Competitive advantage leads to superior profitability.  At the most basic level, how profitable a company becomes depends on three factors:

  1. The amount of value customers place on the company’s product.
  2. The price that a company charges for its products.
  3. The cost of creating that value.

Value is something that customers assign to a product.  It is a function of the attributes of the product, such as its performance, design, quality, & point – of – scale & after sale service.

A company that strengthens the value of its product in the products in the eyes of customers gives it more pricing options.  It can raise prices to reflect that value or hold prices lower, which induces more customers to purchase its product & expand unit sales volume.

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