Question

In which of the following situations would a firm most likely pursue a low-cost leader strategy?

A) There are no competitors in the market and the firm is the market leader.

B) The market is quality-sensitive rather than price-sensitive.

C) The firm can minimize its operational expenses in order to sell higher volumes of products.

D) The company's product is a niche product and appeals to only a few customers.

E) The nature of its products does not allow the firm to maintain a volume advantage in the market.

Answer 1

A firm is most likely to pursue a low-cost leader strategy when it can minimize operational expenses to sell higher volumes, as in situation C.

Step-by-step explanation:

A firm is most likely to pursue a low-cost leader strategy in the situation where it can minimize its operational expenses in order to sell higher volumes of products. This corresponds to scenario C, where the firm's ability to operate efficiently at a large scale enables it to become a low-cost leader. The pursuit of a low-cost leader strategy is indicative of a competitive market where firms vie for an advantage primarily through cost minimization, typically resulting in the need to operate near the bottom of the long-run average cost curve (LRAC) where the cost of production is lowest. This allows the firm to offer products at a lower price than competitors while maintaining profitability.