Final answer:
To eliminate an internal cost disadvantage, firms should focus on reducing costs through operational improvements. This strategy directly targets the issue, unlike methods such as product differentiation or focusing on niche markets.
Step-by-step explanation:
Strategic actions to eliminate an internal cost disadvantage often involve making operational changes to reduce expenses. Among the options provided, the one that specifically addresses this issue is reducing costs through operational improvements. This could involve optimizing processes, utilizing technology for efficiency, outsourcing to lower-cost suppliers, or streamlining the workforce. Product differentiation is any action that firms use to make consumers perceive their products as distinct from competitors', but it is not primarily about cost reduction, though it could potentially reduce costs indirectly by allowing for a premium price. Rather than raising prices or focusing on niche markets, which might not address the core issue of cost disadvantages, strategic cost reduction directly confronts the challenge.