Question

Which of the following cost-saving actions can potentially result in a company gaining a sustainable cost advantage over rivals because the company's actions to cut costs cannot be detected by rivals from the information in either the FIR or the Comparative Competitive Efforts section of the CIR?
1. Making it a company policy never to produce branded footwear with higher than a 3.0-star S/Q rating
2. Actions to underspend rivals on brand advertising
3. Actions to use only refurbished production equipment, actions to keeps supervisory costs to a bare minimum, and never spending any money on corprorate social responsibility and citizenship
4. Making it a company policy never to produce branded footwear with higher than a 3.5-star S/Q rating
5. Actions to completely avoid the payment of any import tariffs

Answer 1

Answer:

Cost-saving actions:

3. Actions to use only refurbished production equipment, actions to keeps supervisory costs to a bare minimum, and never spending any money on corporate social responsibility and citizenship

Explanation:

Competitive rivals will not glean the information about the use of production equipment, supervisory costs, and corporate social responsibility and citizenship from the Financial and Competitive Intelligence Reports.  So, using refurbished production equipment will reduce costs provided the quality is not adversely affected.  Supervisory costs can be minimized with target costing, and the amount on corporate social responsibility and citizenship is a management discretionary cost that can be eliminated, depending on prevail circumstances.