Question: A firm with a highly differentiated product can increase the volume of its sales. Increased sales volumes can enable a firm to reduce its costs.

A firm with a highly differentiated product can increase the volume of its sales. Increased sales volumes can enable a firm to reduce its costs. High volumes with low costs can lead a firm to have very high profits, some of which the firm can use to invest in further differentiating its products. What advice would you give a firm whose competition is enjoying this product differentiation and cost leadership advantage?

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