The Big Danger or Risk of an Unsound Best-Cost Provider

question 4

Multiple Choice

The big danger or risk of an unsound best-cost provider strategy is

• A) that buyers will be highly skeptical about paying a relatively low price for upscale attributes/features.
• B) not establishing strong alliances and partnerships with key suppliers.
• C) that low-cost leaders will be able to steal away some customers on the basis of a lower price and high-end differentiators will be able to steal away customers with the appeal of better product attributes.
• D) that it will be unable to achieve top-notch quality at a rock-bottom cost.
• E) becoming too highly integrated and not relying enough on outsourcing.

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Definitions:

Consolidated Sales

The total sales of a parent company and its subsidiaries, after eliminating intercompany sales, reported in the consolidated financial statements.

Normal Markup

The standard amount or percentage added to the cost of a product to determine its selling price.

Common Stock

Equity securities that represent ownership in a company, providing voting rights and a share in the company’s profits through dividends.

Equity Method

A method of accounting for investments, where the investor recognizes its share of investee's profits and losses in its own income statement, typically used when the investor has significant influence over the investee.