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CFA Level 1 Question of the Week - Equity Investments

Matt_AnalystPrepMatt_AnalystPrep MontrealPosts: 141 Associate
edited September 2017 in Level 1 Questions
Which of the following statements related to the cost leadership strategy is/are accurate?

I. The cost leadership strategy is used to decrease production costs.
II. The cost leadership strategy is used to increase sales.

CFA Level 1 Question of the Week - Equity Investments 10 votes

A. I only
30% 3 votes
B. II only
10% 1 vote
C. Both I & II
60% 6 votes

Comments

  • The correct answer is C.

    Firms engaging in cost-leadership strategy seek to combine low per-unit profit with large sales to make a profit.  Typically, but not always, they tend to market to a large population base or a niche with a high demand volume. Perhaps the most famous cost leader is Wal-Mart, which has used a cost-leadership strategy to become one of the largest companies in the world.
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