Competitive Advantage

A Rookie's Guide To Everything You Need To Know About Competitive Advantage

Any business aims to make customers choose their products or services over their competitor's. Having a thorough knowledge of competitive advantage will make achieving this goal much more manageable.

Competitive Advantage Definition

In business, competitive advantage refers to the factors that enable a company to produce higher-quality affordable products than its competitors, thereby creating more opportunities for customers to choose their company over others.

What Is Competitive Advantage?

A competitive advantage is what makes a company's products more desirable to the consumers. Therefore, it helps to attract more sales and garner a more significant portion of the market share. You should get mortgage interest rates assignment help.

The competitive advantage can be of two types:

• Comparative advantage
• Differential advantage

The comparative advantage arises when a company can produce their products more efficiently than its competitors. If the production cost becomes less and the production quantity increases, the company can sell their products at lower prices. This will give the company a massive advantage over others as any practical customer will choose a cheaper product as long as it maintains its quality.

A differential advantage is when a company creates a unique product or service superior to any other company in the market. Several factors contribute to this advantage, such as high brand image, advanced technology, more outstanding personnel. Know about Lewis turning point.

In most cases, larger companies have a significant competitive advantage over their competitors due to higher purchasing power, better brand reputation and majority consumer demand.

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Sustainable Competitive Advantage

In a market that is getting increasingly competitive every day, having a sustainable competitive advantage is vital to ensure that your company doesn't get drowned in the influx of thousands of start-ups every year.

Creating a sustainable competitive advantage over the market competition ensures that your business can become more profitable over an extended period. You can achieve this by following a few tips-

• Understand the market – Your first step should be to research the market and see what you're competing against. Try to check out what products are most in-demand and why.
• Understand your target audience – As long as you understand what your customers want, you can focus on improving those specific areas to provide better value services.
• Play up to your strengths – Companies that focus more on developing their strengths than foster consumer trust.

Once you can use your sustainable competitive advantage in marketing and promotion, it'll become easier to convince customers that your services are the best in the market. This will invariably ensure easier sales. Building a long-term advantage might be slow, but it provides more stability in the face of stiff competition.

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Competitive Advantage Examples

Having a competitive advantage will enable a company to outperform its competitors and increase its market share significantly. There are plenty of examples that you can refer to in real life-

1. Community banks

Community banks use the differentiation tactic of competitive advantage to target small local businesses or high net individuals who enjoy the personal touch with the banks' services. This extra attention ensures they always come back to these banks despite paying a higher service charge.

2. McDonald's

McDonald's relies heavily on cost leadership tactics to stay ahead of any competition. By lowering the production cost, the company can sell its items at lower prices than its competitors, thereby drawing in more customers.

3. Amazon

Amazon focuses on building its comparative advantage through its colossal scale and efficiency. It becomes challenging for other e-commerce platforms to compete with the sheer scale of Amazon as the company gains a significant advantage through price competition.

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Which Of The Following Is Not One Of The Three Strategic Approaches To Competitive Advantage?

In 1985, Harvard Business School Professor Michael Porter stated that a company could achieve this advantage in three ways – cost advantage, value advantage, and focus.

1. Cost advantage

An effective way to have more customers flock to one company is to offer reasonable value items at low prices. One way to achieve this is by improving operational efficiency, which translates to paying workers low wages and depending on unskilled labour.

2. Value advantage

When customers get more value from a company's products, they will prefer to stick to that, thus increasing brand loyalty. A few ways to achieve this are by providing customers with unique products, delivering the highest quality services, and improving marketing tactics.

3. Focus advantage

Focus advantage is when a company develops an understanding of their target market and focuses on improving the services geared towards that group. The key to using this to your advantage is to target a niche market that does not have much competition.

All of these three strategies are valid methods to gain a competitive advantage in the market. 

However, individual resources don't fall under this category. These types of resources belong to one private individual, and no other person can access them. They might help start a business and get it off the ground. But if you're looking for expanding your business and developing a competitive advantage, it won't be of much help Know about money market.

An excellent way to develop a competitive advantage is to find methods that the competitors cannot replicate easily. This can include working on innovative marketing tactics, creating unique products, improving production efficiency to offer lower prices and developing deeper brand trust and awareness.

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