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The

XtraXtra

manufactures an$$ entry$-$level hoverboard,$$ HOV$-$X$.$ Pursuing a$$ cost$-$leadership strategy, the company has tried to improve quality and reduce costs. As a result of the actions taken over the last$$ year, quality has significantly improved in

$20202020$

while rework and unit costs of the$$ HOV$-$X have decreased.

XtraXtra

has reduced manufacturing capacity because capacity is no longer needed to support rework.

XtraXtra

has also lowered$$ HOV$-$X$\text{'}$s selling price to gain market share and unit sales have increased. Information about the current period

$(20202020)$

and last period

$(20192019)$

$$follows:

First, calculate how much of the change in operating income from

$20192019$

to

$20202020$

is due to the$$ industry$-$market$-$size factor, product$$ differentiation, and cost leadership. $($Do not round intermediary calculations. Only round the amount you input in the cell to the nearest$$ dollar.$)$

Change due to industry market$-$size

$$

$$

Change due to product differentiation

$$

$$

Change due to cost leadership

$$

$$

Change in operating income

$$

$$

Part $2$

How does this relate to

XtraXtra$\text{'}$s

strategy and its success in$$ implementation? Explain.

XtraXtra

$$

$$

has been

has not been

successful in implementing its

$$

$$

cost leadership

product differentiation

strategy. The

$$

$$

decrease

increase

in operating income during

$20202020$

was due to

$$

$$

a decline in quality and decreased sales

quality improvements and sales growth

$.$

It

$$

$$

cut

increased

its prices to gain market share that might also benefit it in future periods.

XtraXtra$\text{'}$s

change in operating income in

$20202020$

was

$$

$$

also helped

not affected

by a growth in the overall market size.

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