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What is competitive advantage? Strategy with examples

Creating a competitive advantage is a long process, starting from the very beginning of forming the company’s culture, mission, and vision. You can likely see the advantages you can create while you are creating the company’s mission, aka the summary of why your company/product exists, which customer problem you aim to solve, and your overall goal.

What Is Competitive Advantage Strategy With Examples

At the end of the day everything is defined for creating customer value, which generates profit for the business 🤑

The role of a competitive advantage is then to make sure that you are creating and delivering the customer value as you planned.

In this article, we will learn the story of competitive advantage. We will understand the process to analyze our product and market, how we can state our strategy inside the market, and how we can test our options. By the end, we will learn how to sustain a competitive advantage with best practices and real-life examples.

What do we mean by competitive advantage?

Competitive advantage is the capability you have over competitors to create value for customers. The advantage creation process starts from the mission, which usually coincides with the inception of the company in the first place:

The strategy of your company may be different, but each decision you make and feature you define aims to achieve a competitive advantage. If I still can’t emphasize how important competitive advantage is, think about it like this: every goal we want to achieve in our daily lives as product manager serves to create a competitive advantage.

You can say you achieved a competitive advantage if:

You are offering something different than your competitors
Your company’s strategy is different than other companies
You can create more economic value with your product than your competitors

As product managers, our role requires us to carry the company’s mission and objectives into our product. To do this, we have to analyze the market, external competitors, our product, and internal company capabilities. According to our analysis, we create options and select our strategy.

The type of choices we make shapes our goals and how we want to compete with our rivals. The decision we make puts our product into one of two categories and helps shape our competitive advantage:

Niche product
Cost advantage product

1. Niche product

When you have a niche product, users prefer your product because it creates a unique output — something they can’t get elsewhere. Users will often pay extra for this.

I love to provide Apple examples in these cases. Apple products offer you premium features and users don’t mind paying the required amount. Think of new iPhones or Mac laptops — the experience they provide isn’t easily replicated by competitors. With a niche product, however, don’t forget there is always a risk of being copied. The challenge for this method is protecting your uniqueness.

To continue with modern examples, think of how Instagram creates a unique platform for sharing photos, the same way that Twitter does with small posts and that Facebook does for longer posts and videos.

When we think of a niche product, I can’t skip the classic example of Coca-Cola. With its unique recipe, no one has been able to replicate or get close to it.

2. Cost advantage product

While making the product, your company should have a production or distribution advantage over rivals. With a cost advantage, you can sell your products at competitive prices.

We can think of big brands for this — because of their high production amounts, they catch a cost advantage opportunity. Walmart can be one of the best examples of this strategy. They offer very low prices and for that reason, people choose to shop there over other stores.

example of competitive advantage in business plan

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How to identify and analyze your product’s competitive advantage

Competitive advantage can only be created after a strategic management process. As product managers, we identify the differentiator points and amplify them to create a competitive advantage:

Different Types Of Competitive Advantage

The decision we will make will be between the type of advantage we seek and the target market. I recommend you start with your target market.

If you still haven’t read Start with Why: How Great Leaders Inspire Everyone to Take Action by Simon Sinek, I recommend that you start asking why 🧐 For example, why will users pay for your product and why you are producing this product in the first place?

The second big decision is what kind of an advantage you seek. This is the time to bring your analysis and every input you have to the table. Lower cost or differentiation has its levels like in the picture above. You don’t have to focus on a pure version of these, though, you can mix the customer need and market situation and create an in-between.

As we discussed earlier, to be able to create a competitive advantage, you should select one of the strategies from your analysis. How can you decide which strategy is the best? Your winner which will become your advantage should pass at least three tests:

The fit test
The competitive advantage test
The performance test

1. The fit test

For the first test, we go over the company’s vision, mission, objectives, and company structure. We may know the problem, but our approach to solving it should fit our company culture and internal dynamics. We search for the best fit according to our internal and external analysis.

2. The competitive advantage test

You may find a good competitive advantage, but it is not enough if you can’t sustain it . We mentioned finding an advantage, but now we will test if it is likely to sustain our strategy (like Coca-Cola).

The competitive advantage can be easy to imitate and we may only have a first-mover advantage . This option has a risk if you are investing more and competitors will be able to access the technology behind your product easily. They may even beat you with lower-cost strategies. For these reasons, you should have a good plan to sustain the advantage you created.

3. The performance test

Performance is the profit you will generate with this advantage. At the end of the day, we are seeking profit and the higher value advantage will most likely be our winner. You need to create a value proposition model for each option.

Additionally, you should check the product’s performance, strengths, and the market around it. Use product metrics to see how it’s doing. The performance of the product can be determined with all of those components.

What does it mean to have a sustainable competitive advantage?

In the competitive advantage test, we are checking if the strategy is sustainable or not. Do not worry if you think your advantage will be imitated by your rivals. Most competitive advantages are brilliant ideas and most of them will be copied in a way. Your rivals will find a way to offer a better solution by using your idea.

Sustainable competitive advantage means you earn high profits with this strategy and the money keeps coming in the long term. However, as you can imagine, the more profit you get, the more competition you will create. And that’s not all, this competition will decrease your sustainability in most cases.

If you succeed in creating an advantage that’s hard to imitate and competitors are unable to find your source, you can say that you have a sustainable advantage. In some product markets, competitors may not imitate your product directly — they may offer a better solution and attract your customers. This example can be seen mostly in the service industry.

Coca-Cola has a sustained product strategy as they kept their formula impossible to imitate. They’ve updated their recipe but still have never had a competitor that copied their recipe or flavor exactly. There are other components supporting this success, such as marketing and sales teams.

When you create a good strategy and opportunity, sustaining the success can be done through all sources of the company. However, do not forget that even sustainable competitive advantages may expire in time.

How to strengthen your product’s competitive advantage over time

As a product manager, finding our own (as well as our competitors’) product strengths and weaknesses is our main duty. However, creating a competitive advantage requires a good strategy. You need a strategy to succeed.

What makes a good product manager is the agile modifications in your strategy over time. If you are persistent to continue in the same strategy, know that your advantage is going to go away.

The below list is variables that you need to be aware of to avoid being beaten by your rivals:

Following the needs shift in the market conditions
Using the latest technology
Following the trends and market opportunities
Knowing every move your competitors take
Knowing customer needs and changing tastes
Creating continuous ideas for the product and the strategy improvement

Time is crucial for even the best things. When the time comes, you should be able to point out the elements or strategies that should be abandoned. A product’s strategy includes everything from abandoned features, new planned initiatives, ongoing strategy, and new elements to adapt to changing circumstances.

The company’s strategy acts as a roadmap to our competitive advantage, along with the long-term plan to beat competitors in the market. And to be able to call yourself a good product manager, you should have a good strategy and good execution capability.

As the product manager, you should be able to address the solutions to possible obstacles the company may face. You should have the answers below for long-term success:

How can we beat our new rivals?
How can we sustain product growth if our user count decreases?
How can we adapt if our customer base changes?
Should we reduce costs and compete using discounting?
Should we partner with a rival that has a capability we don’t have?
Should we expand our business into different countries/demographics?
Should we find new product lines or substitute products?

This continuous questioning process will help you to maintain and strengthen your product’s competitive advantage.

Best practices for leveraging competitive advantage in product development

There are a few practices and tools to help you land your competitive advantage through research and market analysis, including value chain analysis, SWOT analysis, and weighted competitive strength assessment.

Value chain analysis

Product value chain analysis is an effective method to convert your company’s activities into a competitive advantage. This method helps companies understand their own processes better and, with the help of that knowledge, create an awareness of the company’s strengths.

Analysis starts with dividing a company’s process into primary and secondary activities. Primary activities show us what to focus more on the processes that create higher costs and analyze more to decrease them. Primary activities are most likely competitive advantages that we have over our rivals. Secondary activities show us the unnecessary processes so that we can eliminate them to create a cost advantage.

