National Evaluation Series (NES) Business Studies Practice Test

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Prepare for the NES Business Studies Test. Study with flashcards and multiple choice questions, each question has hints and explanations. Boost your exam readiness now!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

Which strategy might a firm implement to maintain competitive advantage?

Reducing product quality
Innovating new products
Increasing prices without justification
Focusing solely on cost-cutting

The correct answer is: Innovating new products

Innovating new products is a crucial strategy for a firm aiming to maintain a competitive advantage. This approach allows a company to differentiate itself from competitors by offering unique features, better functionality, or enhanced customer experiences. Continuous innovation can lead to the development of new markets and customer segments, as well as keeping existing customers engaged and satisfied with fresh options. By staying ahead of market trends and consumer needs, a firm can capture greater market share and foster brand loyalty. The other options do not effectively contribute to maintaining a competitive advantage. Reducing product quality could lead to customer dissatisfaction and harm the company's reputation. Increasing prices without justification risks alienating consumers, who may seek more value from competitors. Solely focusing on cost-cutting might improve short-term profitability but can result in reduced product quality and innovation in the long run, which could ultimately undermine a firm's position in the market.