ACCA Applied Knowledge · Business and Technology · Competitive factors
Which of the following is a risk specific to a firm pursuing a cost leadership strategy?
The specific risk is that competitors imitate the firm's cost-saving methods or find lower-cost sources, eroding its advantage. Loss of valued uniqueness is a differentiation risk, and a disappearing niche is a focus risk, so neither is specific to cost leadership.
- ACustomers may stop valuing the unique features that justify premium prices
- BCompetitors may imitate cost-saving methods or find lower-cost sources, eroding the advantageCorrect
- CThe firm's narrow target segment may disappear
- DThe firm may face excessive costs of maintaining brand uniqueness
Explanation
A cost leader's advantage can be eroded if rivals copy its methods or access cheaper resources or technology. The other options relate to differentiation, focus or brand-building strategies rather than cost leadership.
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