Competitive Strategy and Business Model Innovation

Introduction

A business model explains how an organization creates, delivers, and captures value. Competitive strategy explains how it performs these activities in a way that produces superior value or returns relative to alternatives. Business model innovation occurs when an organization meaningfully changes the logic of its value proposition, customer interface, activity system, revenue model, cost structure, or relationship with partners.

For entrepreneurs, competition is not limited to firms selling identical products. Customers may solve the same problem through substitutes, internal processes, informal arrangements, or by deciding not to act. A new venture must therefore understand industry forces, choose a defensible position, design a coherent activity system, and continue innovating before competitors erode its advantage.

This chapter examines industry analysis, competitive positioning, differentiation, cost advantage, Blue Ocean Strategy, disruption, and mechanisms of defensibility. It also considers how entrepreneurs can redesign activity systems and use switching costs, network effects, data, brand, capabilities, and partnerships to sustain advantage.

Learning Objectives

By the end of this chapter, students should be able to:

1. Assess the competitive forces affecting an industry.
2. Distinguish cost leadership, differentiation, focus, and hybrid strategies.
3. Analyze how a business model creates and captures value.
4. Apply Blue Ocean and disruption concepts appropriately.
5. Redesign an activity system for strategic coherence.
6. Identify sources of defensibility, including switching costs and network effects.
7. Evaluate the ethical, technological, and governance implications of competitive strategy.

1. Competition as a Business Model Problem

Traditional strategy often compares products, market shares, and resources. Business model analysis adds another level: it asks how the organization’s activities fit together. Two companies may offer similar products but use different channels, revenue mechanisms, suppliers, technologies, and customer relationships. Their competitive positions can therefore differ substantially.

A business model has four connected dimensions:

• Value proposition: the customer problem addressed and the benefits offered.
• Value creation and delivery: the resources, processes, partners, channels, and technologies used.
• Value capture: how revenue is generated and how costs are controlled.
• Value architecture: how activities reinforce one another and create barriers to imitation.

A useful strategic test is whether the model creates value for customers, captures a share of that value, and does so in a way that competitors cannot easily reproduce.

Customer value can be represented conceptually as:

Perceived benefits may include performance, convenience, reliability, status, safety, or social impact. Sacrifices include price, time, effort, risk, learning costs, and privacy costs. This is not an accounting identity; it is a conceptual framework. Because benefits and sacrifices are often subjective, the expression should not be treated as a precise financial calculation.

A venture can compete by increasing benefits, reducing sacrifices, or changing the basis on which customers compare alternatives.

2. Industry Forces and Competitive Pressure

Porter’s Five Forces

The Five Forces framework assesses the structural conditions that influence industry profitability. The forces are:

1. Rivalry among existing competitors.
2. Threat of new entrants.
3. Bargaining power of suppliers.
4. Bargaining power of buyers.
5. Threat of substitutes.

The framework does not predict a company’s performance mechanically. It helps managers ask which forces limit value capture and which strategic responses may alter those conditions.

Rivalry among existing competitors

Rivalry tends to be intense when many firms are similar in size, industry growth is slow, products are weakly differentiated, fixed costs are high, and customers can switch easily. Price wars, frequent promotions, rapid imitation, and high marketing expenditure are common outcomes.

Rivalry may be reduced through meaningful differentiation, strong customer relationships, proprietary capabilities, focused segments, or a cost structure that permits profitable pricing. However, differentiation must matter to customers; merely adding features can increase costs without improving willingness to pay.

Threat of new entrants

Entry is easier when capital requirements are low, distribution is accessible, regulation is limited, technology is widely available, and customers are willing to try new providers. Entry barriers may include economies of scale, patents, trusted brands, data advantages, network effects, licenses, specialized know-how, and switching costs.

Entrepreneurs should distinguish barriers that create social value from barriers that merely restrict competition. A trusted safety certification may protect customers, whereas an unnecessary contractual restriction may exploit them.

Supplier power

Suppliers are powerful when they are concentrated, provide specialized inputs, face few substitutes, or can credibly integrate forward. A small venture may be especially vulnerable if it depends on one platform, manufacturer, logistics provider, or data source.

Responses include multi-sourcing, standardizing inputs, developing internal capabilities, negotiating longer-term agreements, and designing products that can use alternative suppliers. Dependence on a dominant digital platform should be treated as a strategic risk even when the platform initially provides rapid market access.

