The risks of a cost leadership strategy include all of the following EXCEPT: A. investments in...

The risks of a cost leadership strategy include all of the following EXCEPT:

A. investments in manufacturing equipment can become obsolete due to innovation.

B. firms may fail to understand customers’ perceptions of competitive levels of differentiation.

C. competitors may learn how to successfully imitate their strategy.

D. firms may fail to include enough unique features in the product.

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Expert Solution

A cost leadership strategy relies of having enough scale, expertise, advanced technology, learning curve etc. to be able to produce at a cost lower than the competition.

A. investments in manufacturing equipment can become obsolete due to innovation. - is a real risk in this strategy since the firm needs to keep an eye on changing technology

B. firms may fail to understand customers’ perceptions of competitive levels of differentiation. - is not really relevant here since this is more about differentiation strategy

C. competitors may learn how to successfully imitate their strategy. - is a real risk since this would take away the cost advantage they carry

D. firms may fail to include enough unique features in the product. - is a risk since customers may still be interested in unique features of a product rather than just the low price which the cost leader is able to offer

Hence B is the right answer.

Rahul Sunny answered 1 year ago

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