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Why may a cost competitive advantage fail to last?
ARivals adopt the same technology and cut their costs too
BRegulators forbid a firm from holding the lowest costs
CCustomers stop caring about price once quality improves
DRaw material prices fall for the cost leader alone
Answer & Solution
Correct answer: A. Rivals adopt the same technology and cut their costs too
1. A cost advantage often rests on an innovative technology that lowers cost.
2. Other firms in the industry adopt the same technology and reduce their own costs.
3. Firms also lose the advantage when rivals switch to the same lower-cost suppliers.
4. Because of this erosion, a cost advantage may not offer a long-term advantage.
5. No regulator forbids a firm from holding the lowest costs, so that option is invented.
6. A fall in material prices for the leader alone would strengthen the advantage, not end it.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 11 "Creating Products and Pricing Strategies to Meet Customers' Needs", section 11.2 Creating a Marketing Strategy_
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