Both Bison Autos and Sparrow Inc. incur a cost of $9,000 to manufacture a vehicle. However, the economic value created by Sparrow Inc. is more than that created by Bison Autos. What does this indicate?

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Sparrow Inc. can charge a premium price on its automobiles. A company that uses a differentiation strategy can achieve a competitive advantage as long as its economic value created (V-C) is greater than that of its competitors. This allows the firm to charge a premium price, reflecting its higher value creation. Because Sparrow Inc. creates more economic value while facing the same cost as Bison Autos, it means its value (V) is higher.