According to the productivity Frontier graph, which of the following statements is TRUE ?

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BlackTom AI · Accepted Answer

In examining the Productivity Frontier concept, we start by identifying what the frontier represents in competitive strategy. It maps optimal trade-offs between product differentiation and relative cost position, showing the best possible positions a firm can achieve given trade-offs in activities and activities that add value.
Option 1: 'A company must choose a specific position on the curve, implying a trade-off where increasing differentiation typically results in higher relative costs.' This aligns with the core idea of the Productivity Frontier: you trade off cost and differentiation, and you must select a position along the frontier that reflects the balance you optimize for. Increasing differentiation usually comes with higher costs, so this statement is consistent with the concept.
Option 2: 'Operational effectiveness allows a company to escape the trade-off between cost and differentiation.' This is incorrect. Operational effectiveness improves efficiency and productivity but does not eliminate the fundamental trade-offs between cost and differentiation; you can improve both aspects only to a limit, not escape the trade-off entirely.
Option 3: 'A firm can achieve both high product differentiation and low relative cost position simultaneously.' While firms strive for excellence, the frontier shows that achieving high differentiation typically imposes higher costs, making simultaneous high differentiation and low cost improbable within the frontier constraints. This statement misrepresents the trade-off.
Option 4: 'The Productivity Frontier shows that low-cost strategies are always more profitable than differentiation strategies.' The frontier emphasizes that profitability depends on the chosen strategic position and its fit with the market; it does not declare one approach as universally more profitable. The idea that one strategy is always superior is an overgeneralization and contradicts the concept of trade-offs depicted by the frontier.
Thus, the only statement that correctly reflects the Productivity Frontier concept is Option 1.

According to the productivity Frontier graph, which of the following statements is TRUE ?

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