The Risks of a Focused Strategy Based on Either Low-Cost

question 25

Multiple Choice

The risks of a focused strategy based on either low-cost or differentiation include:

• A) the chance that niche customers will bargain more aggressively for good deals than customers in the overall marketplace.
• B) the potential for the preferences and needs of niche members to shift over time toward product attributes desired by buyers in the mainstream portion of the market.
• C) the potential for the segment to be highly vulnerable to economic cycles.
• D) the potential for segment growth to race beyond the production or service capabilities of incumbent firms.
• E) All of these.

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Definitions:

Total Surplus

The sum of consumer surplus and producer surplus, representing the total net benefit to society from producing and consuming a good or service.

Consumer Surplus

Consumer surplus is the difference between the total amount that consumers are willing and able to pay for a good or service and the total amount they actually pay.

Producer Surplus

The gap between the price producers are ready to take for offering a product or service and the actual payment they receive.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, representing the benefit consumers receive.