Competitive advantage is a term you hear a lot in business. Startups chase it, incumbents tightly grasp it, and everyone – from multinational corporations to mom-and-pop shops – works tirelessly to achieve it.
What is competitive advantage, exactly? Why is it so coveted in the business world? And how can your business gain a competitive advantage over rivals? Let’s take a closer look.
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What Is Competitive Advantage?
Simply put, competitive advantage refers to the conditions and factors allowing a company to appear more desirable to consumers than industry rivals. While there are several paths toward a competitive advantage, the results are universally the same: more sales, higher profit margins, and greater value to owners and shareholders.
Most competitive advantages are relatively fleeting; companies will shuffle around one another for top billing in the consumer imagination. However, it’s possible to achieve “sustained competitive advantage,” a longstanding leg up over competitors that’s uniquely challenging to neutralize.
How to Gain Competitive Advantage in Business
As mentioned, there are several ways to gain a competitive advantage over rivals. Listed below are a few popular ways.
Price Advantages
A price advantage – typically called “cost leadership” – is probably the most common route toward competitive advantage. It involves making the same or similar product for a lower price than competitors. Price advantages require a company to develop its systems of efficiency and productivity, or disruptively innovate its way toward a cheaper product.
Talent Superiority & “Operational Excellence”
It’s possible to gain a competitive advantage through operational excellence and talent superiority, especially if your company works in a constantly evolving industry. Achieving talent superiority may require fostering an attractive company culture, and balancing competitive wages with low overhead to deliver the price advantages mentioned above.
Passing a Competitive Advantage onto Consumers
Regan McGee is the innovator behind Nobul, a successful real estate digital marketplace. He attributes his company’s competitive advantage to an “industry-wide acceptance of new technologies” and bringing “choice, accountability and transparency to an industry that has – for decades – been widely regarded by homebuyers as opaque and challenging.”
He also understands that part of what makes his company special is that it empowers real estate consumers in their own pursuit of an upper hand: “Prospective homebuyers are also looking for a competitive advantage in finding their dream homes – finding the right agent is an essential part of that.” Think of how you can empower your consumers in their personal systems of competition.
Speed
The “need for speed” pervades the modern business landscape. Consumers used to prefer it – now they expect it. Specifically, we’re discussing two kinds of speed: speed to market and speed of delivery.
The former essentially refers to the tight turnaround window in which a company can turn its ideas into viable products/services. The faster a company can conceive of, develop and launch a product, the better chance it has of beating competitors to the market. This speed precipitates what business experts call “first mover advantage,” the competitive advantage of being first to market with a product.
Speed of delivery is also a competitive advantage nowadays, especially in the latter business era of on-demand eCommerce. If your company can solve its fulfillment and logistics hitches ahead of competitors, ensuring speedier delivery, you will gain an easy competitive advantage.
Whether you head a giant corporation or a modest commercial business, you can use these definitions and competitive methods to gain a stronger foothold over rivals.
