This article explains the meaning of competitive advantage, how it works, tips to develop a competitive advantage and a look at the concept through examples.
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The purpose of having a competitive advantage is to distinguish a company from its competitors by offering something different and of superior value to its customers. Competitive advantage also means the business can outperform its competition in the market and make a higher profit.
Having a competitive advantage over your competition is essential to business success because:
A business can monitor the strategy it uses to adjust areas that aren't as effective and focus more resources on ones that are successful, which can further its competitive advantage. For example, a beauty and hair products company whose competitive advantage is its social media platforms can monitor the number of new customers referred to it through its social media accounts. Monitoring this information helps the company create more avenues for new clients to sign up for their products, like bonuses or referral programs.
In the cost leadership competitive advantage strategy, the goal is to become the lowest-cost or most efficient producer. The traditional way to produce low-cost products or services is to be large-scale supplier. If your company can produce products at a lower cost than your competition, you can then establish a selling price your rivals can't duplicate. To be the lowest-cost producer, you can try:
Intellectual property. Distribution network. There are six types of competitive advantage you can make use of: Differential: This advantage means you offer products with a more unique benefit than the competition, such as better quality or quicker service.
Cost-leading: This advantage involves the production of goods or services equal to competitors but offered at lower prices.
Resource: This advantage refers to a company's edge because of limited access to resources or materials for production.
Customer satisfaction is the ultimate advantage a company can have over their competitors.
By working closely with suppliers, you can provide a partnership where you get the quality supplies needed to gain your competitive advantage.
The first part of providing the customers with quality goods involves purchasing those products from suppliers or getting quality parts to make your own product. An important aspect of Kurtusian TQM is to help the supplier provide quality to your company.
Competitors may not be able to meet those prices. Eliminating errors is a major goal. An extension of TQM is the Six-Sigma approach that seeks to eliminate errors to 6 parts in a million (six sigma deviation). Getting lower cost, quality good from suppliers will also reduce costs.
By continually improving the processes involved in making the product or delivering the service, a company can be more effective in reducing losses due to waste. This will allow the business to deliver products at lower prices while still achieving a good profit. Competitors may not be able to meet those prices.
Making the workers part of the team and helping them provide quality work can give you a good competitive advantage on competition that may have an unhappy workforce.
Achieving lower costs for getting or making products gives a company a great competitive advantage over their competition.
A competitive advantage distinguishes a company from its competitors. It contributes to higher prices, more customers, and brand loyalty. Establishing such an advantage is one of the most important goals of any company. In today’s world, it is essential to business success.
There are three strategies for establishing a competitive advantage: Cost Leadership, Differentiation, and Focus (Cost-focus and Differentiation-focus).
McDonald’s: McDonald’s main competitive advantage relies on a cost leadership strategy. The company is able to utilize economies of scale and produce products at a low cost and, as a result, offer products at a lower selling price than that of its competitors.
Examples of Competitive Advantage 1 Access to natural resources that are restricted from competitors 2 Highly skilled labor 3 A unique geographic location 4 Access to new or proprietary technology#N#Intangible Assets According to the IFRS, intangible assets are identifiable, non-monetary assets without physical substance. Like all assets, intangible assets 5 Ability to manufacture products at the lowest cost 6 Brand image recognition
Louis Vuitton: Louis Vuitton’s advantage relies on both differentiation and a differentiation-focus strategy. The company is able to be a leader in the luxury market and command premium prices through product uniqueness. Walmart: Walmart’s advantage relies on a cost leadership strategy.
Competitors: It is important for a company to understand other competitors in the competitive landscape. To construct a competitive advantage, a company must be able to detail the benefit that they provide to their target market in ways that other competitors cannot.
Benefit: A company must be clear about what benefit ( s) their product or service provides. It must offer real value and generate interest. Target Market: A company must establish who is purchasing from the company and how it can cater to its target market. Competitors: It is important for a company to understand other competitors in ...
Whether these SBUs are up-and-coming stars, top-earning cash cows, in-need-of-development problem children, or lazy dogs, companies use portfolio matrices to determine the best decision for the business.