Buyer power

Buyers have power when they are concentrated, price-sensitive, well informed, able to switch easily, or able to produce the offering themselves. Business customers may also use competitive bidding to force prices downward.

A firm can reduce buyer power by serving a differentiated niche, embedding itself in customer workflows, offering measurable outcomes, and creating reliable service relationships. It should not confuse customer dependence with customer exploitation: lock-in without fair exit processes can create legal and reputational risks.

Threat of substitutes

A substitute satisfies a similar need through a different solution. Video conferencing can substitute for business travel; repair can substitute for replacement; public transport can substitute for private car ownership. Substitutes often become stronger when technology changes the customer’s acceptable price-performance trade-off.

Entrepreneurs should ask, “What is the customer trying to accomplish?” rather than “Who sells the same product?” This question reveals indirect competitors and opportunities for innovation.

Complementors and ecosystems

The Five Forces model can be supplemented by analysis of complementors: organizations whose products increase the value of the focal offering. Payment providers, app developers, content creators, logistics firms, and accessory manufacturers may all be complementors.

In platform markets, value depends not only on direct competitors but also on the health of the ecosystem. A platform that attracts users but fails to attract quality complementors may stagnate. Conversely, a platform that treats complementors unfairly may encourage them to support rivals.

3. Competitive Positioning

Competitive positioning is the deliberate choice of how a firm will serve customers differently from alternatives. Michael Porter’s generic strategies are commonly described as cost leadership, differentiation, and focus. Focus may be based on low cost or differentiation within a narrow segment.

A strategy is not simply an aspiration such as “be the best” or “provide high quality at low price.” It requires choices about customers served, activities performed, activities avoided, and the trade-offs accepted.

Cost advantage

Cost advantage means that a firm can deliver an equivalent value proposition at lower economic cost, or can provide greater value at a comparable cost. Sources include economies of scale, learning effects, automation, efficient procurement, superior asset utilization, simplified product design, and lower transaction costs.

Average cost can be represented as:

Total cost includes fixed and variable costs over the relevant period, and quantity must be measured in compatible units. The relationship is useful for comparing cost efficiency, but it should not be assumed that average cost always falls as volume rises. Diseconomies of scale, coordination costs, congestion, and quality problems may eventually increase cost.

A cost strategy can fail when cost reductions damage reliability, employee capability, customer trust, or regulatory compliance. Sustainable cost advantage comes from a system of mutually reinforcing choices rather than indiscriminate cost cutting.

Differentiation advantage

Differentiation exists when customers perceive a meaningful difference and are willing to reward it through higher price, greater purchase frequency, lower acquisition cost, or stronger retention. Sources include product performance, speed, customization, convenience, design, status, sustainability, privacy, service, and community.

Differentiation should be tested through evidence. Useful indicators include conversion rates, willingness-to-pay research, retention, repeat purchase, referral rates, complaint patterns, and controlled experiments. A feature that managers consider distinctive may be irrelevant to customers.

Trade-offs and strategic fit

A coherent position requires trade-offs. A firm designed for rapid customization may not be optimized for mass standardization. A luxury brand may weaken its position by pursuing extensive discounting. A low-cost operation may be damaged by offering numerous highly customized options.

Strategic fit occurs when activities reinforce the chosen position. For example, a low-cost retailer may combine limited product variety, high inventory turnover, simple store design, efficient logistics, and lean staffing. Each activity supports the others. Competitors may copy one visible feature but struggle to reproduce the entire system.

4. Activity-System Design

An activity system is the network of activities through which a firm creates and captures value. It includes primary activities, support activities, partner relationships, information flows, incentives, and customer interactions.

A useful analysis asks:

1. Which customer problem is central?
2. Which activities are essential to solve it?
3. Which activities reinforce one another?
4. Which activities should be outsourced, automated, or eliminated?
5. Where do bottlenecks, risks, and unnecessary costs occur?
6. Which activities are difficult for rivals to imitate as a system?

For example, a subscription software venture may combine self-service onboarding, cloud infrastructure, usage analytics, automated billing, online support, and frequent product releases. These activities reinforce a scalable and recurring-revenue model. If the firm adds expensive, highly customized implementation for every customer, the activity system may become inconsistent with its original cost logic.

Activity-system redesign can be undertaken through a value-chain map, customer journey analysis, business model canvas, or process map. The purpose is not to produce a diagram for its own sake, but to identify strategic dependencies and redesign choices.

