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QUESTION 7 When conducting a relative cost analysis of value chain, managers should a. focus on the total cost differences their firm has relative to its competitors. O b obtain a competitors costs for the analysis. O c C focus on willingness to pay. O d. focus their analysis on the primary activities. e. focus on the differences in individual activities.
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Answer #1

7.

The goal of a relative cost analysis is simply to estimate how a company's costs compare to a rival's. Companies examine relative costs for a host of reasons:

  • to anticipate how a rival is likely to react to a price change
  • to predict how a price war may evolve
  • to test whether a cost advantage it believes it has is real and sustainable
  • to decide how low a company must bid in order to win a competitive contract from a rival
  • to identify opportunities for internal cost reduction.

Hence, the correct option is option a.

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