Question

Low-cost leaders who have the lowest industry costs are likely to:

A. have out managed rivals in finding ways to perform value chain activities more cost-effectively.
B. be considering exiting the current product market and use their competitive low-cost strength to gain a competitive advantage in other product arenas.
C. be favorites to win the game of strategy in the long run.
D. understand that driving costs to the lowest possible level is the only way to sell cheap products to consumers.
E. understand that they have lower bargaining power with suppliers than rivals who employ a different strategy.

Answer 1

Low-cost leaders generally outperform rivals by having more efficient value chain activities, leading to lower production costs and competitive advantages. They may achieve this through technological improvements or improved efficiency, not necessarily by weak bargaining power with suppliers or plans to exit the product market.

Step-by-step explanation:

Low-cost leaders who have the lowest industry costs are likely to have out managed rivals in finding ways to perform value chain activities more cost-effectively. These firms achieve this through various strategies such as slicing up the value chain, benefiting from economies of scale, or through technological improvements leading to decreasing average total costs. Such improvements can include advancements in technology or an increase in employee education within the industry. By reducing production costs, these firms often gain a competitive advantage, enabling them to offer lower prices or retain higher margins compared to competitors.

It is not necessarily the case that low-cost leaders with the lowest industry costs are always considering exiting their current product market for other areas, nor does it imply that they have lower bargaining power with suppliers. Furthermore, while low-cost leadership can be a significant advantage, it does not guarantee long-term strategic victory, nor does it suggest that cost reduction is the sole way to appeal to consumers seeking inexpensive products.