Which of the following statements is true of differentiation and cost structure?
A)Differentiation and cost structure decisions affect one another.
B)Differentiation and cost structure decisions do not affect one another.
C)Companies that focus on the higher-value end of the market have a lower cost structure.
D)Differentiation decisions do not affect a company's profitability.
E)Cost structure decisions do not affect a company's profitability.

Question

Which of the following statements is true of differentiation and cost structure?
A)Differentiation and cost structure decisions affect one another.
B)Differentiation and cost structure decisions do not affect one another.
C)Companies that focus on the higher-value end of the market have a lower cost structure.
D)Differentiation decisions do not affect a company's profitability. 
E)Cost structure decisions do not affect a company's profitability.

Quizplus · Accepted Answer

Differentiation and cost structure decisions are interdependent. Higher levels of differentiation often require higher costs, which can affect a company's cost structure. Similarly, cost structure decisions can impact a company's ability to differentiate its product or service. Therefore, these decisions must be taken together and not in isolation. Option C is not always true as companies that focus on higher value may need to invest in research and development, advertising, or premium materials which would lead to a higher cost structure. Option D and E are incorrect as both differentiation and cost structure impact a company's profitability.

Which of the Following Statements Is True of Differentiation and Cost