Refer to the scenario below to answer the following questions.
Competitive Strategies (Scenario)
Carly's general manager has just given her a big assignment: develop three different potential strategies the business could use to maintain its competitive advantage. Its computer business was slowly losing market share to competitors, and everyone realized that something needed to be done. Carly glanced through the article by Michael Porter that her manager had provided. According to Porter, there were three different types of strategies to choose from. Carly began wondering if there was a way they could make their computers cheaper so they could be sold at a lower price. If they could reduce the price by $100 per machine, they would become the industry price leader. Carly wondered if they could find any lower-priced suppliers for the more expensive computer components. She knew that their computers were particularly appealing to small business owners due, in part, to price. They were able to offer the lower price because their computers were not as powerful or fast as some machines; but they did contain all the basic word processing, database, and spreadsheet applications required by the typical small business owner. This combination of program capabilities, lack of product frills, and good reputation for quality had worked successfully for them in the past. Now Carly wondered if they would be better off looking at a smaller segment of the market, such as small businesses with accounts receivable billings that could fully utilize the database capabilities. She knew this strategy would cut their market potential by 50 percent, but maybe targeting a smaller market niche would lead to better results in the long-term. Carly began compiling her report for Friday's meeting.
-The competitive strategy of reducing the price by $100 to become the industry price leader is called __________.
A) retrenchment
B) diversification
C) focus
D) differentiation
E) cost leadership

Question

Quizplus · Accepted Answer

The competitive strategy of reducing the price to become the industry price leader is an example of cost leadership, which is one of the three strategies mentioned by Michael Porter. The other two strategies are differentiation (offering a unique product or service) and focus (narrowing in on a specific market niche). While the option of targeting a smaller market segment is also mentioned in the scenario, it does not represent a specific competitive strategy but rather a potential tactic within a broader strategy. Therefore, the best choice is E.

Refer to the Scenario Below to Answer the Following Questions