SWOT analysis

Strength, weaknesses, opportunities, and threats are the key elements of this analysis. You can use SWOT analysis to find your company’s competitive advantage options:

Strengths — Internal strengths are the basis for our strategies
Weaknesses — Internal weaknesses are our deficient capabilities
Opportunities — Market opportunities are our objectives that will become the strategy
Threats — External threats help us create defensive points in our strategies

SWOT helps you to find a new strategy or recommend a new strategic action. You will have the opportunity to use your strengths while you are seizing opportunities and preventing external threats. The created strategic actions will strengthen your competitive advantage or create a shiny new one.

Weighted competitive strength assessment

Weighted competitive strength assessment is different from the other methods and helps decide which strategy to use, rather than helping find options. Each possible competitive advantage gets scored and the one with the most points dictates which creates the most value and helps us beat rivals.

To do this, follow the steps below:

Prepare a SWOT analysis or make a list of the competitive strengths and weaknesses
Prepare the market’s key success factors and assign importance and weight to each strength
Add your competitors to the list and add scores on each competitive strength for all of them
Multiply the scores with importance weight and sum the weighted strength for each competitor. The overall measure will be the competitive strength of each competitor
Analyze the result ratings and create a concussion document
List the competitive advantages and disadvantages of the company
Create a strengths and weaknesses list for future strategy processes

The company with a higher weighted score will have an overall advantage within the market. The scores will help you to decide what strategy will be better for you and which will not.

Examples of products with strong competitive advantages and how they achieved them

We earlier talked about Coca-Cola and its competitive advantage. The formula of their drink is not their only competitive strength, however. They also have big, successful marketing strategies that help them to achieve being a market leader.

The Coca-Cola happiness machine and Christmas balloons can be some examples. These kinds of marketing campaigns are called guerilla marketing. The purpose is to increase market share with hit-and-run techniques. It may be a big risk for such a big company but reaps a big reward for its strategy. Coca-Cola takes these kinds of risks and collects the rewards.

Another example is WeChat in China, which created a blue ocean strategy with a next-generation product. Their mobile payment application was using QR codes on smartphones. This strategy is called first-to-market or leapfrogging. They found an opportunity and turned it into a competitive advantage. First movers always have the biggest share in the market so they have a strong competitive advantage.

Another strategy to keep your competitive advantage is an investment in R&D. Technology companies are in a red ocean, and to be able to keep their market share, they should be constantly on alert. Apple’s strongest advantage is its continuous product innovation. They are beating their less-innovative rivals with this advantage and increasing their sales and market share.

Google invested $6.8 billion in 2012 to keep its market share and acquisitions. When other companies gain an advantage, they acquire a competitor company into their organization. They have been acquiring new companies since 2010, such as YouTube, DoubleClick, and Waze. There are hundreds of companies they have done this with and the number continues to increase.

Timing is important for strategic moves and competitive strategies. Sometimes, when to make a move can be more challenging than creating new competitive advantages.

I know I said that being a first-mover has a great effect on creating a strong competitive advantage, but there is no guarantee of success in any market. There are always risks when implementing something new.

Let’s do our best to check the data, and know the product and market. Additionally, we should be careful to only implement strategies that are compatible with our company culture. No need to force our team members to do something different than they believe in. After you implement everything I recommended, I can only send my best wishes to you while waiting for your product to become successful 🫶

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7 Competitive Advantage Examples for Business Success

Julia McCoy

Imagine stepping into a ring where everyone’s fighting to be number one. That’s the business world for you, and having a competitive advantage is like knowing a secret move that puts you ahead of the others. But what are your competitive advantages?

We’re about to explore the different types of competitive advantage in business and how companies shine by reducing expenses smartly and offering distinctive value that makes them the preferable choice of consumers.

We’re talking real-world competitive advantage examples where companies have turned the tables in their favor using these strategies.

Additionally, we’ll delve into the significance of embracing innovation and adjusting to worldwide shifts, vital for maintaining a competitive advantage.

So buckle up; it’s time to learn how to stay ahead in the game.

Types of Competitive Advantage

Michael Porter , a world-renowned authority on business competitiveness, identified three fundamental strategies that companies can adopt to secure enduring advantages. These strategies are cost leadership , differentiation , and focus .

Cost leadership is all about making and selling stuff that’s cheaper than the other guys.

Differentiation is about creating products that truly stand out from the crowd.

Focus is where you hone in on specific market segments and offer them something unique and tailored to their needs.

Let’s break down these three competitive advantage examples.

In cost leadership, it’s all about becoming the lowest-cost producer in your industry. Think Walmart or IKEA. These industry giants excel in trimming expenses from every angle, while still maintaining a decent level of quality. They buy in bulk, optimize operations, and pass these savings to their customers.

Even smaller enterprises can engage in this approach by focusing on efficiency and expanding their operations as opportunities arise. The key? Streamlining processes and negotiating better deals with suppliers to lower production costs.

Differentiation is when you make your product or service stand out because it has something unique. Apple, with its pioneering gadgets and a brand that epitomizes sophistication and cutting-edge technology, truly excels in carving out a distinctive niche.

There are three types of product differentiation: vertical, horizontal, and mixed.

Vertical differentiation is all about clear-cut advantages like price or quality that set a product apart.

Horizontal differentiation, on the other hand, zooms in on consumer tastes like packaging, flavor, or color.

Mixed differentiation blends both approaches — highlighting a mix of objective and subjective product characteristics.

To nail differentiation, think deeply about what makes your offering special — be it design, features, customer service, or technology — and then shout it from the rooftops (or market it wisely online).

Remember: Different doesn’t always mean better for everyone but it means better for your target audience.

A focus strategy involves targeting a specific niche market rather than trying to appeal to the masses. This could mean specializing in gluten-free baked goods if you’re a bakery or eco-friendly apparel if you’re into fashion retailing.

The beauty of focus strategies lies in understanding and serving your chosen segment so well that competitors simply can’t keep up because they’re spread too thin catering to broader markets.

Warby Parker, by really honing in on the specific desires and necessities of its target audience, has managed to secure a substantial niche despite aggressive rivalry from bigger eyewear corporations.

Gaining an edge over competitors requires not just following one path but often blending these strategies smartly based on changing market dynamics.

Source: The Balance

Cost leadership, product differentiation, and focus are generic competitive advantages. Porter has also identified three specific types of competitive advantage: strong brand , technological superiority , and access to capital .

For any company, establishing a robust brand is essential. It not only boosts the effectiveness of advertising but also fosters a deeper emotional bond with consumers.

A powerful brand transcends mere logos and names; it’s a community built on ideas, values, and beliefs, evoking inspiration and uniqueness. It’s the go-to choice for consumers, meeting their expectations effortlessly and staying attuned to evolving social and consumer trends.

To build a strong brand, you first need a clear purpose beyond profit-making. This purpose defines why your business exists. Then, you analyze competitors, identify your target audience, and formulate a strategy.

Crafting a compelling brand story follows — communicate your values, vision, and mission.

Next, shape or refine your brand identity with a strong name, recognizable logo, and unique tone of voice.

Consistency is key here — your messaging, storytelling, and promotional efforts should consistently align with your brand’s purpose.

New technology is a fantastic opportunity to revamp business models and streamline operations for better efficiency.

When technological prowess delivers specific perks like automation or data-driven innovations, it becomes a powerful competitive advantage.

Investing in research and development to unveil new products can also capture consumers’ attention and propel a company to the forefront of the digital landscape, setting it apart from rivals.

There’s a myriad of ways to leverage technology for that competitive edge. For instance, using data to understand both customers and employees better can inform strategic decisions. Cloud services enable the storage of vast amounts of data, while artificial intelligence helps with thorough analysis, leading to enhanced efficiency, cost savings, and superior customer experiences.

