CFA Level I · CFA Level I Exam · Industry and Competitive Analysis
A company sells a basic product that is nearly identical to its rivals' products. It focuses on driving down its cost per unit through scale and tight cost control, and it prices at or near the industry average. This approach is best described as a:
The approach is a cost leadership strategy. The firm sells an undifferentiated product, lowers unit cost through scale and cost control, and prices near the industry average, so it earns higher margins than rivals through a cost advantage rather than through unique features or a narrow niche.
- Acost leadership strategyCorrect
- Bdifferentiation strategy
- Cfocus strategy based on a premium niche
Explanation
Cost leadership aims to be the lowest-cost producer, using scale and cost control, and earns superior margins by pricing near the industry average. Differentiation relies on unique features that support premium prices, which does not match a standard product. A premium niche focus targets a narrow segment, which is not described here.
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