How is the difference defined between a core competence and a distinctive competence?

The correct choice highlights the key distinction between a core competence and a distinctive competence in the context of competitive advantage. Core competence refers to activities that a company performs particularly well, drawing on its unique capabilities and resources. These competencies are essential for a company's overall strategy and are integral to the company's identity.

On the other hand, distinctive competence takes this concept further by indicating that not only does the competency exist within the company, but it is executed in a manner that surpasses competitors. This implies a level of excellence that creates a significant competitive edge. Distinctive competences are what enable a company to stand out in the marketplace, making it possible to deliver greater value or achieve efficiency compared to rivals.

The other options do not accurately capture this nuanced distinction. For example, the idea that distinctive competence is merely a function of lower costs or a focus on physical assets simplifies the complex nature of business capabilities. Moreover, the notion that core competence is merely a minor advantage compared to distinctive competence misrepresents their respective roles within competitive strategy. The essence of the correct answer lies in its recognition that competence is about not just performing activities well but excelling in them relative to others in the industry.