A disadvantage of pursuing a cost leadership strategy is that
A) technological change can make production methods obsolete.
B) price wars make it hard to compete with differentiators.
C) it costs more than a differentiation strategy because of the necessity of high capital investments.
D) powerful buyers are a major threat.
E) no quality control exists.

Question

Quizplus · Accepted Answer

Pursuing a cost leadership strategy can be risky because technological change can make production methods obsolete, which can erode the cost advantage. As a result, the company may need to continually invest in new technology to stay ahead of competitors, which can be costly. In addition, a cost leadership strategy often involves producing standardized products, which can make it difficult to differentiate the product and brand from competitors. This can lead to price wars and profit erosion. Powerful buyers can also be a threat because they can negotiate lower prices and drive down profit margins. Finally, quality control is essential for a cost leadership strategy, as the low price can often be associated with poor quality.

A Disadvantage of Pursuing a Cost Leadership Strategy Is That