand image.
• D)can only be achieved in the modern world by outsourcing to cheap-labour countries.

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Definitions:

Intrinsic Value

The inherent worth of an asset, distinct from its market value, based on its fundamental characteristics.

ROE

Return on Equity, a measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested.

Required Return

The minimum expected return an investor demands for holding a particularly risky investment.

Plowback Ratio

The percentage of profits a company keeps instead of paying out to shareholders in the form of dividends.