What is a Competitive Advantage?
Competitive advantage is a sustainable advantage compared to competitors. It is divided into cost advantage, difference advantage and focus advantage.
Competitive Advantage
(Management Terminology)
- Competitive advantage is a position of a company in a competitive landscape that allows the company earning return on investments higher than the cost of investments. Competitive advantage should be relevant, unique, and sustainable.
- A set of unique features of a company and its products that are perceived by the target market as significant and superior to the competition.
- English: competitive advantage
- Category: 1. cost competitive advantage
- Reduced from the following aspects: Experience curves
- Efficient labor
- No-frills goods and services reduce packaging
- Government subsidies
- Product design
- Reengineering business process redesign
- Production innovations
- New methods of service delivery
- 2. product / service differentiation competitive advantage
- 3. niche stragegies
- Competitive advantage is a theory that seeks to address some of the criticisms of comparative advantage.
- 1. Cost Leadership
- 2. Differentiation strategy
- 3. By expanding or contracting these two strategies, a third competitive advantage strategy will be formed-Focus Focus Strategy
- Competitive advantage first strategy: cost leadership (low cost advantage)
- * Achieving cost leadership means that companies become low-cost manufacturers in the industry.
- * Although cost leaders rely on low cost to achieve a competitive advantage, they must also reach parity in price, and at least they should also use a differentiation strategy.
- * If more than one company is committed to being a cost leader in the industry, it will be a disaster.
- * Price leadership is often achieved through economies of scale.
- Competitive Advantage Second Strategy: Differentiation
- * Realizing differentiation means that the company occupies a unique and unreplaced position in the industry, and is widely accepted and appreciated by customers.
- * Differentiated companies should not ignore their cost status. Without affecting the differentiation strategy, the company should reduce costs as much as possible; in the differentiated field, the product cost should be at least lower than the price premium that the company collects from the buyer.
- * The areas that can be differentiated are: products, channels, sales, markets, services, corporate image, etc.
- Competitive Advantage Third Strategy: Focus on Concentration
- * Achieving focused concentration means that the company becomes the best company in a certain market segment or industry.
- * Two variants: centralized cost and centralized differentiation.
- * Strive for midstream
- o For companies whose profit performance is below the industry average, this recipe is for them.
- o As long as the industry's overall performance is good, even the midstream companies' profit returns are attractive.
- o Businesses have little choice.
- o For companies that use a focus strategy, the most dangerous thing is to start ignoring the people they focus on after success. Instead of letting their focus strategies diminish, they must look for new focus targets.