How does innovation affect ABC's competitive advantage?

• A. It undermines existing processes by making them obsolete.
• B. Innovation gives ABC a strong advantage because its room-temperature process appears greener and potentially cheaper than traditional methods.
• C. It has no impact on competition.
• D. It only affects regulatory compliance, not cost or quality.

Answer: (B)

Innovation changes how value is created, affecting both cost and differentiation. ABC’s room-temperature process being greener and potentially cheaper directly reduces production costs and strengthens its environmental profile. That combination improves the value proposition for customers and can enable either lower prices with maintained margins or higher pricing for superior sustainability and quality. In short, the greener, cheaper method enhances efficiency and differentiates ABC from rivals using traditional methods, giving the firm a real competitive advantage. Other options miss the point by focusing on obsolescence, regulatory compliance, or claiming no impact—these aspects may play a part, but the main effect on competition here is the cost and differentiation benefits from the innovative process.