According to competitive advantage models, what are the two potential sources of advantage?

The correct response highlights that competitive advantage can arise primarily from two key sources: cost (price) and differentiation.

In the context of competitive advantage models, cost advantage refers to a company's ability to produce goods or services at a lower cost than its competitors, which allows it to either offer lower prices to customers or enjoy higher margins on its products. This cost leadership strategy is crucial for businesses aiming to attract price-sensitive customers or to increase profitability through operational efficiency.

On the other hand, differentiation involves offering products or services that provide unique features, benefits, or quality that set them apart from those offered by competitors. This can create customer loyalty and allow companies to charge a premium price for their unique offerings. Effective differentiation might focus on aspects such as superior design, technology, brand image, or customer service.

The combination of these two approaches—cost leadership and differentiation—allows firms to establish a strong market position and achieve sustainable competitive advantage. While the other options mention relevant business concepts, they do not represent the primary sources of competitive advantage as clearly as the distinction between cost and differentiation does.