Final answer:
Firms evaluate two types of competitive advantages when selecting a business-level strategy: low cost or differentiation. Competitive advantage is influenced by various factors such as resources and economies of scale. The dynamic nature of comparative advantage requires businesses to adapt continuously for maintaining competitiveness.
Step-by-step explanation:
When selecting a business-level strategy, firms evaluate two types of potential competitive advantages: low cost or differentiation. These strategies are aimed at achieving a competitive edge in the marketplace. Companies might pursue a low-cost strategy to become the cheapest producers in their industry, thereby hoping to undercut competitors on price. Alternatively, firms might adopt a differentiation strategy, aiming to produce unique products or services that stand out from the competition and can be sold at a premium.
Competitive advantage can be influenced by access to opportunities and advantages such as natural resources, skilled labor, and economies of scale. With the emergence of new technologies and globalization, markets have expanded beyond local boundaries, allowing businesses to compete on a global scale. This also introduces the concept of dynamic comparative advantage, where companies must continually adapt to maintain their competitive position.