MicroMaster Advertises That Its Computers Are Backed by 24/7 Toll-Free

question 85

Multiple Choice

MicroMaster advertises that its computers are backed by 24/7 toll-free technical support. However, in order to meet its goal of keeping costs as low as possible, MicroMaster located its support function in a foreign country and staffed it with a small number of poorly trained employees who had (to Canadian ears) heavy foreign accents. Thus, when customers call the support line, they often must wait on hold. Then they find themselves speaking to someone who often can't answer their questions even if the customer could understand what the tech support person was trying to say in the first place. Which of the following appears to be the case with MicroMaster?

• A) It realizes that the quality of technical support does not matter to customers.
• B) It is focused on efficiency at the expense of effectiveness.
• C) It is utilizing an approach known as lean production, which maintains that it is more important to produce low-cost goods than to spend a lot of money on expensive services.
• D) It is concerned primarily with effectiveness and has completely ignored efficiency.

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Definitions:

Cross Subsidy

A pricing strategy where the revenue or profits from one product or service are used to support another within the same company, often to gain competitive advantage.

High Margin

Refers to products or services that yield a significantly greater profit relative to their cost.

Market Skimming

A pricing strategy involving setting high prices initially to target customers willing to pay more before lowering prices to attract a broader market.

Razorblade Strategy

A business model where the initial product is sold at a low price, and profit is generated from selling complementary goods.