This paper examines a product innovation in a service. By adopting a rational strategic framework, an Internet bank will be examined in detail, aiming at finding the most describing competitive strategy the firm pursued. The framework adopted does not differ between manufacturing and services, and is apparently suitable for both economic spheres. The result of the case-analysis is that instead of following one competitive strategy, a mix between some strategies is most appropriate.The reason for this outcome in the analysis is explored in the different characteristics of goods and services, and these are considered. Based on a suspicion that quality plays a vital role forming a service firm’s competitive ability, a quality scale is developed. This scale provides a measure-tool for quality in services and provides a rating in-between two extremes, an objective and a subjective perceptive. Analyzing the Internet bank and what quality interpretation it used, becomes crucial for the banks strategy formulation. The result is that a subjective quality approach can be a describing competitive strategy for the case in this analysis. This paper does therefore suggest a quality dimension as vital for service firms and their strategy formulation, and add this differentiation element to the original rational strategy theory.The focus of this paper is competition and how strategy formulations not necessarily have to be black boxed in contradictive understandings. It shows how an intermediate way, through combining and taking the best of various approaches results in a better understanding of the case this paper examines.The purpose of this paper is to help managers in service firms get a better understanding of how they can increase their competitive ability using quality of their products strategically. Moreover it sets out to combine and analyze research questions from various scientific fields, and examine science, technology and society as interfering and not distinct from each other. Thus this paper will also be my master thesis at ESST.