Competitive advantage is the edge a company has over the competition. Competitive advantage enables a company to take a bigger market share or generate more sales.
If a company possesses competitive advantage, it means it is set apart from other average players in the same market, because it is able to create value for its products more efficiently.
To maintain competitive advantage, a business or organization must possess characteristics that give it that edge. These may come in the form of resources, technology, specialized skills, or better distribution networks, among others.
Competitive advantage may be achieved through skillful manipulation of these factors in order to maximize efficiency and produce the highest-quality product with the lowest cost. The combination of resources and an effective strategy is therefore important in achieving this.
There are two kinds of competitive advantage. Cost advantage is known as a company’s ability to keep costs lower than its competitors’ while still providing quality products or services. In turn, product or service prices may also be lower than the competition’s, or the business could produce a larger profit.
On the other hand, differential advantage is achieved when the company’s products or services are perceived by consumers to be of higher value or quality than the competitors.’ These both fall under the classification of positional advantage.
For many businesses, it is not enough to have competitive advantage over one’s rivals companies. The main objective is to ensure that this advantage is sustainable. When this is achieved, a company may be considered as the market leader.