What is a competitive advantage in business?

In the industrial field there is a natural competition to occupy the first places in sales, growth and brand positioning.

Therefore, it is useful to know what a company’s competitive advantage is and other aspects of interest in this regard.

competitive advantage in business
Written by

Table of Contents

What is competitive advantage?

Competitive advantage is any particular characteristic of a company that makes it stand out from the rest.

It can also refer to products or services that by their essence have superiority over others, allowing them to enjoy an advantage in business competition.

Competitive advantage is a term that is applied with respect to a benchmark in the industry, that is, it is used as a comparative measure to the best company in the sector.

Based on the above, it is possible to assure that a company has a competitive advantage when some particularity of it places it ahead of its competitors.

Business meeting and teamwork by business people

Types of competitive advantages

According to the nature of the characteristic or feature that provides the advantage, it may be:

Internal competitive advantage

Occurs when the characteristic is located by its nature in the internal part of the company, in the administrative, production or similar aspects. For example, when the manufacturing costs of a certain product are lower compared to those of the competition. This type of advantage offers better production conditions, higher profitability and more profit generated from sales.

External competitive advantage

The product: represented by those qualities that add value to a product for the benefit of the buyer, either because it provides additional advantages or offers a longer time of use, eventually saving money to whoever acquires it. For this reason, the buyer tends to prefer it and, by acquiring it, raises a company's sales rates, positioning it advantageously with respect to others. This type of advantage is surprising because it can lead buyers to purchase a product at a higher price than that offered by the competition, thanks to the promise of its benefits. However, this process is not simple and involves a great deal of effort on the part of the company in marketing strategies to achieve the objective.

Why should companies know their competitive advantage?

Today, offering certain benefits to the public can make a company stand out from the crowd.

Knowing a company’s competitive advantage is in itself an advantage, since it allows the industry to exploit it and take advantage of it to lead the competition in the labor market.

In this sense, it is possible to mention some competitive situations that merit that the company knows its advantage:

How to develop a competitive advantage?

Business people in business district

Depending on the type of competitive advantage a company has, it can develop it in different ways:

Finally, the company can develop its competitive advantage by focusing its marketing strategies on taking advantage of the benefits of this particularity that makes it stand out from others.

However, in order to do so, it is essential to carry out market studies and research to identify this competitive advantage, based on a comparison of the company itself with others in the sector.

Without a doubt, the big giants of the industry have specialized departments in which these studies are carried out and the guidelines to be applied to devise the marketing strategies that will take advantage of this competitive advantage are determined, so it is an element that deserves the attention of every entrepreneur or businessman.

More about Business Planning.