What is a Competitive Advantage?
Competitive advantages are those resources that allow a business entity to develop and maintain an edge over competitors who produce similar goods and services. The competitive advantage differs from the comparative advantage, in that the focus is often more on the strategies and skills involved, and less on the resources and final cost of production. A competitive advantage may be achieved by a brilliant public relations strategy, a unique mode of production, or the addition of some benefit that goes above and beyond the benefits offered by similar products on the market. The purpose of seeking a competitive advantage is to establish the company and its products as unique within the wide range of comparable goods and services. By doing so, companies are able to create a loyal client base that will remain with them even if operating costs make it necessary to increase the unit price of the product in question. In order to accomplish this goal, the manufacturer must include and exploit
If you and I played a game of basketball and we each scored 10 points, would you say that one of us had an advantage? Probably not. Yet we do that all the time with companies. Two companies can have the same return on invested capital or the same profit margins, and new companies can enter the fray all the time while old ones leave the market, and we talk about each company’s competitive advantages. If you are only doing the same thing as everyone else, and lots of people are doing it, do you really have a competitive advantage? Competitive advantage is usually found in industries that have higher than average returns. It is usually some barrier to entry, but could stem from other things as well like customer captivity, economies of scale, or unique physical assets. The correct answer to the question “what is your competitive advantage?” will, more often than not, be “nothing.” Most industries don’t have them. Actually, let me clarify that a bit. Most companies and or industries don’t
It is what sets your business apart from your competitors. It could be your products, your service, your reputation or even your location. It is the reason why customers prefer to buy from you. It describes how you can fulfil customer needs in a way no other business does. How to identify your competitive advantage A competitive advantage comes from knowing your competitors, knowing your strengths and knowing your customers’ needs and current frustrations. It is the critical component that is pivotal to your success. Market research and analysis therefore is essential to help you determine what sets your business apart from your competitors. Use the Competitive Advantage worksheet to assist you. For further information on market research and developing a marketing plan, please refer to the Business Planning and How To Do It Right article and the Market Research Module in Smart Skills. Make sure your competitive advantage has what it takes A successful competitive advantage: • must refl
