Question

What are the two ways a company can translate its low-cost advantage over rivals into attractive profit performance?

Multiple Choice
A. either going beyond the segment of price-sensitive buyers or increasing production to achieve greater economies of scale and even lower costs
B. either using the cost advantage to add a few inexpensive differentiating features or cutting its price to levels significantly below the prices of rivals
C. either entering other market segments where price is an important competitive weapon or using its cost advantage to add other products to widen market appeal
D. either using its cost advantage to spend heavily on advertising or increasing price to earn the biggest possible profit margin on each unit sold
E. either using its low-cost edge to underprice competitors and attract price-sensitive buyers in large enough numbers to increase total profits or refraining from price cutting and using the low-cost advantage to earn a bigger profit margin on each unit sold

Answer 1

E. either using its low-cost edge to under price competitors and attract price-sensitive buyers in large enough numbers to increase total profits or refraining from price cutting and using the low-cost advantage to earn a bigger profit margin on each unit sold.

Step-by-step explanation:

When the company is able to produce the goods at a cost lower than that of competitors it can increase its revenue share. For this the company can have two strategies:

Either to attract the price sensitive customers that means the customers who wants to buy the goods at lower price as the cost is low, then adding the same profit margin as that of competitors will still keep the price low.

Further it can also not deduct the price but can earn good margin of profit as cost is low, but keeping the same price as that of competitors will assure greater profit.