Multiple Choice
In a perfectly competitive market setting, which of the following is true about individual firms?
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3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
Which of the following is NOT a potential pitfall of a focus strategy in competitive markets?
A
Competitors may begin to target the same niche
B
The target segment may become less profitable over time
C
The firm may achieve economies of scale across all market segments
D
Customer preferences in the niche may shift unexpectedly
Verified step by step guidance1
Step 1: Understand what a focus strategy entails. A focus strategy involves targeting a specific market niche or segment rather than the entire market, aiming to serve that segment more effectively than competitors.
Step 2: Identify common pitfalls of a focus strategy. These typically include competitors entering the niche, changes in customer preferences, and the niche becoming less profitable over time.
Step 3: Analyze the option 'The firm may achieve economies of scale across all market segments.' Economies of scale usually arise when a firm expands production across a broad market, not when focusing narrowly on a niche.
Step 4: Recognize that achieving economies of scale across all market segments is generally not a pitfall of a focus strategy; rather, it is more associated with broad market strategies.
Step 5: Conclude that the correct answer is the option that does not represent a pitfall of a focus strategy, which is 'The firm may achieve economies of scale across all market segments.'
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