A basic value-capture measure is contribution margin:

Contribution margin is measured for a product, customer, or period. Revenue and variable costs must relate to the same unit or time period. It indicates the amount available to cover fixed costs and profit; it is not the same as net income.

The contribution margin ratio is:

If a product generates $100,000 in revenue and incurs $60,000 in variable costs, contribution margin is $40,000 and the contribution margin ratio is 0.40, or 40%. This measure helps entrepreneurs evaluate pricing, channel economics, and customer segments.

5. Blue Ocean Strategy and Market Reconstruction

Blue Ocean Strategy emphasizes creating a new value curve rather than competing directly within established industry boundaries. A “red ocean” represents intense competition in an existing market; a “blue ocean” represents a market space in which the value proposition and competitive rules are substantially reconstructed.

The four-actions framework asks entrepreneurs to:

• Eliminate: Which industry factors taken for granted can be removed?
• Reduce: Which factors can be offered below the industry standard?
• Raise: Which factors should be offered above the standard?
• Create: Which new factors could attract noncustomers?

The framework should not be treated as a guarantee of uncontested success. A new market may later attract imitation, and customers may not adopt the new proposition. It is most useful as a disciplined method for questioning industry assumptions.

Blue Ocean reasoning often involves identifying noncustomers. These may include people who find existing offerings too expensive, inconvenient, complicated, risky, or poorly aligned with their identity. The entrepreneur then reconstructs the offering around their unmet priorities.

A major danger is confusing novelty with strategic innovation. A product is not strategically innovative merely because it uses new technology. Innovation requires a viable relationship among customer value, activity design, revenue, cost, and adoption.

6. Disruption and Strategic Change

Disruption is frequently used to describe any successful innovation, but the academic concept is more specific. Disruptive innovation generally begins with a simpler, more accessible, or lower-cost offering that serves overlooked customers or creates a new market. It then improves and may challenge established firms.

Disruption should be distinguished from:

• Sustaining innovation: improving performance for existing mainstream customers.
• Business model innovation: changing how value is created or captured, whether or not the technology is new.
• Radical innovation: introducing a major technological or market departure.
• Creative destruction: replacement of established economic structures by new combinations.

An established company may ignore a disruptive entrant because the entrant initially offers lower margins or inferior performance for its best customers. However, the entrant’s different cost structure and learning trajectory may eventually change the basis of competition.

Entrepreneurs should not assume that every low-price entrant will disrupt an industry. Success depends on technology, customer adoption, complementary assets, regulation, financing, distribution, and the incumbent’s response. The concept is best used for analyzing trajectories, not for labeling every startup.

7. Sources of Defensibility

A competitive advantage is defensible when it can persist despite imitation, changing customer preferences, and competitive response. Defensibility does not mean permanence. It means that rivals face meaningful time, cost, uncertainty, or capability disadvantages.

Switching costs

Switching costs are the economic, technical, psychological, or procedural costs of changing providers. They may include data migration, retraining, integration work, loss of accumulated benefits, uncertainty, contractual penalties, or relationship disruption.

Healthy switching costs often arise from genuine customer value, such as accumulated history, personalized settings, or reliable integration. Harmful lock-in may arise from deceptive contracts, impossible data export, or deliberate incompatibility. Entrepreneurs should design retention through value rather than coercion.

Network effects

A network effect exists when the value of a product or service changes as the number or quality of users changes. Direct network effects occur when users benefit from more users of the same service, as with communication networks. Indirect network effects occur when one user group attracts another, as on a marketplace connecting buyers and sellers.

Network effects can create rapid growth, but they also create a “cold-start” problem: a platform may be unattractive before sufficient participants join. Strategies include focusing on a narrow beachhead market, subsidizing one side, recruiting high-quality anchor participants, or enabling single-player value before network value emerges.

Network effects are not the same as scale economies. Scale economies reduce average cost as output increases; network effects increase user value as participation or interaction increases. A large network can still be unprofitable if monetization and governance are weak.

Data and learning advantages

Data can improve personalization, forecasting, fraud detection, service quality, and product development. However, data is defensible only when it is accurate, legally obtained, difficult to replicate, and converted into capabilities. Large data volume alone does not guarantee advantage.

Learning effects arise when repeated activity improves speed, quality, or cost. Learning must be retained through processes, documentation, analytics, culture, and employee development. If knowledge resides only in individuals who can easily leave, the advantage is fragile.

