A competitive strategy of striving to be the low-cost provider is particularly attractive when:

• A. there is little competition and firms have significant pricing power
• B. customers value product differentiation over price
• C. products offered by different firms are largely identical and buyers are price sensitive
• D. barriers to entry are high and new entrants are unlikely

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of a low-cost provider strategy. This strategy focuses on minimizing production and operational costs to offer products at the lowest price in the market, attracting price-sensitive customers.
2. Step 2: Identify the market conditions where this strategy is most effective. It works best when products are largely identical (homogeneous), so customers choose based on price rather than product features.
3. Step 3: Recognize the role of buyer price sensitivity. When buyers are sensitive to price changes, a firm with the lowest cost can capture more market share by offering lower prices.
4. Step 4: Contrast this with situations where product differentiation is valued. If customers prefer unique features or brand reputation over price, a low-cost strategy is less attractive.
5. Step 5: Note that in markets with little competition and high barriers to entry, firms have pricing power, so competing on cost alone is less critical. Therefore, the low-cost strategy is particularly attractive when products are similar and buyers care about price.