Question

Company W makes motor vehicles. Several years ago, W restructured its value chain to significantly reduce production costs and improve quality. This was in response to similar activities by W's major rivals.

Because of this, W has been able to maintain its prices at a similar level to those of its competitors, while continuing to produce a wide range of cars that are tailored to a variety of market segments.

W has recently decided to undertake a significant investment in advertising, as it feels that its brand is one of the most recognised in the market. W wishes to further increase the desirability of its brand, which it feels could allow it to raise its prices slightly in the coming year, while still maintaining its overall sales volume.

According to Porter's generic strategies model, W's current approach to its market is an example of:
O Cost leadership
O Focus
O Stuck in the middle
O Differentiation

Answer 1

Company W's market approach is an example of differentiation because it is focusing on creating a distinctive brand and products that allow for premium pricing due to their uniqueness and brand desirability.

Step-by-step explanation:

According to Porter's generic strategies model, Company W's approach to its market can be characterized as differentiation. This strategy is distinguished by a firm’s efforts to create unique product offerings that are valued in the marketplace, thereby allowing the company to command a premium price.

Company W has invested in restructuring its value chain to reduce production costs and improve quality, maintaining competitive prices. Importantly, it produces a wide range of cars tailored to various market segments.

W's decision to invest significantly in advertising to enhance brand desirability suggests the company aims to differentiate its brand even further, potentially allowing it to raise prices due to the strong brand recognition.