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

Under Porter's generic strategies, a firm that offers a distinctive product at a premium price, supported by branding and innovation, is following which strategy, and what is the cost management emphasis?

The firm follows a differentiation strategy. Its cost management aims to sustain and fund the features, branding and innovation that justify the premium price, rather than simply achieving the lowest unit cost as in cost leadership.

  1. ACost leadership; minimising cost per unit through scale
  2. BDifferentiation; managing costs to sustain the value customers pay a premium forCorrect
  3. CFocus on cost only; eliminating all non-production overheads
  4. DDiversification; spreading fixed costs across unrelated businesses

Explanation

A premium-priced, distinctive product reflects differentiation. Cost management then supports and protects the differentiating features rather than minimising cost at any price. Cost leadership aims at the lowest industry cost, so it does not fit.

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