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What is a Competitive Advantage?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 18 August 2014
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Competitive advantages are those resources that allow a business entity to develop and maintain an edge over competitors who produce similar goods and services. The competitive advantage differs from the comparative advantage, in that the focus is often more on the strategies and skills involved, and less on the resources and final cost of production. A competitive advantage may be achieved by a brilliant public relations strategy, a unique mode of production, or the addition of some benefit that goes above and beyond the benefits offered by similar products on the market.

The purpose of seeking a competitive advantage is to establish the company and its products as unique within the wide range of comparable goods and services. By doing so, companies are able to create a loyal client base that will remain with them even if operating costs make it necessary to increase the unit price of the product in question. In order to accomplish this goal, the manufacturer must include and exploit some aspect of the product that will keep and hold the attention of the consumer.

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A simple example of a product with a competitive advantage would be scented bleaches. There are a number of companies that produce bleach for home use, such as cleaning and laundering clothing. However, companies that found a way of adding a pleasant scent to the product were able to attract consumers who wanted a product that was both effective and left behind a more pleasing aroma. Taking it one step further, some bleach producers were able to create unique blends of scents and add to their bleach products. This further differentiated them from their competitors, and helped to ensure their share of the consumer market.

Along with developing a unique benefit to the product, aggressive and appealing marketing campaigns can help to establish a company and its product line as being highly desirable. Even when similar products are as good or maybe even better at the core purpose for the product, a competitive advantage is achieved when public recognition is higher. Many consumers will only purchase products they consider to be brand names. Successful marketing helps to establish a product as a brand name and thus increases the chances that the consumer will buy the product instead of a competitor.

Competitive advantage is a process that draws on the collective skills, knowledge, and strategies of a company. If successful, the effort to achieve a competitive advantage will result in a product that is recognized easily by the public, has some benefit that sets it apart from similar products, and is available at a price that the consumer feels is fair for the benefits derived from using the product.

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Phaedrus
Post 1

I'd say another simple example of a competitive advantage is McDonald's french fries. Other fast food restaurants may offer french fries as a side order, but they are rarely as appealing to customers as the ones served by McDonald's. As long as no other restaurant can duplicate the same process, McDonald's will continue to hold a competitive advantage.

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