Final answer:
In business, the quality of products and services, along with innovation and reputation, are crucial for achieving competitive advantage and earning above-average returns. A good reputation can allow for higher pricing, and continuous innovation can provide a temporary competitive edge.
Step-by-step explanation:
The concept being discussed is the strategic importance of quality in achieving competitive advantage and earning above-average returns. Firms aim to gain and retain repeat customers who can advocate for their products and services, which underscores the importance of a good reputation and the delivery of quality products.
Market competition incentivizes firms to continuously innovate, providing products that meet customer needs efficiently, which is echoed by Gregory Lee, CEO of Samsung, highlighting innovation as a fundamental business principle. A well-established grocery store is an example of a business that can leverage its reputation to charge higher prices as compared to a temporary stand at a farmer's market. All these points illustrate that while quality is necessary, it is not the sole guarantor of strategic competitiveness; innovation and reputation also play critical roles.