CS Professional · Strategic Management and Corporate Finance · Competitive Positioning
A mid-sized Indian apparel firm tries to be the cheapest producer while also spending heavily on premium designer branding and boutique service. Its costs are above those of mass-market rivals and its prices are too low to reflect a premium image, so its returns are below the industry average. According to Porter, this firm is best described as:
The firm is stuck in the middle. It mixes lowest-cost pricing with expensive premium branding, so it has neither a cost advantage nor a differentiated premium image, and as Porter predicts, it earns below-average returns.
- AStuck in the middle, lacking a clear competitive advantageCorrect
- BPursuing a successful hybrid focus strategy
- CEnjoying first-mover advantage
- DExploiting economies of scope
Explanation
Porter argued that a firm failing to commit to cost leadership, differentiation or focus is stuck in the middle and usually earns below-average returns. Here the firm has high costs of a differentiator but prices of a cost leader, so it has no clear advantage. Hybrid focus is not a recognised success here as returns are poor, and the other terms are not supported by the facts.
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