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CMA Final · Strategic Cost Management · Introduction to Strategic Cost Management

Tulsi Beverages Ltd follows a differentiation strategy with a premium price. Which cost management emphasis is most consistent with this strategy?

A differentiation strategy requires investing in features and quality customers value while controlling costs that add no value. Cost management supports the premium positioning rather than simply minimising cost or price, which would suit a cost leadership strategy.

  1. ACutting all costs that reduce the product's perceived uniqueness to the customer
  2. BInvesting in features and quality that customers value, while controlling costs that do not add valueCorrect
  3. CMinimising the selling price to match the lowest competitor
  4. DEliminating all spending on research and branding

Explanation

Under differentiation, cost management supports value-adding features and quality while controlling non-value-adding cost. Option A is wrong because cutting costs that create uniqueness would erode the differentiation, which is the opposite of the strategy.

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