Asked by Michael Brazis on Jun 13, 2024
Verified
Which of the following statements is incorrect about fundamental business strategies?
A) A company implementing a cost differentiation strategy is attempting to increase operating efficiency of assets and improve the inventory turnover ratio.
B) A company implementing a product differentiation strategy is attempting to improve its net profit margin through charging higher prices.
C) A company will be more profitable because it will attract a higher volume of customers and sales revenue when it follows a product differentiation strategy versus a cost differentiation strategy.
D) In general,a cost differentiation strategy results in lower profit margins whereas a product differentiation strategy results in higher profit margins.
Cost Differentiation Strategy
A business strategy aiming to offer products or services differentiable from competitors' based on features, quality, or service rather than competing primarily on price.
Product Differentiation Strategy
A business approach aimed at distinguishing a product or service from others in the market to attract a specific customer segment.
Inventory Turnover Ratio
Inventory turnover ratio is a financial metric that measures how many times a company's inventory is sold and replaced over a specific period, indicating efficiency in inventory management.
- Determine how a company's strategic decisions impact its financial outcomes.
- Analyze the effect of operational strategies on cost control and revenue generation.
Verified Answer
MN
Moosa Nayeem MohammedJun 20, 2024
Final Answer :
C
Explanation :
It is incorrect to say that a company will be more profitable with a product differentiation strategy compared to a cost differentiation strategy. The profitability depends on various factors such as the industry, competition, target market, and execution of the chosen strategy.
Learning Objectives
- Determine how a company's strategic decisions impact its financial outcomes.
- Analyze the effect of operational strategies on cost control and revenue generation.