Which of the following phrases best describes product focus
|A. low volume, high variety|
B. Finished goods are usually made to order.
C. Processes are designed to perform a wide variety of activities.
D. high fixed costs, low variable costs
E. high inventory
The Correct Answer Is:
D. high fixed costs, low variable costs
Correct Answer Explanation: D. high fixed costs, low variable costs
Product focus refers to a production strategy where a company emphasizes the efficiency and optimization of a specific product or a narrow range of products. This strategy aims to achieve economies of scale and lower costs by producing a high volume of a limited range of products.
Among the options provided, the best description of product focus is option D: high fixed costs, low variable costs.
Option D, “high fixed costs, low variable costs,” accurately characterizes a product-focused approach. In this strategy, a company invests heavily in fixed costs, such as equipment, facilities, and technology, to produce a high volume of a specific product or a narrow product range.
Once the fixed costs are incurred, the company can produce a large quantity of products at a relatively low variable cost per unit. This is because the costs associated with producing additional units (variable costs) are relatively low compared to the initial fixed costs.
Now, let’s analyze why the other options do not best describe product focus:
A. Low volume, high variety:
This phrase describes a production strategy where a company manufactures a wide range of products but in relatively smaller quantities. This approach is often associated with a process-focused strategy rather than a product-focused one.
In a process-focused strategy, the emphasis is on flexibility and the ability to handle a diverse range of tasks or products.
This allows the company to cater to a broader market with various product offerings. In contrast, a product-focused strategy seeks to specialize in a specific product or a narrow range of products to achieve economies of scale.
By concentrating resources on a limited product range, the company can optimize production processes and reduce costs.
B. Finished goods are usually made to order:
This statement describes a make-to-order production strategy, where products are manufactured based on specific customer orders. While this approach can be efficient for customization and meeting unique customer requirements, it is not characteristic of a product-focused strategy.
In a product-focused approach, the company typically produces a large quantity of standardized products in anticipation of market demand. This allows for economies of scale and cost efficiencies, as the fixed costs associated with production facilities and equipment are spread over a larger production volume.
C. Processes are designed to perform a wide variety of activities:
This option suggests a flexible manufacturing approach where production processes are designed to handle a broad spectrum of tasks or products. While flexibility is a valuable trait in manufacturing, this description aligns more with a process-focused strategy.
In a process-focused strategy, the emphasis is on adaptability and the ability to switch between different product lines or tasks efficiently. This allows the company to respond to changing market demands and produce a wide range of products.
In contrast, a product-focused strategy aims to specialize in a specific product or product range, optimizing processes for the efficient production of those items.
E. High inventory:
This phrase indicates that a company maintains a significant amount of finished goods in stock. While having high inventory levels can be a consequence of a product-focused strategy, it is not the defining characteristic.
The primary focus of a product-focused strategy is on achieving economies of scale through high-volume production.
This means that the company invests heavily in fixed costs to set up efficient production facilities. Once these fixed costs are covered, the variable costs associated with producing additional units are relatively low.
This enables the company to produce large quantities of products at a lower cost per unit, ultimately leading to a high volume of inventory.
In summary, while each of the options may describe a valid production strategy, none of them encapsulates the core principles of a product-focused strategy, which involves specialization in a specific product or product range to achieve economies of scale and cost efficiencies.
Option D, “high fixed costs, low variable costs,” remains the most accurate description of product focus.