A Low-Cost Provider Strategy Can Defeat a Differentiation Strategy

question 2

Multiple Choice

A low-cost provider strategy can defeat a differentiation strategy

• A)when a company can offset thinner profit margins per unit by selling sufficient additional units to increase total profits.
• B)when there are few ways to differentiate a product or a service and many buyers perceive these differences as valuable.
• C)when customers are basically satisfied and do not think extra attributes are worth a higher price feature.
• D)when there are many ways to differentiate the product or service and many buyers perceive these differences as having value.
• E)when technological change is fast-paced and competition revolves around rapidly evolving product features.

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Definitions:

Market Risk Premium

The additional return expected by investors for taking on the higher risk of investing in the stock market over a risk-free rate.

Beta

A measure of a stock's volatility in comparison to the overall market; a beta above 1 indicates greater volatility than the market.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, serving as a benchmark for measuring risk.

Security Market Line

A line that depicts the relationship between the expected return of a market security and its risk as measured by beta.