Apps serve as vital conduits for seamless interactions between a company and its clientele across various platforms.

Cognitive technologies like machine learning and speech recognition streamline processes that once relied on human input.

Furthermore, cybersecurity is crucial in today’s tech-driven world, safeguarding against cyber threats and ensuring the protection of sensitive customer data.

Large companies across various industries, including manufacturing, space exploration, and healthcare, frequently leverage this form of competitive advantage.

Access to capital denotes the availability of funds, equipment, and materials necessary for the production and distribution of goods. It encompasses resources for storage, refunds for defective products, and funding for marketing endeavors.

Small businesses often grapple with challenges in securing capital to launch products or expand sales. Conversely, large enterprises benefit from ample financial resources for advertising, research and development, and infrastructure — positioning them to outpace competitors.

With access to capital, market leaders can effortlessly raise funds and reinvest additional resources to scale production or venture into new markets.

Now, let’s look at real-world competitive advantage examples and explore how renowned companies have pushed their brands to the forefront of their respective industries.

Real-World Competitive Advantage Examples

Discover how industry giants like Amazon, Apple, Walmart, Tesla, Starbucks, Nike, and Netflix have used their competitive advantage to leave market competitors in the dust.

Walmart has become synonymous with savings, but it’s not just about low prices for customers. They achieve this through a relentless focus on efficiency — from logistics to negotiations with suppliers. By prioritizing efficiency, they manage to offer lower prices than their rivals while still keeping their profit margins healthy.

Another factor that turned into Walmart’s competitive edge is its strategic placement of stores in remote areas. By catering to small towns with limited retail options, Walmart effectively monopolized these markets, making it challenging for competitors to establish a foothold. This presence in hard-to-reach locations, coupled with competitive pricing and quality service, solidified Walmart’s dominance in numerous underserved communities.

Walmart’s use of technology for inventory management is especially noteworthy — it uses automation to gain a competitive advantage in the retail space. Automation plays a crucial role in streamlining operations throughout the company’s distribution centers and stores. From product transportation and sorting to packaging and checkout processes, Walmart employs automation technologies to enhance efficiency and customer satisfaction.

Scan-and-go kiosks in stores reduce wait times, while automation in distribution centers, powered by robotics and artificial intelligence, optimizes supply chain processes, ensuring accuracy and speed. Thanks to AI, Walmart shelves are stocked efficiently while avoiding overordering — saving millions annually.

In essence, Walmart’s strategy turns cost-saving into its most potent weapon against competition.

If there’s one company that knows how to stand out, it’s Apple. Their approach? Deliver products so unique that they set the standard for what consumers expect in quality and design.

This isn’t just about having sleek gadgets; Apple backs up its designs with robust ecosystems like iOS and exclusive services such as iTunes and the App Store which lock users into their world seamlessly.

No doubt, Apple’s biggest competitive edge is its strong brand reputation — built over many years of delivering high-quality products with clean, intuitive designs. This brand equity not only distinguishes Apple in the global market but also fosters strong customer loyalty. With consistent brand recognition and a seamless ecosystem of interconnected devices and services, customers often opt for additional Apple products, reinforcing the company’s market dominance.

Technological innovation is the core of Apple’s success, as the company continually pushes boundaries with groundbreaking products like the iPod, MacBook, and iPhone. Through substantial investments in research and development, Apple maintains its position at the forefront of technological advancement, consistently introducing cutting-edge features and functionalities to captivate consumers. In 2022 alone, Apple allocated over $25 billion to R&D, showcasing its unwavering commitment to innovation.

Apple continually reshapes the market landscape, not merely by keeping pace but by establishing new benchmarks in innovation and user experience.

Amazon’s success stems from a multifaceted approach to competitive advantage.

First, the company prioritizes cost leadership — focusing on customer satisfaction over immediate profits.

Recognizing the significance of delivery costs, Amazon pioneered free shipping for purchases exceeding $25, a move that significantly enhanced customer appeal and boosted sales. This strategy was further amplified with the introduction of Amazon Prime, providing expedited two-day delivery for time-sensitive customers.

Amazon also employs product differentiation to stand out in the market. Offering an unparalleled selection of goods, the company serves both buyers and sellers through its expansive marketplace. This broad product assortment caters to diverse consumer needs, ranging from everyday essentials to specialized items, aligning with Amazon’s customer-centric ethos and enhancing service convenience.

Amazon maintains a focus on technological superiority to elevate customer service standards. The platform’s user-friendly interface, coupled with features like enhanced search functionality, personalized suggestions, and one-click ordering, prioritizes ease of use for customers.

Lastly, Amazon extends its technological prowess through its subsidiary AWS, offering cloud computing services to individuals, businesses, and governments to diversify its revenue streams and cement its position as a leader in the tech industry.

Nike’s success in the sports apparel and footwear industry is attributed to its product differentiation and efficient brand management.

Nike boasts unparalleled brand awareness, driven by its iconic swish logo and slogan “Just Do It” which has solidified its status as a household name. Endorsements from high-profile athletes like Michael Jordan and Tiger Woods further amplify Nike’s visibility and resonance with consumers.

Central to Nike’s strategy is a relentless pursuit of innovation, exemplified by its dedicated research division called The Nike Sports Research Lab. Through innovation, Nike continuously expands its product range to cater to diverse demographics, including women, teenagers, and children, ensuring its offerings align with evolving market trends and customer preferences.

Notable innovations like the Nike Fuel Band, which tracks daily activities, and Nike By You, a customization service for footwear and sportswear, enhance customer engagement and foster brand loyalty by offering personalized experiences unmatched by competitors.

Starbucks has become a household name by focusing on product differentiation, emphasizing the quality of its offerings to attract a clientele of middle to upper-class individuals. The strategic placement of Starbucks stores in bustling urban centers, suburban retail districts, and university campuses enhances accessibility and reinforces its brand image as a place where customers can relax and socialize outside of home and work.

By curating inviting store environments, offering complimentary WiFi, and providing exceptional service alongside a diverse product range, Starbucks creates a distinct customer experience that sets it apart from competitors.

With a massive global presence spanning over 80 countries and a uniform visual identity maintained across its stores worldwide, Starbucks has built a strong brand identity symbolized by the iconic Siren logo. This concerted effort to maintain consistency across locations reinforces the brand’s reputation and ensures a seamless customer experience regardless of geographical location.

Lastly, Starbucks has turned corporate social responsibility (CSR) into a competitive advantage — demonstrating a commitment to environmental sustainability that further enhances its positive brand image and fosters long-term customer loyalty.

Netflix maintains a sustainable competitive advantage through a cost leadership strategy, prioritizing low operational costs and affordable pricing to attract a broad customer base.

With over two decades of experience in the streaming industry, Netflix has developed a robust infrastructure on a large scale, positioning itself ahead of newer competitors entering the market. Rather than focusing on niche segments, Netflix adopts a global approach, aiming to expand its customer reach worldwide and solidify its market presence.

Investment in research and development plays a pivotal role in Netflix’s strategy, driving innovation and addressing customer needs effectively. Through initiatives like the Dynamic Optimizer and the introduction of offline viewing capabilities, Netflix optimizes content delivery and enhances user experience.

Continuous refinement of its recommendation algorithm also enables Netflix to personalize content suggestions according to viewing habits, further enhancing customer engagement and retention.

Unlike its rivals that offer mostly in-house titles, Netflix implements a differentiation strategy by offering original content alongside licensed third-party videos. By working directly with producers and leveraging subscriber data to inform content creation and pricing decisions, Netflix delivers value to its audience while maintaining cost efficiency.

