ACCA Applied Knowledge · Business and Technology · Competitive factors
A budget airline removes free meals, uses a single aircraft type and flies from low-cost secondary airports so that it can set fares below all rivals across the whole market. Which generic strategy is it following?
The airline follows cost leadership. It cuts costs through a single aircraft type, no free extras and cheap airports so it can charge the lowest fares across the broad market. Cost focus would target only a narrow segment, and differentiation relies on uniqueness.
- ACost leadershipCorrect
- BDifferentiation
- CCost focus
Explanation
The airline minimises costs to undercut rivals and it targets the whole market, which is cost leadership. Cost focus would aim at a narrow segment only. Differentiation would rely on uniqueness valued by customers, not on low price.
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