In a competitive market, if a company uses Porter's cost leadership strategy, what is the primary objective of this approach?

• A. To maximize profits by restricting output and raising prices
• B. To focus on serving a narrow market segment with specialized products
• C. To differentiate its products through unique features and branding
• D. To achieve the lowest production costs and offer products at lower prices than competitors

Answer: (D)

Verified step by step guidance

1. Understand that Porter's generic strategies include cost leadership, differentiation, and focus strategies, each aiming at gaining competitive advantage in different ways.
2. Recognize that the cost leadership strategy specifically aims to become the lowest-cost producer in the industry, which allows the company to offer products at lower prices than competitors.
3. Note that this strategy involves optimizing production processes, achieving economies of scale, and minimizing costs across the value chain to maintain profitability despite lower prices.
4. Contrast this with other strategies: differentiation focuses on unique product features, and focus strategies target narrow market segments, neither of which primarily emphasize cost reduction.
5. Conclude that the primary objective of Porter's cost leadership strategy is to achieve the lowest production costs and offer products at lower prices than competitors, thereby attracting price-sensitive customers and increasing market share.