This approach has enabled Netflix to produce compelling content targeted at specific viewer interests, fostering customer loyalty and cementing a sustainable competitive advantage in the streaming industry.

Tesla took electric cars from a niche novelty to a must-have status among environmentally conscious consumers.

Rather than targeting all car buyers, Tesla focused on affluent individuals looking for luxury without compromising on eco-friendliness.

Tesla’s biggest competitive advantage is its technological prowess, continuously integrating cutting-edge innovations into its vehicles. With a focus on software-driven functionality, Tesla can collect and analyze data from its vehicles, allowing for continuous improvement and refinement of features such as autopilot.

The use of artificial intelligence further reinforces Tesla’s position at the forefront of autonomous driving technology, with neural networks trained using real-world data captured by Tesla owners.

Like Apple’s approach to product excellence, Tesla has built a reputation for delivering high-quality, stylish automobiles that defy traditional expectations of electric cars. The introduction of the Tesla Roadster shattered stereotypes, showcasing that electric vehicles can be both fast and visually appealing.

Tesla’s vertical integration strategy, particularly in battery production, also provides a significant competitive advantage. The establishment of the Gigafactory drastically reduced battery manufacturing costs through economies of scale, waste reduction, and process optimization.

This strategic move not only enables Tesla to produce more batteries than all other car manufacturers combined but also facilitates continuous improvements in battery quality and chemical composition, further solidifying its dominance in the electric vehicle market.

FAQs – Competitive Advantage Examples

A competitive advantage makes a firm’s goods or services better than its rivals. Apple stands out with its unique ecosystem.

Amazon dominates its industry by delivering a vast selection, quick shipping, and stellar customer service.

This fast-food giant shines through top-notch customer service and quality eats. Their secret sauce? Treating patrons like gold.

Stepping into the business ring, knowing your secret move matters. That’s where competitive advantage examples shine.

Key takeaways? Cost leadership and differentiation are not just buzzwords; they’re game changers. Innovation keeps you ahead, while globalization opens doors but demands agility.

Sustaining your edge means adapting, evolving, and never settling for yesterday’s win.

To sum up: stay sharp, be unique, and always look forward. The right strategy isn’t just about leading today; it’s about staying ahead tomorrow.

Written by Julia McCoy

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How to Successfully Achieve and Sustain Competitive Advantage

Updated on: 5 January 2023

Competitive advantage is at the core of an organization’s performance in markets where there is heavy competition. It sets an organization apart from its competitors and paves the way for higher profit margins, greater return on assets, and accumulating valuable resources.

There are many ways to achieve a competitive advantage but only two basic types of it. In this post, we will be looking at the concept of competitive advantage and the steps an organization can follow to achieve and sustain competitive advantage through cost advantage and differentiation.

What is Competitive Advantage

Competitive advantage stems from the value an organization is able to create for its customers. It can come in the form of prices lower than what is offered by competitors for the same benefits or in the form of unique benefits that counterbalance a higher price. In the end, the value created for the customer should exceed the organization’s cost of creating it in the first place.

This creates a sustainable advantage allowing them to succeed in the market.

According to Michael Porter, there are two types of competitive advantage;

Low cost – where an organization is able to produce its products at a lower cost than its competitors.
Differentiation – where an organization is able to differentiate its products or service in terms of quality, style, customer service, etc. hence creating superior value to the customers over the competition.

Cost advantage and differentiation stems from industry structure or how well it can cope with the industry forces that influence its profitability (as introduced in Michael Porter’s five forces model ) better than its competition.

How to Create and Sustain Competitive Advantage

Creating a sustainable competitive advantage is a laborious process that needs to be continuously attended to. Adhere to the following steps to ensure you get and remain ahead of the field.

Analyze Competitors

To successfully compete in an industry, an organization needs to understand its competitive landscape. This means gathering and analyzing information on competitor strengths, weaknesses, strategies, positioning, value proposition, customer perception, and more.

Equipped with this knowledge, the right strategy can then be developed to achieve a sustainable competitive advantage.

Learn more about conducting a competitive analysis .

Map Competitors into Strategic Groups

A business mainly competes against other businesses that offer similar products or services and follow the same generic competitive strategy. Such businesses that follow the same competitive strategy in an industry belong to the same strategic group. Identifying the other businesses that fall into the same strategic group as it does, is important to an organization in terms of developing a strategy to achieve competitive advantage.

Learn more about mapping strategic groups .

Assess the Most Attractive Position in the Industry

Based on your strategic group analysis, you now know who your direct rivals are and where they stand. Next, you should articulate your position in the industry to succeed in the marketplace. Defining your competitive positioning will help identify areas of opportunity for your business.

Michael Porter’s five forces analysis helps assess and evaluate the competitive strength and position of an organization. Porter’s five forces model helps organizations understand the intensity of competition in an industry, its attractiveness, and profitability level. It helps identify where power lies in a business situation and hence assess the strength of an organization’s current competitive position and the strength of a position that an organization may look to move into.

The five forces include,

Porter's Five Forces what is competitive advantage

The entry of new competitors
The threat of new substitutes
The bargaining power of buyers
The bargaining power of suppliers
The rivalry among the existing competitors

Three Generic Strategies for Achieving Competitive Advantage by Michael Porter

An organization’s relative position in an industry decides whether its profitability is above or below the industry average. Even within an industry structure that is unfavorable, a well-positioned organization may earn high rates of return.

Michael Porter introduces three generic strategies for achieving above-average performance in an industry and thus creating a competitive advantage. Generic strategies include cost leadership, differentiation, and focus which is divided into cost focus and differentiation focus.

The idea behind the concept of generic strategies is that competitive advantage is at the core of any strategy. And in order to achieve a competitive advantage, the organization must make a choice about the type of competitive advantage it wants to attain and the scope within which it will attain it.

Each of the generic strategies highlights different methods competitive advantage can be achieved.

Porter's Generic Strategies Example what is competitive advantage

Cost leadership

An organization adhering to this strategy aims to become the low-cost producer in its industry. The sources of cost advantage vary here from industry to industry, and may include proprietary technology, preferential access to raw material, increased individual skills, improved organizational routines, location advantages, managerial effectiveness, and more .

A low-cost producer must find and exploit all these sources of cost advantage. An organization that can achieve and sustain overall cost leadership, can become an above-average performer in its industry given that it can command prices at or near the industry average.

By offering their products or services for a similar or lower price than their competitors, organizations following this strategy can maintain a low-cost position in their industry which will, in turn, increase their return.

A cost leader however needs to consider the bases of differentiation, for if the product is not perceived as comparable or acceptable by its buyers, it will be forced to reduce prices well below its competitors to gain sales. This will in turn reverse the benefits of its favorable cost position.

Differentiation

An organization that follows this strategy aims to become unique in its industry along certain dimensions that are highly valued by buyers. In this strategy, the organization selects specific attributes that are considered important by its buyers and uniquely positions itself to meet those needs. It is then rewarded for its uniqueness with premium prices.

An organization can achieve differentiation through the product itself (quality, price, durability), its delivery system, marketing approach, customer service, and many other factors. The logic behind the differentiation strategy requires that the attributes an organization chooses to differentiate itself should be different from the attributes used by its rivals.

An organization that can achieve and sustain differentiation can be an above-average performer in its industry if the premium price they offer can offset the extra costs spent for being unique. An organization aiming to become a differentiator therefore should adhere to ways of differentiating that lead to a price premium greater than the cost of differentiating.

A differentiator shouldn’t ignore its cost position for there’s a chance of its premium prices being nullified by the inferior cost position of competitors. To overcome this, a differentiator can reduce costs in all areas that don’t affect differentiation.

Focus

An organization following this strategy selects a segment of the industry and tailors its strategy to cater specifically to them while excluding the rest of the market. By optimizing its strategy for a selected group of customers, the focuser aims to achieve a competitive advantage in its target segment although it cannot achieve an overall competitive advantage.

