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Competitive Advantage

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What is competitive advantage


Definition of a competitive advantage

Competitive advantage is what makes a customer choose your business over another one. By understanding, and promoting such advantage, companies can win a greater amount of market share.

A competitive advantage may stem from the user experience — that is, a better, more affordable or more enjoyable product — or it may be another tangible or intangible asset, such as the intellectual property or the customer service team.

Examples of competitive advantage

Competitive advantage separates a surviving business from a thriving one, but the source can change from sector to sector and company to company.

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Some common examples of competitive advantage include:

  • The team

  • Unique access to technology or production methods

  • A product that no-one else can offer (protected by IP law or patents, etc.)

  • Ability to produce and sell at a lower cost (known as cost leadership)

  • Brand and reputation

Whilst you may launch into the market with a totally novel idea, it may not be long until rivals catch up. That’s when you may need to revisit what your competitive advantage can be.

In the case of sectors with many copycat brands, such as soft drinks, brand and reputation may be the most powerful advantage to harness.

How to identify your business’s competitive advantage

What can you offer to your audience, that none of your rivals can claim to?

To identify your advantage, you must map out:

  • How you deliver value or benefits to customers

  • Who your target market is

  • Who else is operating in the same, or similar, space to you

Your competitive advantage lies in unlocking the most engaging benefit, for your target audience, and delivering it in a way that no other business can.

It’s possible you’ll have several possible competitive advantages, the one you choose to promote in your marketing and brand communication should be the one with the greatest differentiation and potential to engage.

General FAQ

When does a company achieve a sustainable competitive advantage?
A company achieves sustainable competitive advantage when it meets one (or more) of the following three criteria, as outlined by a professor at Harvard Business School in 1985: Cost leadership — offering reasonable value at a lower rate than competitors Differentiation — delivering better (or unique) products and service than others Focus — recognizing, understanding, and committing to a target market in a way no other company is.
What are some common strategies for achieving a competitive advantage?
A business may be able to create a competitive advantage by charging a higher price than competitors. True, this appears to fly in the face of Porter’s cost leadership concept. But hear us out… By setting a higher price point for products, a company can establish itself as a luxury brand and create an air of exclusivity. However, the product and service have to justify the inflated cost. Another effective strategy is to take advantage of cutting-edge technology and embrace innovation, particularly if your main competitors have yet to do so at the same level. This must be done in a way that other businesses will be unable to duplicate exactly, or at least, find doing so very difficult. This ties in with another strategy, which is to deliver such a high standard of dedicated, personalized customer service, that no other business can compete. Implementing the latest technologies can provide customers with a better experience overall when used right.
Why is having a competitive advantage important?
A competitive advantage helps a business to distinguish itself from competitors, and allows it to charge higher prices, build brand loyalty, and attract a wider audience.

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