The competitive strategy of cost leadership allows a firm to outperform competitors by producing products or services:
A)With reduced quality standards, thus reducing overall costs.
B)In smaller operational units.
C)At lower cost achieved by increased productivity.
D)With attractive added features making the product more expensive, or "the cost leader".
E)That are heavily promoted and heavily warranted.

Question

Quizplus · Accepted Answer

Cost leadership strategy is about producing goods or services at a lower cost than competitors while maintaining satisfactory quality. Increased productivity helps to reduce the cost of production, which then helps to maintain a lower price compared to other competitors. Therefore, option C is the correct answer. Option A is incorrect because reducing the quality standard may affect customer satisfaction, leading to adverse effects on sales. Option B is incorrect because smaller operational units may not necessarily reduce the cost of production. Option D is incorrect because added features will increase the cost of production, resulting in a higher price. Option E is incorrect because heavy promotion and warranties will increase the cost of production, leading to a higher price.

The Competitive Strategy of Cost Leadership Allows a Firm to Outperform