The focus strategy has two variants;

Cost focus: here, the organization seeks a cost advantage in its target segment by exploiting its cost behavior

Differentiation Focus: here, the organization seeks differentiation in its target segment by exploiting the special needs of the buyers

How to Measure and Analyze Competitive Advantage

The value chain model by Michale Porter can be used as a tool to diagnose competitive advantage and find ways to improve it. The value chain divides an organization into the distinct activities it performs in designing, producing, marketing, and distributing its products and helps identify the linkages among the activities that are central to achieving competitive advantage.

Porter’s value chain model divides these activities into two categories,

Primary activities are the activities involved in the physical creation of the product, its sale and transfer to the buyers, and after-sale assistance.
Support activities ; these are the activities that support the primary activities and each other by providing purchased inputs, technology, human resources, and various organization-wide functions.

The value chain analysis helps understand the activities that are most valuable and should be optimized to achieve competitive advantage.The firm can then optimize the primary activities that account for the greatest share of production costs and increase profit margins. The analysis can also reveal the support activities that could use more spending to generate better value.

Analyzing competitive advantage

Here’s how to analyze your organization’s value chain based on how you want to develop a competitive advantage (cost leadership or differentiation).

Cost leadership

In order to reduce the cost of internal business activities,

First, identify the primary and support activities involved in developing and delivering products and services.
Determine the importance of each activity in terms of production cost. Those activities that consume a large percentage of the total cost of production should be addressed first.
Identify the cost drivers behind each activity by analyzing how they use the company resources.
Map out the connections between the activities to better understand the roles each plays in the overall value chain. This will allow you to detect problems such as how reducing the cost of one activity would cause the cost of a linked activity to increase.
Now that you have understood the cost drivers and the inefficient processes in the value chain, you can make informed decisions on how to improve them and reduce production cost.

Differentiation

An organization following a differentiation strategy can effectively create more value for the buyer by adding product features and improving customer satisfaction by following the steps below.

Identify the activities in the value chain that contribute the most to creating customer value.
Evaluate the differentiation strategies for improving customer value. Strategies like adding more product features , improving customer service and responsiveness, and offering complementary products can be used to increase product differentiation and product value.
Identify the best sustainable differentiation. Creating superior differentiation and customer value requires the use of many interrelated activities and strategies. Use the best combination of them to pursue a sustainable differentiation advantage.

Now It’s Your Turn to Develop a Competitive Advantage Strategy

To gain a competitive advantage is to attract more customers, make more profit, return more value to shareholders than rival organizations do. A company can effectively gain a competitive advantage in one of two ways; by reducing its own costs and by adding more value to its products or services hence differentiating itself from competitors.

We hope this post will assist you in developing your own strategy to achieve a sustainable competitive advantage. Got anything to add? Let us know in the comments below.

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5 Sources of Competitive Advantage to Drive Growth

team identifying sources of competitive advantage in a meeting

10 Nov 2020

From chariot races and jousting tournaments to playground games and professional sports, competition is an age-old force that drives humans to evolve and outpace their competitors.

Competition in business is no exception, and it can make or break your organization. While it's often uncomfortable and scary to witness another business profit from your company's weaknesses, competition can also push your business to evolve into a better version of itself.

How do you gain an edge to drive growth for your organization? Here are five sources of competitive advantage to leverage for your business strategy.

Access your free e-book today.

Sources of Competitive Advantage

1. product attribute differentiation.

One way to gain an advantage over competitors is by differentiating your product from theirs. Ask yourself: What makes my offering unique? Why would consumers want to purchase my product instead of my competitors’?

Countless attributes can set your product apart. Here are some to consider:

Better customer service
More variety
Faster or cheaper shipping
Color and aesthetics
Brand identity
Atmosphere of brick-and-mortar locations
Source of goods

Whole Foods Market is one example of a company that differentiates its products using brand identity, atmosphere, and sourcing. Whole Foods’ competitors are other natural food chains, such as Trader Joe’s and Sprouts Farmers Market, along with big names in the grocery space, including Stop & Shop and Wegman’s.

Whole Foods stands out in the crowded natural foods market as the first and only certified organic national grocery store in the United States. Its brand identity centers on the integrity of its natural and organically sourced foods. It also cultivates an in-store atmosphere that makes grocery shopping feel purposeful and is a step up from some of its competitors' traditional grab-and-go shopping experience.

Like Whole Foods, find the attributes that differentiate your product from others and make them central to your brand’s identity.

Economics for Managers | Craft successful business strategy | Learn More

2. Customers’ Willingness to Pay

The way you price your products or services can set you apart from your competitors. When doing so, it’s vital to understand your customers’ willingness to pay .

Willingness to pay (WTP) is the maximum price a customer is willing to pay for a product or service. It can be a specific dollar amount or a price range.

By determining your customers’ WTP, you can ensure you’re maximizing profit without turning away customers.

In the context of competition, it’s important to view willingness to pay as a strategic tool. If your customers are willing to pay the same amount for your and your competitors’ products, consider what can be shifted to increase their willingness to pay for yours.

For example, business support system company CSG reports that 47 percent of consumers are willing to pay more for products that are sustainably sourced. Among those consumers, five percent are willing to pay double the price for a sustainable product over a non-sustainable one.

With the knowledge that certain factors could cause your customers’ willingness to pay to increase, you can strategically implement changes that give your business a competitive edge.

Alternatively, if your competitor provides a product at the very top of customers’ willingness to pay, you can gain a competitive advantage by offering a lower price. Tread cautiously, because doing so could start a price war in which you both continue to drop prices to win customers.

3. Price Discrimination

With an understanding of your customers’ willingness to pay, you may find that different types of customers are willing to pay different amounts for your products. In such cases, it can be useful to employ price discrimination, which can be a valuable tool for expanding your company’s reach when competing with others.

“Price discrimination is one of the most common and powerful price strategies for companies,” says Harvard Business School Professor Bharat Anand in the online course Economics for Managers .

In the course, Anand presents several examples of price discrimination, including reduced prices for students, seniors, and veterans. These “special case” prices present an opportunity for your company to earn customers whose willingness to pay may be lower than that of its typical customers.

It’s worth noting that a lower price doesn’t always win consumers over—selecting a strategic price is crucial, but it’s just one factor they consider when determining which product to buy.

4. Bundled Pricing

Another pricing strategy that can prove to be advantageous is bundled pricing.

Bundled pricing is the practice of selling two or more products together in a “bundle,” for which the cost is different than that of purchasing all of the items separately.

Cable companies often leverage bundling. Purchasing voice, video, and data services together often grants the customer a lower price than if they were to purchase the services individually.

“How you think about the logic of pricing should depend on willingness to pay,” Anand says in Economics for Managers . He presents the example of bundling childcare and theater tickets.

“Put two products together that, when consumed jointly, increase consumers’ willingness to pay,” he says. “You might be able to increase the price for both just because it has so much more value for consumers.”

The way you price your products should be strategic, purposeful, and give your business a leg up over its competitors.

5. Human Capital

A company is only as strong as its people. As such, hiring, training, and retaining a team of skilled employees is a competitive advantage for any business.

Putting in the time and care to select outstanding candidates for open positions, train current employees, offer professional development opportunities, and create a culture wherein people feel supported and challenged can pay off.

Gallup reports that business units with highly engaged employees see a 21 percent increase in profit over their less-engaged counterparts.

Employee engagement has been especially important during the coronavirus (COVID-19) pandemic , as many businesses have closed physical offices and transitioned to remote work. By finding ways to effectively engage your team in a virtual setting , you can make them feel supported and empowered from afar.

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Positioning Your Business for Success

Differentiating your product, creating a pricing strategy, and investing in your employees can be the difference between rising to the top of your market and being driven out by a competitor.

