ACCA Strategic Professional · Strategic Business Leader · Strategic choices
Kestrel Foods sells organic gluten-free baby snacks only to health-conscious parents, using specialist ingredients and charging higher prices than mainstream brands. Which statement correctly classifies this strategy and its main vulnerability?
Kestrel follows a differentiation focus strategy because it serves a narrow segment with distinctive, premium-priced products. Its key vulnerability is that larger rivals may enter and serve the niche better, or that the segment's needs may converge with the mainstream market, eroding the basis of its advantage.
- ADifferentiation focus; the main vulnerability is that large competitors may serve the segment more effectively or the segment's needs may converge with the mainstream marketCorrect
- BCost focus; the main vulnerability is that the firm cannot charge a premium
- CBroad differentiation; the main vulnerability is that the firm lacks scale in a mass market
- DCost leadership; the main vulnerability is that its products are too unique
Explanation
Kestrel targets a narrow segment and competes on distinctive product features at a premium, which is differentiation focus. Focus strategies are vulnerable when broad-market rivals target the segment or when segment differences narrow. Cost focus is wrong because the firm competes on uniqueness, not low cost.
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