Question

Happy Foods and General Grains both produce similar puffed rice breakfast cereals. For both companies, the cost of producing a box of cereal is 45 cents, and it is not possible for either company to lower their production costs any further. How can one company achieve a competitive advantage over the other?

Answer 1

Answer: introduce more differentiation

Explanation: Product differentiation is a method of using various tactics to make a product stand out from the rest of the similar products sold by a competitor, in an effort to make it more appealing to its customer base. This means differentiating the product so much, that it will make it more attractive for customers to buy. This can be anything from making the product's packaging more aesthetically appealing, including some form of a bonus/gift for purchasing the product (like getting a free toy in each cereal box) etc. In the end by applying product differentiation the one company will increase the customer benefits of purchasing this product from them, hereby gaining a competitive advantage over the other company.