Competitive advantage

What is competitive advantage?

The competitive advantage is the ability of superiority that a company presents with respect to its competition. Through this, a company manages to better position itself in the market, in relation to its competitor.

The competitive advantage in companies it is usually due to better cost management or product differentiation, that is, for offering a better product. For example, a lower cost of labor will reduce the final price of the product, which will mean a competitive advantage.

It is considered that a company has a competitive advantage when it has a unique and sustainable differentiation with respect to its competition in the market. This differentiation allows it to have a superior position in the sector where it competes.

Competitive advantage characteristics

The main characteristics of competitive advantage are the following:

• Without a good administration, it is not possible to maintain it in the long term.
• It must be a quality that suggests a product superiority.
• Is it so customer oriented and to generate a value for it.
• They are usually given by lower costs to the competition or by differentiation of products.

Types of competitive advantage

The possibility of achieving competitive advantages over the competition can be achieved mainly in 2 ways: by cost and by differentiation.

The competitive advantage can be due to cost or differentiation.

For costs

When a company manages to considerably reduce the cost of its production process, can offer the product at a lower price and with sufficient quality.

This competitive advantage, of being able offer the same product at a lower price, allows companies to better position themselves with respect to their competitors.

By differentiation

This condition is achieved when the good produced generates trust and prestige in the consumer. Therefore, it allows companies to have an advantage over their competitors.

This advantage occurs a lot with well-known commercial brands, which do not necessarily have affordable prices. Rather, if the product is expensive, it will be more popular with consumers. For example, Starbucks or Apple.

Examples of competitive advantage

Let's see next Some examples to better understand competitive advantage:

• Japanese automakers- In the 1980s, there was a strong fight in the automotive market between American and Japanese car brands. This happened because the Japanese brands could offer the same quality of vehicles at a lower price, due to their low cost of labor, a fact that offered them a competitive advantage.
• Manzana- This electronic equipment company is synonymous with quality and excellence. Its clients choose it over its competitors due to its differentiation, since its products tend to produce prestige in the client.
• Starbucks: Another example of competitive advantage by differentiation is Starbucks coffee, as it gives prestige to the user who consumes it, which allows its customers to prefer it over other coffee shops.