Competitive advantages are the strengths and opportunities that you have over your competition.
It is an attribute that allows a company to achieve superior profits compared to its rivals and generates more value for the company, customers, and its shareholders.
We have listed some steps to derive Competitive Advantages as follows
Determine the right competition
- Understand your market situation and your position in it
- Perform competitor analysis through different frameworks
- Figure out the points where you stand out from your competition
- Those stand-alone points are your competitive advantages
- Leverage!
To better understand lets have a look at some Competitive Advantage Examples
1. Brand
When the company is identified as a Brand in the market, it brings you a positional advantage and your sales become easier and wider
2. Network Effect
In a positive Network Effect, A product becomes more valuable as more people use it
3. Scale
In the retail industry, large chains can use their scale to buy merchandise at low prices unavailable to their smaller competitors.
4. Customer Lock-in
Some businesses make products or services that have very high switching costs for customers
5. Patents/Intellectual Property
Patents are essentially temporary monopolies granted by the government to provoke risk.
6. Know-how/Monopolies
If a critical enabling element can be kept secret, it can become a source of sustainable advantage.
7. Economies of Scale
The basic tenet of economies of scale is that the cost per unit declines as output increases.
8. Exclusive Access to a resource
Exclusive or near-exclusive access to valuable resources can give a sustainable advantage
9. Exclusive License
Sometimes governments grant exclusive licenses to businesses
10. Cost Advantage
Cost advantage can be achieved through economies of scale. This makes it difficult for competitors to match the low prices.
11. Adapting Product Lines
Products that continuously evolve, many tech companies could fit in this category
How do you know if a company has a Competitive Advantage?
- There are a few different perceptions to look at your competitive advantage which are
- Is your Competitive Advantage Sustainable?
- Is your Competitive Advantage Replaceable?
- Is your Competitive Advantage Strategic?
- Is your Competitive Advantage Rare?
Importance of Competitive Advantages
- You get a chance to highlight your business’s strengths and opportunities
- Your investors can have an idea that you have crystal clear ways to thrive your business
- You restore your investors’ faith in you
- You explain why your business would be their best choice to invest in
Our Free Competitive Analysis Kit to help you get started:
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