In business,
competitive advantage involves having something your
competitors do not. It is a
distinctive feature that makes a business successful. Good competitive advantage has to be hard to copy, otherwise competitors will soon find a way to
imitate or
improve on it.
Simple competitive advantage
The simplest form of competitive advantage is merely the ability to charge
less than your competitors do for a particular
product.
Innovation
A very powerful way to be
distinctive is through
innovation. This means you come up with new ideas. They could be -
It is important to protect
innovation through
patents - if you want it to last.
Relationships
Good relationships with
stakeholders can give a company competitive advantage. Customers who are treated well will hopefully come back, suppliers that are treated well will
supply punctually. These relationships are known as a business' '
architecture', and can be a powerful form of competitive advantage.
These relationships are often retained more easily when times are good than in times of hardship - for instance, Marks and Spencer had to pull out of relationships with UK suppliers to buy more cheaply in the Middle East when times were hard.
Reputation
Business which have a particular
reputation and
image have a powerful competitive advantage. If people associate you with a particular
value or
product, you're onto a winner. Examples -
Reputation takes a long time to build, but is
invaluable once gained.