Question

A competitive strategy to be the low-cost provider in an industry works well when

A. price competition among rival sellers is especially vigorous.
B. commodity-based product prevails and minimal differentiation exists.
C. buyers incur low costs in switching their purchases from one seller/brand to another.
D. industry newcomers use low introductory prices to attract buyers and build a customer base.
E. All of these.

Answer 1

E) All of these.

Step-by-step explanation:

When a company decides to compete only based on their low prices that doesn't generally work very well because consumers want to maximize their benefits per dollar, and if the benefits offered are very low, it doesn't matter if the price is also low, consumers wouldn't buy it.

Low price strategies are successful only when a combination of factors are given:

1. the products offered are homogeneous and the price competition is very intense, leading to perfect substitute products.
2. buyers can easily switch from one product to another, and the benefits they get are similar between competing products.
3. new suppliers also use low introductory prices to try to gain market share.

These are basically the conditions of a perfect competition market, but that rarely happens except with commodities.

Answer 2

E= All of these

Step-by-step explanation:

As per the Michel Porter Five Forces Model When the competition in industry is very high, substitute product exists, switching costs are very low and there are no entry barriers to enter in market for new suppliers in these scenarios firm must sell their product at low cost.