Determining whether a company's prices and costs are competitive requires looking at the costs of a company's internally performed activities and the costs of its suppliers and forward channel allies (distributors/dealers). requires performing pricing surveys on at least a quarterly basis. involves developing close relationships with buyers to determine if the market is showing signs of increasing price sensitivity. typically involves the use of activity-based cost accounting by the company's key retail customers. is a technique to evaluate whether a capability or resource is valuable, rare, inimitable, or nonsubstitutable.

Consider two cigarette companies, pm inc. and brown inc. if neither company advertises, the two companies split the market and earn $50 million each. if they both advertise, they again split the market, but profits are lower by $10 million since each company must bear the cost of advertising. yet if one company advertises while the other does not, the one that advertises attracts customers from the other. in this case, the company that advertises earns $60 million while the company that does not advertise earns only $30 million. if these two companies collude and agree upon the best joint strategy, a. neither company will advertise. b. both companies will advertise. c. pm inc. will advertise but brown inc. will not. d. brown inc. will advertise but pm inc. will not.