By taking a strategy course , such as Economics for Managers , you can bolster your skills in these areas and see competition not as a looming threat, but as a catalyst for growth.

Do you want to learn more about positioning your business for success in a competitive market? Explore our eight-week Economics for Managers course and other online strategy courses to hone your skills.

About the Author

Plan Projections

ideas to numbers .. simple financial projections

Home > Business Plan > Competitive Advantage in a Business Plan

Competitive Advantage in a Business Plan

… but we have the following advantages …

A business is creating competitive advantage over its competitors when it can achieve higher the industry average profit margins on its products. This can happen due to a number of factors including cost advantages, and superior product offerings. The main objective of the business is the make the competitive advantage sustainable.

Superior product offerings or differential advantages occur when the business has a product which is perceived by the customers as substantially better than the competitors products.

Even if a competitor were able to make an almost identical product, your competitive advantages should enable the business to win, build and maintain market share in the chosen target market.

Competitive Advantage Examples

Examples of things which might give your business a competitive or unfair advantage include the following:

First to market
Barriers to entry
Available funds and working capital
Key partnerships and relationships
Access to expertise, special skills and talents
Distribution rights

Competitive Advantage Presentation

An investor will look to see if there is a sustained competitive edge, capable of further development, which will allow the business to build and hold market share.

This is part of the financial projections and Contents of a Business Plan Guide , a series of posts on what each section of a simple business plan should include. The next post in this series sets out details of the market share the business plans to win using its competitive edge.

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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How to create a competitive analysis (with examples)

Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own. In this guide, we’ll outline how to do a competitive analysis and explain how you can use this marketing strategy to improve your business.

Whether you’re running a business or playing in a football game, understanding your competition is crucial for success. While you may not be scoring touchdowns in the office, your goal is to score business deals with clients or win customers with your products. The method of preparation for athletes and business owners is similar—once you understand your strengths and weaknesses versus your competitors’, you can level up.

What is a competitive analysis?

Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own.

Direct competitors market the same product to the same audience as you, while indirect competitors market the same product to a different audience. After identifying your competitors, you can use the information you gather to see where you stand in the market landscape.

What to include in a competitive analysis

The purpose of this type of analysis is to get a competitive advantage in the market and improve your business strategy. Without a competitive analysis, it’s difficult to know what others are doing to win clients or customers in your target market. A competitive analysis report may include:

A description of your company’s target market

Details about your product or service versus the competitors’

Current and projected market share, sales, and revenues

Pricing comparison

Marketing and social media strategy analysis

Differences in customer ratings

You’ll compare each detail of your product or service versus the competition to assess strategy efficacy. By comparing success metrics across companies, you can make data-driven decisions.

How to do a competitive analysis

Follow these five steps to create your competitive analysis report and get a broad view of where you fit in the market. This process can help you analyze a handful of competitors at one time and better approach your target customers.

1. Create a competitor overview

In step one, select between five and 10 competitors to compare against your company. The competitors you choose should have similar product or service offerings and a similar business model to you. You should also choose a mix of both direct and indirect competitors so you can see how new markets might affect your company. Choosing both startup and seasoned competitors will further diversify your analysis.

Tip: To find competitors in your industry, use Google or Amazon to search for your product or service. The top results that emerge are likely your competitors. If you’re a startup or you serve a niche market, you may need to dive deeper into the rankings to find your direct competitors.

2. Conduct market research

Once you know the competitors you want to analyze, you’ll begin in-depth market research. This will be a mixture of primary and secondary research. Primary research comes directly from customers or the product itself, while secondary research is information that’s already compiled. Then, keep track of the data you collect in a user research template .

Primary market research may include:

Purchasing competitors’ products or services

Interviewing customers

Conducting online surveys of customers

Holding in-person focus groups

Secondary market research may include:

Examining competitors’ websites

Assessing the current economic situation

Identifying technological developments

Reading company records

Tip: Search engine analysis tools like Ahrefs and SEMrush can help you examine competitors’ websites and obtain crucial SEO information such as the keywords they’re targeting, the number of backlinks they have, and the overall health of their website.

3. Compare product features

The next step in your analysis involves a comparison of your product to your competitors’ products. This comparison should break down the products feature by feature. While every product has its own unique features, most products will likely include:

Service offered

Age of audience served

Number of features

Style and design

Ease of use

Type and number of warranties

Customer support offered

Product quality

Tip: If your features table gets too long, abbreviate this step by listing the features you believe are of most importance to your analysis. Important features may include cost, product benefits, and ease of use.

4. Compare product marketing

The next step in your analysis will look similar to the one before, except you’ll compare the marketing efforts of your competitors instead of the product features. Unlike the product features matrix you created, you’ll need to go deeper to unveil each company’s marketing plan .

Areas you’ll want to analyze include:

Social media

Website copy

Press releases

Product copy

As you analyze the above, ask questions to dig deeper into each company’s marketing strategies. The questions you should ask will vary by industry, but may include:

What story are they trying to tell?

What value do they bring to their customers?

What’s their company mission?

What’s their brand voice?

Tip: You can identify your competitors’ target demographic in this step by referencing their customer base, either from their website or from testimonials. This information can help you build customer personas. When you can picture who your competitor actively targets, you can better understand their marketing tactics.

5. Use a SWOT analysis

Competitive intelligence will make up a significant part of your competitor analysis framework, but once you’ve gathered your information, you can turn the focus back to your company. A SWOT analysis helps you identify your company’s strengths and weaknesses. It also helps turn weaknesses into opportunities and assess threats you face based on your competition.

During a SWOT analysis, ask yourself:

What do we do well?

What could we improve?

Are there market gaps in our services?

What new market trends are on the horizon?

Tip: Your research from the previous steps in the competitive analysis will help you answer these questions and fill in your SWOT analysis. You can visually present your findings in a SWOT matrix, which is a four-box chart divided by category.

6. Identify your place in the market landscape

The last step in your competitive analysis is to understand where you stand in the market landscape. To do this, you’ll create a graph with an X and Y axis. The two axes should represent the most important factors for being competitive in your market.

For example, the X-axis may represent customer satisfaction, while the Y-axis may represent presence in the market. You’ll then plot each competitor on the graph according to their (x,y) coordinates. You’ll also plot your company on this chart, which will give you an idea of where you stand in relation to your competitors.

This graph is included for informational purposes and does not represent Asana’s market landscape or any specific industry’s market landscape.

[inline illustration] Identify your place in the market landscape (infographic)

Tip: In this example, you’ll see three companies that have a greater market presence and greater customer satisfaction than yours, while two companies have a similar market presence but higher customer satisfaction. This data should jumpstart the problem-solving process because you now know which competitors are the biggest threats and you can see where you fall short.

Competitive analysis example

Imagine you work at a marketing startup that provides SEO for dentists, which is a niche industry and only has a few competitors. You decide to conduct a market analysis for your business. To do so, you would:

Step 1: Use Google to compile a list of your competitors.

Steps 2, 3, and 4: Use your competitors’ websites, as well as SEO analysis tools like Ahrefs, to deep-dive into the service offerings and marketing strategies of each company.

Step 5: Focusing back on your own company, you conduct a SWOT analysis to assess your own strategic goals and get a visual of your strengths and weaknesses.

Step 6: Finally, you create a graph of the market landscape and conclude that there are two companies beating your company in customer satisfaction and market presence.

After compiling this information into a table like the one below, you consider a unique strategy. To beat out your competitors, you can use localization. Instead of marketing to dentists nationwide like your competitors are doing, you decide to focus your marketing strategy on one region, state, or city. Once you’ve become the known SEO company for dentists in that city, you’ll branch out.

[inline illustration] Competitive analysis framework (example)

You won’t know what conclusions you can draw from your competitive analysis until you do the work and see the results. Whether you decide on a new pricing strategy, a way to level up your marketing, or a revamp of your product, understanding your competition can provide significant insight.

