How do follower businesses with above-average profitability and below-average profit performance differ in terms of competitive advantage and investment and asset management?

Question

What will be an ideal response?

Answer 1

With respect to competitive advantage, share followers with above-average profits have higher relative product quality, which helps support higher levels of customer value, price, and unit margin. However, they also invest more aggressively in marketing as a percentage of sales, as well as on a relative basis, in comparison with competitors. These effects produce a slightly higher share, which contributes to a higher level of capacity utilization.

With respect to investment and asset management, profitable share followers tend to invest more in research and development (R&D) as a percentage of sales. This investment translates into a higher level of technological advantage that most likely results in a higher relative product quality. The more profitable followers, then, protect their number-two share positions with investments in both R&D and marketing.