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What Is Competitive Advantage: A Complete Guidelines

Last updated: Jun 19, 2024

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If you are wondering what is a competitive advantage, it is one aspect of business that can increase sales, maintain customer relationships, and develop companies with new innovations. 

Competitive advantage relates to the selling points that make a business superior to its competitors in the same sector. Every business needs to maintain its competitive advantage to be successful in the long run.

Learn more about what is competitive advantage, its types, and examples in the following guidelines.

 

What Is Competitive Advantage?

 Illustration of a discussion on establishing a competitive advantage.
Figure 1: Illustration of a discussion on establishing a competitive advantage. 

Before we talk about how to gain it, you should know what is competitive advantage first. Competitive advantage is an aspect of a company that can make it superior to its competitors. 

Generally, competitive advantage is influenced by customer experience, branding, useful features, affordable prices, and many more. 

It is also often related to the Unique Selling Point (USP) or uniqueness that a brand highlights in order to stand out among competitors in the same market niche

For example, there are two spicy chicken noodle restaurants that have similar tastes, prices, and quality of ingredients. 

However, one of the restaurants has a USP that greatly differentiates it from its competitors, providing a wider variety of toppings in large quantities. 

Since it offers more topping variants, customers may choose that restaurant even though the price may be higher than most chicken noodle restaurants. 

So, how do we create a competitive advantage? You can analyze your business and competitors' strengths with competitive intelligence data. 

Competitive intelligence involves collecting, assessing, and utilizing information regarding customers, competitors, and other elements that enhance a business's competitive advantage.

This process is important because it allows businesses to understand the competitive environment, the opportunities they have, and the strengths of their competitors.

 

Types of Competitive Advantage

As we mentioned in the last section about what is a competitive advantage, it’s important since it can differentiate a business from its competitors. 

However, there are various types of competitive advantage that you need to know before determining a competitive advantage. The types of competitive advantages are as follows:

 

1. Differential Advantage

The type of competitive advantage is the differential advantage or being the most unique among competitors. This is usually because a company manages to provide services or offerings that competitors do not have. 

That way, the company can be considered a market leader. A common example is a technology company that continues to release innovative products and operating systems that differentiate it from other gadget companies that only use ordinary operating systems. 

 

2. Comparative Advantage

This competitive advantage focuses on the company's ability to provide better services or products than competitors but with less capital.

Normally, this type of comparative advantage is used to compare two products that are the same but come from different countries.

For example, there are two cell phones that have clear camera quality but are produced by South Korean and Chinese companies. 

The South Korean-made phone has a higher price than the Chinese-made phone despite having fewer features. However, by giving a Chinese-made phone with the same good camera quality, customers may be inclined to buy it. 

 

3. Sustainable Competitive Advantage

The next type is sustainable competitive advantage, which refers to the unique superiority of a company that keeps it as a market leader. 

Sustainable competitive advantage is a type of advantage that may be difficult to imitate by other competitors and is resilient to market changes. 

Examples of this type of competitive advantage are companies that have patented their products, such as drug manufacturers who have made their products patentable so it is difficult to make a generic version. 

In addition, companies whose resources are managed by the state or regions and are a necessity for society, such as electricity, are also included in the sustainable competitive advantage. This is because there is no private company that can shift its position in the market. 

 

4. Cost-Based Advantage

The last type is cost-based advantage which focuses on price differences. Normally, this competitive advantage is also called a price war, where companies compete to produce products or services that are cheaper than their competitors. 

However, this type of competitive advantage can only be done when the capital and operational costs allocated are low. 

 

Benefits of Competitive Advantage

After knowing the types, let's learn the benefits of competitive advantage. The benefits of competitive advantage are as follows:

  • The company can build a strong brand image that is different from its competitors. 
  • The marketing process becomes more effective so that operating costs are optimized.
  • The company will continue to be encouraged to develop and innovate. 
  • Provide a unique case for the products and services offered by the company. 

 

Example of Competitive Advantage

An example of a competitive advantage that you may often find in the market is a cost-based advantage. 

For example, there are two vegetable stores that sell a variety of vegetables, spices, and kitchen necessities. They sell the same products but offer different prices. 

The first store sells 1 ounce of garlic for IDR7,000, while the second store sells 1 ounce of garlic for IDR7,500. 

Despite the price difference of only IDR500, customers will probably choose the first store to buy garlic. 

 

How to Gain a Competitive Advantage

Apart from the various types of competitive advantages described above, you also need to know how to get them. The ways to get a competitive advantage are as follows. 

 

1. Conduct Market Analysis

The first way is to conduct a market analysis. As explained earlier, a competitive advantage is an advantage that a company has and its competitors do not have. 

For this reason, the first thing to do is to know the target market and what product value can be provided to them. 

Then, you need to examine the strengths and weaknesses of competitors so that we can innovate and automate marketing effectively. 

 

2. Designing a Strategy

Once you have enough data, it's time to design the right strategy, which includes choosing a competitive advantage approach. 

Here, you can look at the types of competitive advantages that might be suitable for your target market and company vision and mission. 

 

3. Implement the Strategy and Evaluate Its Performance

The strategy has been made, it's time to apply it to the product or service. However, don't forget to keep monitoring its performance so that you can assess whether the strategy can be continued or should be improved. 

In addition, you also need to make sure that the strategy is in line with the company's values and can achieve the expected business goals. 

 

Conclusion 

That was the information about what is a competitive advantage that you can learn. Competitive advantage is a strategy that can increase brand awareness among competitors who offer similar businesses. 

However, in addition to designing an effective competitive advantage strategy, you also need to strengthen other marketing strategies so that your brand is increasingly recognized by the audience so that sales can increase. 

In this case, you can use Search Engine Optimization (SEO). SEO strategies consisting of keyword research, website optimization, and quality content production can increase brand awareness, especially on search engines.

However, doing it yourself might be a challenge, especially when you have to focus on other business strategies, such as creating a competitive advantage for your business. 

For that, you can entrust it to SEO Services by cmlabs. Our multidisciplinary team is ready to help comprehensively optimize SEO strategies for your business. Let us know your SEO needs to our marketing team now!

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