ACCA Applied Knowledge · Business and Technology · Competitive factors
Which of the following is most likely to be a source of differentiation advantage rather than cost advantage?
Strong brand image and superior after-sales service support differentiation, because they give customers a reason to pay a premium. Bulk-purchasing economies, standardised production and low-wage locations all reduce unit costs, so they are sources of cost advantage instead.
- AEconomies of scale in bulk purchasing
- BStrong brand image and superior after-sales serviceCorrect
- CStandardising production to reduce unit costs
- DLocating operations in a low-wage region
Explanation
Differentiation rests on features customers value and will pay more for, such as brand image and after-sales service. The other options reduce costs and so support cost leadership.
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