Final answer:
Firms must make two core tradeoffs to achieve competitive advantage: breadth vs depth of products and cost vs differentiation.
Step-by-step explanation:
In order to achieve competitive advantage, firms must make two core tradeoffs. The first tradeoff is between breadth and depth of products. Firms that try to make a wide range of products may struggle to develop expertise and deliver high-quality products. On the other hand, firms that focus on one or a few products can develop a deep understanding of their products and deliver superior value to customers.
The second tradeoff is between cost and differentiation. Firms can compete on the basis of cost by producing products more efficiently and offering lower prices. Alternatively, firms can compete on the basis of differentiation by offering unique features or superior quality. However, pursuing differentiation often requires higher costs, so firms must find a balance between cost and differentiation to achieve a competitive advantage.