Lastly, a company can plan to divest, or 'un-invest' its SBU because of low profits and small market share. Usually the dogs find themselves in these situations if a company cannot turn them around. Divest is the opposite of invest, so instead of putting more money into failing brands like Oldsmobile, Betamax, and record players, the companies decided to divest themselves of these SBUs.
The last strategy a company can use is called diversification . This strategy has the most risk because it is when a company not only develops new products, but also pushes into new markets. A great example is when Disney went from making movies to building theme parks. When a firm is able to be successful at this strategy, they can reap large market share and profits. Companies must thoroughly research the new product development process and the new markets. One of the worst failures was when Colgate tried to make frozen dinners and Cosmopolitan magazine marketed yogurt! The companies should have stuck with teeth and magazines.
Sometimes companies concentrate on developing a new customer base. They want to attract new customers to their existing product lines. This is called market development. One key way of achieving this is to find new ways to use existing products. A perfect example is Arm & Hammer Baking Soda. They constantly find new ways to bring in additional customers. In fact, their promotional campaigns always indicate the many uses, such as cleaning pesticides off fruit, brushing your teeth, baking, deodorizing, et cetera. Another way companies can increase their new customers is to target new markets. For example, McDonald's has had much of their growth overseas and is looking to gain even more customers in Eastern Europe.
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Competitive advantage is at the core of an organization’s performance in markets where there is heavy competition. It sets an organization apart from its competitors and paves the way for higher profit margins, greater return on assets, and accumulating valuable resources. There are many ways to achieve a competitive advantage ...
A company can effectively gain a competitive advantage in one of two ways; by reducing its own costs and by adding more value to its products or services hence differentiating itself from competitors. We hope this post will assist you in developing your own strategy to achieve a sustainable competitive advantage.
An organization can achieve differentiation through the product itself (quality, price, durability), its delivery system, marketing approach, customer service, and many other factors. The logic behind the differentiation strategy requires that the attributes an organization chooses to differentiate itself should be different from the attributes used by its rivals.
To successfully compete in an industry, an organization needs to understand its competitive landscape. This means gathering and analyzing information on competitor strengths, weaknesses, strategies, positioning, value proposition, customer perception, and more.
Michael Porter’s five forces analysis helps assess and evaluate the competitive strength and position of an organization. Porter’s five forces model helps organizations understand the intensity of competition in an industry, its attractiveness, and profitability level. It helps identify where power lies in a business situation and hence assess the strength of an organization’s current competitive position and the strength of a position that an organization may look to move into.
The value chain analysis helps understand the activities that are most valuable and should be optimized to achieve competitive advantage.The firm can then optimize the primary activities that account for the greatest share of production costs and increase profit margins. The analysis can also reveal the support activities that could use more spending to generate better value.
Identifying the other businesses that fall into the same strategic group as it does, is important to an organization in terms of developing a strategy to achieve competitive advantage.
The purpose of having a competitive advantage is to distinguish a company from its competitors by offering something different and of superior value to its customers. Competitive advantage also means the business can outperform its competition in the market and make a higher profit.
Having a competitive advantage over your competition is essential to business success because:
A business can monitor the strategy it uses to adjust areas that aren't as effective and focus more resources on ones that are successful, which can further its competitive advantage. For example, a beauty and hair products company whose competitive advantage is its social media platforms can monitor the number of new customers referred to it through its social media accounts. Monitoring this information helps the company create more avenues for new clients to sign up for their products, like bonuses or referral programs.
In the cost leadership competitive advantage strategy, the goal is to become the lowest-cost or most efficient producer. The traditional way to produce low-cost products or services is to be large-scale supplier. If your company can produce products at a lower cost than your competition, you can then establish a selling price your rivals can't duplicate. To be the lowest-cost producer, you can try:
Intellectual property. Distribution network. There are six types of competitive advantage you can make use of: Differential: This advantage means you offer products with a more unique benefit than the competition, such as better quality or quicker service.
Cost-leading: This advantage involves the production of goods or services equal to competitors but offered at lower prices.
Resource: This advantage refers to a company's edge because of limited access to resources or materials for production.