Question 1 (25 marks) Should a firm pursue differentiation in an industry where customers are very price-sensitive? And should a firm pursue cost leadership in an industry where customers are very price-insensitive? Use real-life example(s) to illustrate your answers.
Question 2 (25 marks) How does diversification strategy bring benefits to a firm? Illustrate your answer with real-life example(s).
Question 3 (25 marks) Watsons Hong Kong operates health care and beauty care chain stores in Hong Kong. It has various brands of products, including its own brand as well. (Examples: https://www.watsons.com.hk/All-Products/c/Product_Categories?q,productBrandCode:productBrandCod c:123155&text=&masterBrandCode=123155)
For the same type of product, why does Watsons Hong Kong sell its own and competitors’ brands? Give three reasons and discuss.
Question 4 (25 marks) Some firms favour horizontal merger rather than vertical merger. Discuss and illustrate three advantages of horizontal merger with example(s).