A competitive advantage is an advantage in some aspect that a company has before other companies of the same sector or market, and that allows it to have a better performance than these companies and, therefore, a competitive position in that sector or market.
Some aspects in which a company could have a competitive advantage are the product, brand, customer service, production process, technology, personnel, infrastructure, location, distribution, etc.
For example, a company could have a competitive advantage in the following cases:
To have a unique and innovative product difficult to imitate by the competition, which allows it to differentiate or distinguish itself from it.
-By having a brand of great value that allows any product that launches to the market has a good reception.
-By having an efficient production process that allows it to produce the same products of the competition, but at a lower cost.
-By having a type of technology that allows it to produce products with a better performance than those of the competition.
-By having highly qualified personnel that allows you to have a high productivity or provide excellent customer service.
-By having a patent that allows you to exploit a particular product without worrying because the competition also does.
-By having an information system that allows you to quickly take and process the customer’s orders, and thus provide a quick attention.
-By having a modern infrastructure that allows its employees to work and their customers are taken care of in a comfortable and welcoming environment.
-Having a strategic location that allows its customers to easily locate and visit them, or that their suppliers can supply them in a timely manner.
-By having an efficient distribution system that allows its products to reach several points of sale, in optimal conditions and in a timely manner.
A company could have different advantages in different aspects before other competing companies, but for an advantage to be considered as competitive, it is necessary that it meets the following requirements:
-Enable better performance: it should enable the company to perform better than the competition; For example, higher sales, higher profit margin, more loyal customers, etc.
-To allow an increase in profitability: it should allow the company to have an increase in profitability that at least gets to be above the average profitability of the sector or market.
-Be sustainable over time: must be able to stay in the medium or long term; For example, a technology capable of adapting to changes in the market and not one that is rapidly obsolete.
-Be difficult to achieve or equal: it must be difficult to achieve or equal by competition; For example, a product difficult to imitate by competition because of its unique components.
The idea of the concept of competitive advantage is that a company must constantly seek to obtain one, keep one or those it already owns, and take full advantage of it, if it wants to achieve a better performance than other competing companies, and thus have a position Competitive in the sector or market.
There are several ways to get a competitive advantage, but the two main ones are to look for a cost leadership (a comparative advantage or cost advantage), and seek a differentiation (a differential advantage):
Seeking cost leadership: it means looking for the lowest costs on the market (for example, creating more efficient processes or simplifying product design), in order to be able to offer lower prices than the competitors.
Seeking a differentiation: it is to seek to offer something unique, original and novel (for example, a product with better performance or durability than others), in order to differentiate or distinguish itself from the competition.
To be and remain competitive, a company must constantly seek a competitive advantage, even if it already has one or more of one; But also be aware of that or those competitive advantages that already have, strive to maintain and take full advantage of it.
Maintaining a competitive advantage could mean strengthening that advantage to make it more durable and meaningful; For example, if a company has a competitive advantage to its sales force, maintaining it could mean looking for new and better ways to empower it.
While maximizing a competitive advantage could mean seeking maximum benefit from it; For example, if a company has a competitive advantage as an alliance with a strategic partner, taking full advantage of it could mean seeking new agreements with that partner; Or if you have a competitive advantage to your distribution system, take full advantage of it could mean using that system to sell other complementary products to those already sold.
Finally, taking advantage of a competitive advantage could also mean turning that advantage into a business opportunity; For example, if a company has as a competitive advantage the knowledge and technology needed to produce a product that already exists in the market, but with a higher quality, taking advantage of that advantage could mean launching that product to the market.