Brand, trust, and reputation

Brand can reduce customer uncertainty, support premium pricing, and lower acquisition costs. Trust is especially important where customers face safety, privacy, quality, or performance uncertainty. Reputation is slow to build and easy to damage, making governance part of competitive strategy.

Intellectual property and specialized capabilities

Patents, copyrights, trademarks, trade secrets, and design rights may protect elements of a business model. Legal protection is limited by jurisdiction, duration, enforceability, and the ease with which competitors can design around it. Specialized talent, supplier relationships, organizational routines, and regulatory expertise may be more valuable than formal intellectual property.

Complementary assets and ecosystems

A technically superior innovation may fail without manufacturing, distribution, service, standards, financing, or regulatory approval. Complementary assets can therefore become a major source of advantage. Entrepreneurs should identify which partners control essential complements and decide whether to partner, acquire, develop alternatives, or change the business model.

8. Measuring Strategic Performance

Strategic assessment should connect market outcomes to economic outcomes. Relevant indicators include:

• Customer acquisition cost (CAC).
• Customer lifetime value (CLV).
• Retention and churn.
• Gross margin and contribution margin.
• Revenue growth and recurring revenue.
• Market share in the chosen segment.
• Conversion and activation rates.
• Referral and engagement rates.
• Time to imitate or replicate key capabilities.

Customer acquisition cost can be calculated as:

The numerator and denominator must refer to the same period, and the result should be interpreted carefully when marketing expenditure generates delayed or indirect results.

A simplified customer lifetime value estimate for a subscription business may be expressed as:

This approximation assumes relatively stable revenue, margin, and churn; a constant churn rate; and a sufficiently long time horizon. It ignores discounting, acquisition costs, expansion revenue, retention investments, and changing customer behavior. Therefore, it is useful for early screening, not as a complete valuation model.

For example, if average monthly revenue is $50, gross margin is 80%, and monthly churn is 5%, the simplified estimate is:

CLV ≈ $50 × 0.80 ÷ 0.05 = $800.

If CAC is $240, the simplified CLV-to-CAC ratio is 3.33. This does not prove that the business is viable because cash timing, fixed costs, refunds, and growth financing remain important.

9. Illustrative Case: Reconfiguring a Local Food Platform

Background

The following is a fictional illustrative case. “HarvestLink” is a digital platform connecting small farms with urban restaurants. Initially, it operated as a simple online directory. Restaurants contacted farms individually, while farms managed inventory and delivery through spreadsheets and messaging applications.

Problem

HarvestLink faced intense competition from general business directories and large wholesale distributors. Restaurants complained about unreliable availability and fragmented ordering. Farms complained about unpredictable demand, late payments, and delivery inefficiency. HarvestLink earned a small listing fee and had weak customer retention.

Analysis

A Five Forces analysis identified high rivalry, low entry barriers, strong buyer power among restaurant groups, and supplier power among farms with scarce specialty produce. Substitutes included direct purchasing, wholesalers, and farmers’ markets.

The original activity system did not create strong defensibility. It provided information but did not control transactions, logistics, quality standards, or demand forecasting. The listing fee was also poorly aligned with the value created.

Approach and solution

HarvestLink redesigned its model around verified weekly orders rather than static listings. It introduced:

• Standardized digital ordering and payment.
• Quality and delivery standards.
• Consolidated delivery routes.
• Demand forecasts shared with participating farms.
• Restaurant subscriptions for predictable access.
• Transaction fees rather than primarily listing fees.
• Exportable order records and transparent dispute processes.

The company first focused on a narrow segment: independent restaurants seeking locally grown specialty produce. This beachhead helped solve the cold-start problem. It recruited a small number of trusted farms and anchor restaurants, then expanded geographically only after route density improved.

The revised activity system created reinforcement. More restaurant orders improved demand forecasts; better forecasts reduced farm waste; consolidated routes lowered delivery cost; reliable supply attracted restaurants; and greater transaction volume produced data for quality control and planning.

Outcome

In this illustrative scenario, HarvestLink improved retention and reduced delivery cost per order. Its advantage did not come from the website alone. It came from coordinated standards, relationships, data, route density, and a focused customer segment. The platform still faced risks: farms could sell through other channels, restaurants could bypass the platform, and larger distributors could copy the ordering interface.