Drawbacks of competitive analysis

There are some drawbacks to competitive analysis you should consider before moving forward with your report. While these drawbacks are minor, understanding them can make you an even better manager or business owner.

Don’t forget to take action

You don’t just want to gather the information from your competitive analysis—you also want to take action on that information. The data itself will only show you where you fit into the market landscape. The key to competitive analysis is using it to problem solve and improve your company’s strategic plan .

Be wary of confirmation bias

Confirmation bias means interpreting information based on the beliefs you already hold. This is bad because it can cause you to hold on to false beliefs. To avoid bias, you should rely on all the data available to back up your decisions. In the example above, the business owner may believe they’re the best in the SEO dental market at social media. Because of this belief, when they do market research for social media, they may only collect enough information to confirm their own bias—even if their competitors are statistically better at social media. However, if they were to rely on all the data available, they could eliminate this bias.

Update your analysis regularly

A competitive analysis report represents a snapshot of the market landscape as it currently stands. This report can help you gain enough information to make changes to your company, but you shouldn’t refer to the document again unless you update the information regularly. Market trends are always changing, and although it’s tedious to update your report, doing so will ensure you get accurate insight into your competitors at all times.

Boost your marketing strategy with competitive analysis

Learning your competitors’ strengths and weaknesses will make you a better marketer. If you don’t know the competition you’re up against, you can’t beat them. Using competitive analysis can boost your marketing strategy and allow you to capture your target audience faster.

Competitive analysis must lead to action, which means following up on your findings with clear business goals and a strong business plan. Once you do your competitive analysis, you can use the templates below to put your plan into action.

Related resources

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How to track utilization rate and drive team profitability

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Smooth product launches are simpler than you think

35 Practical Competitive Advantage Examples to Learn From

In business, a competitive advantage refers to an attribute that allows a company to outperform its competition. In other words, what does your business have that is valuable and hard to replicate by your competitors? What do you do better than them? Today, we will see 35 competitive advantage examples that could make you stand out from the crowd.

In 1985, Michael Porter wrote about 4 generic strategies that companies undertake when it comes to competitive advantage:

Competitive advantage examples: Porter’s generic strategies

And although this model still has an important presence in Business and Marketing to this day, it is rather simplified. Nowadays, companies can build different competitive advantages based on factors that are not necessarily the mainstream ones.

Also, just a little disclaimer before we start! Some of the links on this page are affiliate. This means that I will earn a small commission in the case you end up purchasing after clicking on it.

Competitive Advantage Examples

And now, without further ado, let’s see the full list!

1. Technology

First on our list of competitive advantage examples is technology, in all of its senses . On one hand, it can be technology built into regular products, services and processes with the purpose of making them faster and more efficient.

For example, supermarkets such that offer self-check out terminals have a competitive advantage over those who don’t. Or fast-food restaurants like Burger King that offer the possibility to order via self service check out kiosks:

Another way that technology puts companies in front of their competitors is on the digital field. Or, in other words, digitally native businesses that have managed to develop a better technological solution than the current ones on the market.

For example, Mailchimp offers one of the most comprehensive Email Marketing services in the industry.

2. Innovation

Companies that invest in innovation are definitely one step ahead of their competitors. Think of Amazon Go and the first grocery store without any lines or checkout. You just enter, put the products in your shopping cart, and leave the shop.

Another great example when it comes to innovation is Airbnb. They took a regular service that has been out there for a while, in this case accommodation for travellers. And developed a completely new approach to it!

And you know, when it comes to innovation, it is not about coming up with the most unique product in the market. Sometimes, it is just about making a simple, but practical twist, or taking a new approach to something that already exists.

In the end, it is all about solving a problem for your audience in the best way possible.

3. Ease of use

As I just mentioned, people want a solution to their existing problems. Many companies tend to overcomplicate their products and overcharge them with features that no one ends up using. Because that wasn’t what people needed.

Usually, when companies use web app development services , they want to implement as much functionality to their project as possible. They consider it the best way to achieve success. However, it is not the case. Successful projects are those that can satisfy the basic customer needs with minimum functionality.

For this reason, I would say one of the most underestimated competitive advantage examples is ease of use . Companies that make their product simple, intuitive, and easy to use by anyone are almost always going to be ahead of their competitors.

Competitive advantage examples: Stripe

An example that comes to my mind is Stripe, which makes it effortless for companies to start accepting online payments. Or digital banking apps such as the one of ING, which makes it insanely easy to make transfers or consult your banking details.

4. Experience

One of the most powerful competitive advantage examples on this list is experience. And no, I am not talking about years of experience in a certain field or on a specific topic.

Nowadays, customers want more than just a product or a service. They want experiences . Think of Starbucks and the way it revolutionized the coffee industry. People used to visit a coffee shop to purchase their morning drink on the way to the office.

Now, people go to Starbucks to receive a coffee cup with their name on it. They will take a photo in the cozy environment that the company has provided for them. And of course, they will share it with their family and friends on social media.

competitive advantage examples - starbucks

5. Customization

Another powerful way to stand out from your competitors is having the ability to offer personalized products tailored to your audience’s needs. With today’s competition in practically every industry, generic products that are not capable of answering customers’ exact needs will be left out.

Here are a couple of examples of products with a solid competitive advantage in this area:

GS-JJ – GS-JJ is a subsidiary of BPS, specializing in promotional gifts and is a professional manufacturer of custom products, through which you can customize unique personalized products such as custom keychains, custom T-shirts, custom pins, etc. according to your needs . Through it, it not only helps to promote marketing and leave a deep impression in customers’ mind, but also enhances competitiveness of the company, making it possible to gain an advantageous position in the market.
Hubspot (affiliate link), one of the leading companies for Inbound Marketing, offers a free CRM that grows with your business.
Mailchimp offers different pricing plans depending on the exact number of contacts you have in your email list;
Instapage (affiliate link) offers more personalization features for building landing pages than any other competitor on the market.

After all, customers will always look for the solution that suits their needs the best.

6. Personal touch

This point might look similar to the previous one, and it is. However, I wanted to distinguish it because in this case, we are not talking about products that are customized to meet the needs of the audience.

In this case, the same product doesn’t necessarily change to fit. However, the company adds a personal touch to it in a way that the audience feels special and unique.

For example, remember the Marketing campaign of Coca Cola, in which they printed names on their cans? This was an absolute success for the company, and made it stand out from competitors:

competitive advantage examples - coca cola

People went absolutely crazy about it! And Coca Cola’s profit finally noticed an increase after a long time of being stuck in the same place.

Soon, Nutella followed with a similar campaign:

The point is, sometimes just adding a bit of personalization to your product might help you gain a competitive advantage in front of your competitors.

Next on our list of competitive advantage examples is being able to leverage economies of scale . Put simply, this means that the more you produce, the more your costs drop. Which, as a consequence, gives you the advantage to increase your profit margins while still maintaining a competitive price.

For example, think of IKEA and the huge quantities of standarized products they produce. This allows them to drop their production costs significantly in comparison to a local furniture shop.

Competitive advantage examples: IKEA

Another competitive advantage in many sectors could be the variety of products, services or features that a company offers. Several examples pop up in my mind, such as:

Supermarkets like Carrefour that offer a huge variety of brands in Spain;
Again IKEA , which offers the widest variety of products for your home;
Mr. Bricolage, a French retail chain that offers home improvement and do-it-yourself goods.

And of course, many more!

9. Human resources

Of course, one of the most important competitive advantages that a company can have is its employees.

Having highly efficient teams with the know-how not only within their field of expertise, but also of the specific sector in which the business operates, is key to gaining a significant advantage over your competitors.

