Question

Which of the following best describes a company that has adopted a low-cost producer strategy?

a. it focuses on efficiency and productivity.
b. it focuses on value-based products, but necessarily at the lowest cost.
c. it is likely to adopt an organic organizational structure.
d. it believes that people will pay a premium price for a distinctive product.

Answer 1

A company utilizing a low-cost producer strategy focuses on minimizing production costs to provide lower prices, often leveraging economies of scale and cost-efficient processes to do so. They aim for high volume sales at low margins rather than seeking premium pricing for distinctive products.

Step-by-step explanation:

A company that has adopted a low-cost producer strategy emphasizes minimizing production costs as a means to offer goods or services at lower prices than competitors.

This strategic approach generally involves economies of scale, efficient production processes, and cost reduction practices such as outsourcing, cost-effective resource utilization, and lean operations. Companies with a low-cost strategy rely on high volume sales at low margins to achieve profitability.

Hence, they would not typically believe that people will pay a premium price for a distinctive product, as that would align more with a differentiation strategy rather than a low-cost strategy. Instead, these companies often have a reputation for slashing prices to stay competitive, especially in response to new entries in the market.