Learning points

1. A platform’s defensibility depends on activity-system design, not merely software.
2. Focus can help overcome the early network problem.
3. Transaction data creates value only when converted into better decisions.
4. Fair contracts and data portability can support trust while reducing exploitative lock-in.
5. Operational reliability may be a more important differentiator than technological novelty.

10. Ethical, Regulatory, and Contemporary Issues

Competitive strategy has consequences for workers, consumers, suppliers, communities, and the environment. Entrepreneurs should consider the following issues.

Competition law: Agreements to fix prices, divide markets, abuse dominant position, or exclude competitors may be unlawful. Platform businesses require particular care when setting fees, ranking participants, using competitor data, or combining marketplace and seller roles.

Privacy and data governance: Data-driven advantage must comply with applicable privacy law. Organizations should define legitimate purposes, minimize unnecessary collection, secure information, explain automated decisions, and provide appropriate user rights.

Algorithmic fairness: Recommendation, pricing, lending, hiring, and ranking systems can reproduce discrimination. Testing should examine disparate outcomes, data quality, explainability, and human oversight.

Consumer autonomy: Dark patterns, hidden cancellation processes, deceptive scarcity claims, and intentionally difficult data export may create artificial lock-in. Sustainable advantage should be based on superior value and transparent choice.

Sustainability: A low-cost model that externalizes pollution, waste, or unsafe labor conditions is not necessarily strategically or socially responsible. Lifecycle impacts, supplier standards, resource use, and repairability should be incorporated into business model design.

Generative AI and automation: AI can support market research, customer service, forecasting, personalization, and process redesign. It can also lower entry barriers and accelerate imitation. Firms should govern data provenance, intellectual property, hallucination risk, cybersecurity, human accountability, and workforce effects. AI is a capability within a business model, not a substitute for a coherent value proposition.

11. Best Practices for Entrepreneurs

A disciplined competitive strategy process should:

1. Define the customer job and relevant alternatives.
2. Map the Five Forces and identify the strongest constraints on value capture.
3. Select a segment in which the venture can provide distinctive value.
4. Specify the trade-offs that make the position credible.
5. Map activities, dependencies, partners, and cost drivers.
6. Test assumptions with customer evidence and small experiments.
7. Build retention through value, trust, and useful integration.
8. Monitor imitation, substitution, regulation, and technology shifts.
9. Measure both customer outcomes and economic performance.
10. Reconfigure the model before declining performance becomes irreversible.

Strategy is therefore a continuing process of choice and renewal. The central question is not merely whether an entrepreneur has a good idea, but whether the entire system of activities creates a distinctive, economically viable, and responsibly governed position.

Chapter Summary

Competitive strategy concerns how a firm creates and captures value better than relevant alternatives. Industry analysis begins with rivalry, new entrants, suppliers, buyers, and substitutes, while complementors and ecosystems provide an important extension. Positioning requires a clear choice among cost, differentiation, and focus, supported by trade-offs and strategic fit.

Business model innovation changes the logic of value creation, delivery, or capture. Blue Ocean Strategy encourages entrepreneurs to eliminate, reduce, raise, and create factors rather than accepting existing industry assumptions. Disruption is a specific pattern of market change and should not be confused with every form of innovation.

Defensibility may arise from switching costs, network effects, data, learning, brand, intellectual property, specialized capabilities, and complementary assets. These sources are strongest when embedded in a coherent activity system. Quantitative indicators such as contribution margin, CAC, CLV, retention, and churn help connect strategic choices to economic performance, but simplified metrics require careful assumptions.

Finally, competitive advantage must be evaluated alongside competition law, privacy, fairness, consumer autonomy, sustainability, and responsible technology governance. Effective entrepreneurs continually test, measure, and redesign their business models as markets and technologies evolve.

Key Terms

Competitive strategy: A pattern of choices designed to achieve superior performance relative to alternatives.

Business model innovation: A meaningful change in how an organization creates, delivers, or captures value.

Value proposition: The benefits and outcomes offered to a defined customer group.

Five Forces: A framework analyzing rivalry, entrants, suppliers, buyers, and substitutes.

Rivalry: The intensity of competition among existing firms.

Substitute: A different solution that satisfies a similar customer need.

Cost leadership: Competing through a structurally lower cost base.

Differentiation: Creating valued distinctions that customers recognize and reward.

Focus strategy: Serving a narrow segment with a tailored cost or differentiation position.

Strategic fit: Reinforcement among a firm’s activities and chosen position.

Activity system: The interconnected activities through which a business model operates.

