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:

Variable Cost

Costs that change in proportion to the level of activity or volume of production.

Break-Even Point

The level of production or sales at which total costs equal total revenue, resulting in no net profit or loss.

Fixed Costs

Costs that remain constant in total regardless of changes in the level of production or sales volume.

Unit Selling Price

The amount of money charged for one unit of a product or service, often determining revenue and profitability.