Which of the following is a risk (or potential pitfall) of cost leadership? Multiple Choice a. Cost differences increase as the market matures. b. Attempts to stay ahead of the competition may lead to gold plating. c. Producers are more able to withstand increases in supplier costs. d. Cost cutting in one area of the value chain might increase costs in another.

Question

Amelie

Business

3 January, 14:26

Which of the following is a risk (or potential pitfall) of cost leadership? Multiple Choice a. Cost differences increase as the market matures. b. Attempts to stay ahead of the competition may lead to gold plating. c. Producers are more able to withstand increases in supplier costs. d. Cost cutting in one area of the value chain might increase costs in another.

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Spunky · Answer 1

d. Cost cutting in one area of the value chain might increase costs in another.

Explanation:

Although cost leadership is an efficient way to dominate the competition, it does have potential pitfalls if not executed correctly. For example, if operating cost is decreased, the changed product feature may imply a higher marketing cost afterward. In order to be truly efficient, the cost leadership strategy has to be implemented in such a way, so it doesn't impact other value chain costs negatively (increasing them).