Competitive Advantage

In a competitive environment, businesses try to stand out from their competitors. Consider the following car companies. Is there a particular characteristic or quality that you associate with each of them?

  • Porsche
  • Volvo
  • Hyundai
  • Toyota
  • Ford

Companies try very hard to create a perception that they are different from their competitors. If you are looking for a high-performance sports car you probably won't go to a Ford dealer. But if you are looking for a durable truck you wouldn't go to a Porsche dealer. Companies strive to provide a product or service that is distinct, or differentiated, in some way from their competitors. When customers perceive the distinction as being valuable, they will prefer to purchase the business's product over a competitor's products. This is called a competitive advantage. Competitive advantage means that the business outperforms its rivals in the market because customers prefer its products or services.

Businesses can achieve competitive advantages in a number of different ways. Their product may provide superior performance; it may be of higher quality; it may be more durable; or it may have unique features. The businesses may provide better customer service or have better availability. They may advertise and promote their products better, or they may offer their products at a lower price. The best businesses provide a combination of unique attributes that competitors cannot match.