Question

A company that manufactures and sells kitchen scrubbing sponges has significantly lower cost structures than its competition. The company sells in large volumes and has realized economies of scale in its productions of the scrubbing sponges. Besides the lower production costs, the company has little debt and sells most of its products to larger cleaning companies. Because of the company's situation, which competitive pricing approach should the company take to increase its sales volume? pricing to meet competitors O pricing below competitors pricing above competitors

Answer 1

Answer:

The correct answer is “Pricing below competitors”.

Explanation:

It is given that the organization is operating with a lower cost structure as compared to its competitor and it is also enjoying the economies of scale. Since lower cost structure makes the organization capable to keep the price of its product lower as compared to its competitor. Moreover, the lower price of a commodity will attract new customers. Consequently, its sales volume will increase.