Competitive advantage in either cost or differentiation
is a function of a company’s value chain. A company’s
cost position reflects the collective cost of performing
all its value activities relative to rivals. Each
value activity has cost drivers that determine the potential
sources of a cost advantage. Similarly, a company’s
ability to differentiate itself reflects the contribution
of each value activity toward fulfillment of
buyer needs.Manyof a company’s activities—not just
its physical product or service—contribute to differentiation.
Buyer needs, in turn, depend not onlyonthe
impact of the company’s product on the buyer but alsoon the company’s other activities (for example, logistics
or after-sale services).