A Major US

question 48

Essay

A major U.S. automaker from 1902 to 1966, Studebaker Corp. prospered in the late 1940s and into the 1960s. Its advertising after World War II emphasized quality of design and production. The corporation also used the stability of its work force in its advertisements, often featuring pictures of father and son working side by side in its factories.

Required:
(a) From just this brief description of Studebaker Corporation, which type of competitive strategy-cost leadership or differentiation, would you guess Studebaker was using? Explain your choice.
(b) Given your answer in Part (a), speculate on what market factors might have caused the corporation to go into bankruptcy and cease production in the mid-1960s.

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Definitions:

Perfectly Competitive

A market structure characterized by a large number of small firms, a homogenous product, perfect information, and no barriers to entry or exit.

Marginal Cost

A rise in the comprehensive cost when producing an additional unit of a product or service.

Fixed Cost

A charge that stays the same, no matter how much is produced or sold in terms of goods or services.

Variable Costs

Expenses that vary directly with the level of production or volume of output.