This implies that there are usually competitors willing to accept a lower margin for a largely similar product; in food, I'd compare Trader Joe's to Whole Foods in this role.

Really, this (producing a largely similar product at lower margin and lower price) is the tactic I'm attempting to use, as well. The margins most large companies have, once you account for their economies of scale advantages, must be staggering, (that, or the inefficiencies inherent to being a large company where the people who make the decisions have no contact with the people who own the company are staggering.) which means there's plenty of room for the generics to have a go at bringing prices down.