Where can significant differences in costs among competing firms predominantly occur?

Significant differences in costs among competing firms predominantly occur in internal operations and supplier activities because these areas directly impact how efficiently a company can produce its goods or deliver its services. Internal operations include the processes and systems that a company uses to create its offerings, which can vary widely among firms due to differences in technology, production methods, labor efficiency, and overhead costs. Supplier activities encompass the costs related to sourcing raw materials, components, or services. Variations in supplier relationships or negotiation effectiveness can lead to significant cost differences.

When a company can manage its internal operations effectively, reduce waste, refine processes, or negotiate better terms with suppliers, it can achieve a lower cost structure compared to its competitors. This cost advantage can allow the company to compete more aggressively on price or improve profit margins without increasing sale prices, ultimately influencing its competitiveness in the market.