In light of increasing emission taxes in the European Union, a car manufacturer introduced a new middle-class hybrid vehicle specifically for the European market only. Which of the following competitive strategies has the manufacturer used?
A focus strategy targets a specific market segment, geographical area, or niche customer base rather than competing in the entire market.
Why Option D (Focus strategy) is Correct:
The car manufacturer introduced a hybrid vehicle specifically for the European market to address increasing emission taxes, meaning they are focusing on a specific region and customer need.
Focus strategy aims at tailoring products to meet the needs of a particular group of consumers (e.g., environmentally conscious European customers).
Why Other Options Are Incorrect:
Option A (Reactive strategy):
Incorrect because while the company is responding to regulatory changes, "reactive strategy" is not a recognized competitive strategy under Porter’s model.
Option B (Cost leadership strategy):
Incorrect because cost leadership focuses on minimizing costs and offering the lowest price in the broad market. This scenario does not emphasize cost reduction.
Option C (Differentiation strategy):
Incorrect because differentiation involves offering unique products across a broad market, whereas the hybrid vehicle is targeted specifically for the European market.
IIA Practice Guide – "Auditing Strategic Risk Management": Discusses competitive strategies, including focus strategy.
Porter's Competitive Strategy Model: Defines focus strategy as targeting a niche market.
Chosen Answer:
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