Question

The typical risks of a cost leadership strategy include: a. the inability to balance high differentiation and low price. b. excessive differentiation to the point where the customer base is too small. c. loss of customer loyalty. d. production and distribution processes becoming obsolete.

Answer 1

Answer: The correct answer is "b. production and distribution processes becoming obsolete.".

Explanation: The typical risks of a cost leadership strategy include production and distribution processes becoming obsolete because to maintain cost leadership, the production and distribution processes must always be in constant observation to modify if necessary in order to maintain competitiveness and not remain stuck attached to a production and distribution model that as a consequence of innovations in the competition may become obsolete.

Answer 2

Answer: d. production and distribution processes becoming obsolete

Explanation: Cost leadership strategy is a strategy employed for unsegmented markets and is characterized by tight accounting controls on manufacturing costs and overhead expenses, continuous improvement in productivity, products, services or programs etc. Thus, the strategy relies on experience and maturity of operations to reduce production costs below industry average. However, a threat to this strategy is a technological advance in the industry that makes older technologies or products, including production and distribution processes obsolete.