Which of the following is a defining characteristic of a differentiation strategy?

A) The strategic objective is to attract customers who stay loyal to the firm's unique products.
B) It seeks competitive advantage by operating with lower costs than competitors.
C) Success with the differentiation strategy requires tight cost and managerial controls.
D) It aims at products or services that are easy to create and distribute.
E) It involves working with rivals on projects of mutual benefit.

Question

Mattie Robinson · Accepted Answer

Final Answer : A, Explanation :  A differentiation strategy aims to attract customers by offering unique and differentiated products or services that are not easily replicated by competitors. The focus is on creating a perception of value and quality that results in customer loyalty and a willingness to pay a premium price. This is in contrast to a cost leadership strategy (option B) which focuses on offering lower prices than competitors. Option C is incorrect because a differentiation strategy may require higher costs, such as investing in R&D or marketing, to create the unique product or service. Option D is incorrect because a differentiation strategy is not limited to easy-to-create products, and may require significant investment in development and production. Option E is irrelevant as a differentiation strategy does not involve working with rivals.

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