Low-cost is obvious. A differentiated product is a product, which possess attributes that competing products do not have. The building blocks of competitive advantage are highly interrelated. Competitive advantages are derived from distinctive competencies that are derived from investments in resources and capabilities. The investments should follow the companies' strategy, which, in turn will yield profits.
Profits generally drive the price of a company's stock.
If a company achieves a competitive advantage, the stock price should outperform the market a whole. As you can see from the chart to the left, Merck has outperformed the market over the past four years. It should be obvious that the company has developed competitive advantages. Superior innovation at both the product and process level as well as other functional developments have enabled the company to grow. As previously established, business activities can be grouped into three activities.