Blue Ocean Strategy: Reconstructing market boundaries to create new value space.

Disruptive innovation: A pattern in which a simpler or more accessible offering moves from overlooked segments toward the mainstream.

Switching costs: Costs incurred when changing from one provider or solution to another.

Network effect: A change in user value associated with changes in participation or interaction.

Complementor: An organization whose offering increases the value of another offering.

Defensibility: The degree to which an advantage resists imitation or erosion.

Contribution margin: Revenue minus variable costs.

Customer acquisition cost: Sales and marketing expenditure per newly acquired customer.

Customer lifetime value: An estimate of economic value generated by a customer over the relationship.

Review Questions

Short Answer Questions

1. What are the five forces in Porter’s industry analysis framework?
2. How does differentiation differ from cost leadership?
3. Define switching costs and provide one ethical example.
4. What is a network effect?
5. Why is strategic fit important in an activity system?

Long Answer Questions

1. Explain how an entrepreneur can use the Five Forces framework to evaluate a proposed industry.
2. Compare Blue Ocean Strategy with conventional differentiation strategy.
3. Discuss the main sources of defensibility available to a digital platform.
4. Explain why disruption should not be used as a synonym for innovation.
5. Evaluate the role of technology and AI in business model innovation, including governance risks.

Analytical / Application Questions

1. Select a local business and map its activity system. Identify two activities that reinforce its position and two that create strategic risk.
2. Design an illustrative platform business for a narrowly defined market. Explain how it would solve the cold-start problem and develop network effects.
3. A subscription venture has monthly revenue per customer of $40, gross margin of 75%, monthly churn of 4%, and CAC of $300. Use the simplified CLV formula from this chapter to estimate CLV and evaluate the limitations of the result.

Multiple Choice Questions with Answers

Question 1

Which force examines the ability of customers to pressure a firm on price, quality, or terms?

A. Threat of substitutes

B. Bargaining power of buyers

C. Threat of new entrants

D. Supplier power

Correct Answer: B. Bargaining power of buyers

Question 2

Which statement best describes strategic fit?

A. All activities are outsourced to the lowest-price provider

B. A firm offers every feature requested by customers

C. Activities reinforce the firm’s chosen competitive position

D. A company avoids measuring financial performance

Correct Answer: C. Activities reinforce the firm’s chosen competitive position

Question 3

Which action belongs to the ‘eliminate’ part of the Four Actions framework?

A. Removing an industry factor taken for granted

B. Increasing every product feature

C. Copying the market leader’s price

D. Adding more suppliers without analysis

Correct Answer: A. Removing an industry factor taken for granted

Question 4

What distinguishes a network effect from an economy of scale?

A. A network effect always lowers production cost

B. An economy of scale depends on user interaction

C. A network effect changes user value as participation changes

D. They are identical concepts

Correct Answer: C. A network effect changes user value as participation changes

Question 5

A product earns $120,000 in revenue and has $75,000 in variable costs. What is its contribution margin?

A. $45,000

B. $75,000

C. $120,000

D. $195,000

Correct Answer: A. $45,000

Question 6

Which is the best example of a substitute?

A. Two brands selling the same product through the same channel

B. Video conferencing replacing some business travel

C. A supplier increasing its wholesale price

D. A firm hiring additional sales staff

Correct Answer: B. Video conferencing replacing some business travel

Question 7

A business has average monthly revenue of $50, gross margin of 80%, and monthly churn of 5%. Using the simplified formula, estimated CLV is:

A. $40

B. $200

C. $800

D. $1,000

Correct Answer: C. $800

Question 8

Which statement about disruption is most accurate?

A. Every successful innovation is disruptive

B. Disruption usually begins by serving overlooked or new-market customers

C. Disruption always uses advanced technology

D. Disruption is identical to premium differentiation

Correct Answer: B. Disruption usually begins by serving overlooked or new-market customers

Question 9

Which practice most directly reduces dependence on a single powerful supplier?

A. Multi-sourcing critical inputs

B. Increasing customer switching costs

C. Reducing product reliability

D. Removing quality standards

Correct Answer: A. Multi-sourcing critical inputs

Question 10

Which is an ethically concerning form of lock-in?

A. Customers value accumulated preferences in a service

B. A platform provides useful integration tools

C. A firm makes data export deliberately impossible without a legitimate reason

D. Users receive loyalty benefits for continued use

Correct Answer: C. A firm makes data export deliberately impossible without a legitimate reason