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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
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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.

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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:

  • Numerous competitors in the industry: this implies that since there are a large number of companies competing in the market for the first position, it becomes necessary to know the competitive advantage and make the most of it.
  • Slow growth of the economic sector: requires companies to focus their efforts on exploiting their competitive advantage to the maximum, so that the market can change in their favor.
  • Little diversification: when products or services are offered in a certain area that are very similar to each other, the consumer chooses based on price or advantages, then it becomes necessary to take advantage of those features that can make you stand out and thus make buyers prefer to purchase what you offer.
  • High investment costs: this occurs when a company's production and maintenance costs are high, making it necessary for it to be positioned in the leading positions in the market and, consequently, it is essential to take advantage of the competitive advantage.
  • High-level objectives: when the company sets certain goals that require great effort, it is necessary to have knowledge of the competitive advantage to take advantage of it.
  • Desire to break barriers: when the economy stagnates and the market becomes immobile, knowing a company's competitive advantage can help it break down this obstacle and stand out.

How to develop a competitive advantage?

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

  • Apply cost leadership strategies: this strategy is developed by offering the public the same products or services in the market at a similar price, but with lower production and manufacturing costs. These costs should not lower the quality of the product but offer the same or superior quality at similar prices and a lower investment.
  • Provide excellent quality of service and customer service: nowadays, the advantages are not only based on making sales or producing at low costs, but also include the treatment provided to buyers. Most users prefer to buy in those places where they receive a friendly treatment and quality attention, even over the product that is acquired, so that customer loyalty can be key to this. A customer who has a positive experience when buying a product or service from a particular company comes back repeatedly and helps to improve the brand's positioning.
  • Offering cultural values: a company whose advantage lies in its moral standards and reputation can exploit this characteristic to its advantage. In this sense, the buyer feels secure in acquiring products or services from the company in question, knowing that, thanks to its values, it will provide the best quality and response to his needs, above his own profit.

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.

References

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