Question

Give opinion:

According to our text Managerial Economics one of the reasons a firm may chose a low cost strategy is to spend as least amount of money as possible in areas such as production, administration, and marketing without compromising the quality of the product or service (sec 12.1). Those same firms will also likely sell their products or services at a lower cost in order to sell more of it to a greater spectrum of consumers. A prime example of this is the popular clothing site Fashon Nova. The site has become quite popular over the years for their trendy, very stylish clothing that is sold at a more affordable rate than a lot of other clothing sites. Because their clothing is so affordable the amount of product that they sell allows them to stay relevant as one of the leading clothes retailers right now. The company has also saved money by keeping their business limited to online shopping only. This way there are no expenses for locations, utilities, employees, insurance, etc.

Answer 1

Answer:

When a firm wants to hold its place in the market with a new product and try to enhance its customer base, the best strategy is to keep the right and low price of the product, which can be accessible to greater number of consumers.

The initial brainstorming starts on, Product choice and its ability to attract customers. Which is the major determinant of the strategy to be put in place for the success of the business.

After choosing the product, firms produce at lower cost and at a higher quality than their competitors. This is a success criteria,  and this strategy is achievable as the firm's need to cut down the prices in operations and production and give all the emphasis to quality. Like in the example it was mentioned, 'the Fashion Nova company has also saved money by keeping their business limited to online shopping only. This way there are no expenses for locations, utilities, employees, insurance, etc.'

Moreover the quality should never be compromised even after the success of the firm.

There are many companies (including the example- Fashion Nova) which earn their profit with huge customer base rather than having a high price of the product and few customers for it.

In my opinion, this strategy works quite well for new entrants.

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