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

question 15

Multiple Choice

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

• A) chance that niche customers will bargain more aggressively for good deals than customers in the overall marketplace.
• B) 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) potential for the segment to be highly vulnerable to economic cycles.
• D) potential for segment growth to race beyond the production or service capabilities of incumbent firms.
• E) potential for the segment to become too specialized for other multi-segmented rivals to enter.

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Definitions:

Variable Costing

A costing method that includes only variable costs (direct materials, direct labor, and variable overhead) in the cost of goods sold, treating fixed costs as period costs.

Product Cost

The total expenses incurred to produce a product, including labor, materials, and overhead.

Per Unit

A term referring to the cost or price of a single item or service when discussing bulk production or sales.

Variable Costing

An accounting method that includes only variable production costs (costs that change with the level of production) in product costs.