When a company adopts a low-cost provider strategy, what is its primary objective?

• A. To maximize profits by charging premium prices
• B. To differentiate its products through unique features and branding
• C. To achieve a competitive advantage by offering products at lower prices than rivals
• D. To focus exclusively on niche markets with specialized products

Answer: (C)

Verified step by step guidance

1. Understand the concept of a low-cost provider strategy in microeconomics, which focuses on minimizing production and operational costs to offer goods or services at lower prices than competitors.
2. Recognize that the primary objective of this strategy is to gain a competitive advantage by attracting price-sensitive customers through lower prices, rather than charging premium prices or differentiating products.
3. Compare this strategy with other common business strategies such as differentiation (offering unique features or branding) and niche market focus (targeting specialized segments), which have different goals.
4. Identify that maximizing profits by charging premium prices is typically associated with differentiation strategies, not low-cost provider strategies.
5. Conclude that the main goal of a low-cost provider strategy is to achieve a competitive advantage by offering products at lower prices than rivals, thereby increasing market share and profitability through volume.