What Is Competitive Advantage?


Quick Answer

Competitive advantage refers to a specific advantage of a business or firm, such as greater financial resources or greater technology, giving it a leg up on the competition. Competitive advantage exists in many forms, and it provides internal as well as external benefits. These advantages might include a defined cost structure, large distribution network, high level of customer service and novel products.

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Full Answer

Competitive advantage covers many spheres of business, including finances, product or service and customer relationships. Regardless of type, all competitive advantages lead to the same end result of improving sales and income for the company and its shareholders. Typically, companies set themselves apart from competitors by distinguishing their brand. They might offer the same products as competitors for a better price, or offer unique forms of similar products, in turn attracting consumer attention and interest. Many companies use competitive pricing as a business sales strategy. These organizations include multinational firms like Wal-Mart and Target. This strategy includes marking prices down on popular consumer items, in turn encouraging sales.

Differentiation strategy, where companies offer unique products, relies heavily on technology. This strategy lets companies create new products that competitors cannot, due to lack of innovation or production means. Some companies display advantages through streamlined and highly efficient operations procedures.

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