Final answer:
Competitive advantage is what makes a company outperform others in the same market, either by reducing costs or providing superior value. The concept of comparative advantage is demonstrated through how different countries specialize in certain parts of production, such as Apple's global iPhone production process, which optimizes cost and efficiency by leveraging the strengths of different regions.
Step-by-step explanation:
Competitive Advantage Explained
Competitive advantage is essentially what makes a company 'do it better' compared to others in the same market. A company has a competitive advantage when it can deliver the same value as its competitors but at a lower cost, or offer superior benefits that justify a higher price. These advantages allow a business to achieve higher sales or margins compared to its market rivals.
The concept of comparative advantage relates to how different countries or regions specialize in producing certain goods or services at lower costs, relative to other countries. For instance, one state might have a comparative advantage if it can produce a particular good more cost-effectively than a second state.
Case Study: Apple's Global iPhone
Apple Corporation leverages a global platform to produce its iPhones, exemplifying the concept of comparative advantage. The engineering and design work takes place in the United States because the U.S. has a historical comparative advantage in high-tech design and marketing. Assembly occurs in China which has a large skilled labor force, lowering costs for assembly. In contrast, Korea holds a comparative advantage in manufacturing iPhone components, as it has specialized in scaling production and innovating to reduce production costs.
Such global distribution of production leads to efficiency and lower costs for Apple, enabling the company to purchase high-quality products at lower prices. This in turn translates to either cost savings or improved products for consumers, increased profits for businesses like Apple, and potentially higher income for their employees. Nationally, these benefits can outweigh the losses, resulting in a net economic gain.