10. Customer service

Our list of competitive advantage examples continues with customer support & service. No matter how good your product is, if you are not capable of providing proper support in case it’s needed, you risk having your customers switch to another company in the blink of an eye.

For this reason, having an amazing customer service can definitely give you a competitive advantage in the market. This is especially important if you offer a complex product that requires assistance so that people can start using it. For example, many SaaS companies.

Some companies that are famous for providing exceptional service include:

You can check the full list here.

11. Reputation

Being a company with impeccable reputation can definitely help you stand out from your competitors. Of course, building it requires a lot of time and huge efforts behind the scenes.

However, you can also take it to your advantage by:

Asking your happy customers for testimonials to put on your website;
Asking customers to fill out surveys and reviews on reputable pages;
And of course, involving your own employees in activities for brand awareness.

A company that does a great job using its reputation to its advantage is Hubspot :

Competitive advantage examples: Hubspot

12. Geographic location

Another possible competitive advantage, although not so obvious, is the geographic location of your business. For example, having factories close to your selling points might decrease your logistic processes, and deliver product faster than the competition.

Another example could be a rooftop restaurant on the last floor of the highest building in the city.

In this case, offering a unique view that your competitors can’t replicate gives you a good competitive advantage.

13. Supply Chain and Logistics

Having incredibly efficient supply chain and logistics processes can give you a solid advantage in front of your competitors. For example, having more control over the different phases of production, or meeting demand faster and better.

One of the best examples that come to my mind is Zara, a clothing company of Inditex. They have an amazing supply chain management, and are capable of manufacturing and delivering products to thousands of stores worldwide in the matter of weeks . You can read more about their case here .

Competitive advantage examples: Inditex

14. Trade Secrets

Another possible advantage is tapping into trade secrets that your competitors do not know. This term implies that these knowledge advantages are not explicitly protected by property law, but rather kept secret internally.

An example that comes to my mind is the secret recipe behind Coca Cola . I don’t know if there is any patent on it, but legend says that there is not a single person that knows the whole recipe. Instead, multiple people know a part of the recipe. Although I can’t confirm if this is true!

15. Patents / Intellectual property

Speaking of trade secrets and intellectual property laws, here comes the next point in our competitive advantage examples: patents and intellectual property. In other words, products protected by law including:

Copyrights , for example in sectors such as music, art, and literature;
Patents on products and technological advances;
Industrial design rights that protect the visual design of objects;

For example, Disney holds numerous designs and trademarks on the names and images of this characters. Having the exclusive rights to a product or technology can give you a significant advantage in front of your competitors.

16. Contacts

Next on our list of competitive advantage examples is contacts. Depending on the industry, having the right business connections can significantly increase your negotiation power with both customers and providers.

And, consequently, put you in advantage on the market.

17. Brand history

By far, you have probably seen thousands of logos saying “Since XXXX”, or something similar, under the brand name:

Implying the long history of the brand and how much experienced they’ve had over the years. Of course, in the majority of the cases it is not enough to give you a competitive advantage. However, in some cases it is possible.

For example, the Spanish restaurant Sobrino de Botín, which is the oldest in the world according to many sources. And the age of the place is their unique selling proposition .

18. Experience in the sector

Of course, it is not only about the age of the company, but also its experience in a specific industry. It is possible that an organization itself is new, but its employees are highly-experienced and skilled in the sector with similar products.

Having a lot of experience in a particular sector is highly valued by customers. It not only allows you to develop better as a company, but also makes you prepared for multiple situations that young businesses aren’t ready, or don’t know how to handle.

A company with a sense of purpose and values can truly stand out from the crowd. Having your core values effectively communicated and expressed throughout all the actions of your employees will reflect in the way customers perceive you as well.

20. Brand recognition

Another competitive advantage is brand recognition, or how easy it is for customers to recognize your logo, products, or specific brand colours. People tend to have more trust in brands that they can acknowledge over those they can’t.

In fact, just recently Coca Cola made this campaign:

Competitive advantage examples: The Coca Cola Company

It only consisted of their logo and the phrase “Feel it”. But they were twisted in such a way that you could immediately think of the famous Coca Cola bottle.

21. Local partners

Another competitive advantage is having the right local partners to help you penetrate a new market . Or simply operate and grow faster in it if you are already present there.

For example, I heard that if a foreign company wants to operate in China, 50% of the company must belong to Chinese stakeholders. I couldn’t find an exact source to cite, so excuse me if this is not true. But if it is, it only goes to show that local partnerships can be a crucial importance to the growth of a company.

The main reason why is because they already know the local market and the local target audience. So they know how to reach them faster and better.

22. Brand ambassadors

Next on our list of competitive advantage examples is having a good brand ambassador strategy. Brand ambassadors are people who are hired by your company to represent it with the purpose of increasing sales and brand awareness.

For example, a company that is doing a good job in this field is Lululemon, a company for athletic apparel:

23. Negotiation power

A company can have a solid advantage in front of its competitors if it has more negotiation power. In the B2B sector, it could be both with providers to lower the prices, and with customers to purchase more product or extend a contract.

Negotiation power can come from having more resources, or a strong business partner who knows how to “move” in the industry. Or a combination of both. It can also come from from your own employees.

24. Natural resources

In some industries, having superior access to natural resources will give you a competitive advantage in terms of quality, reputation, and faster production. An example of this is the mineral water brand Evian, which comes from several sources near Évian-les-Bains, on the south shore of Lake Geneva:

Competitive advantage examples: Evian

25. Customers

In many cases, especially when it comes to agencies or businesses in the B2B sector, having worked with important customers can give you a significant advantage over your competitors.

Not only because key customers endorse the quality of your services, but also because you have managed to win the project. And, consequently, the trust of a big and important client.

In fact, you have probably seen many companies displaying the logos of their key clients:

Which is a great way to show future clients that it was your project or product that important companies choose for their business.

26. Labor costs

In a lot of sectors, especially in the B2C commerce, low labour costs can give you a significant advantage on the market. Not only because you can increase your profit margins, but also because competitors who operate in high cost countries will be in obvious disadvantage.

In fact, cost leadership is one of the main strategies proposed by Porter, as we saw in the beginning of the post. And one of the best competitive advantage examples that you can apply within your business strategy.

27. Aesthetics

In other cases, having a more visually appearing product will increase your value among customers. And will make you stand out from your competitors. Even if you are in a similar price range. This is the case for many luxury brands.

Competitive advantage examples: Apple

Another good example of how aesthetics can give you an advantage in front of your competitors is Apple. When they first introduced their products, the minimalist design got people crazy even if other companies offered a similarly priced product.

28. Barriers to entry

Barriers to entry is an economic term that describes the existence of obstacles, such as high starting costs or specific know-how, in order enter a new market. For example, a company for the destruction of biomedical waste will usually have higher barriers to entry than a local shop that sells food.

In some industries, the biggest competitive advantage for companies with natural monopoly is precisely barriers to entry. For example, the only organization that provides railway or subway services in a country or a city, such as Metro Madrid:

29. Sustainability

Next on our list of competitive advantage examples is sustainability . As the industrialization and globalization are causing irreversible damage to our planet, many people are starting to value companies that follow sustainable practices in front of those that don´t.

Some examples include :

PepsiCo , which promotes human, talent, and environmental sustainability;
Brown-Forman , a wine producer that uses climate-sensitive ingredients;
Ford Motor Company , which is constantly increasing the use of renewable materials.

30. Switching barrier strategy

Switching barriers are the obstacles that users face when trying to switch from one competitor to another. The higher the barriers, the more likely users are to stay with their current company.

It is also one of the competitive advantage examples that many companies are applying, especially in the telecommunications sector.

A good example I can think of is are mobile internet providers. When my current provider, Vodafone, discovered that I wanted to switch to another one, they immediately offered me improved conditions to match the competitors’ offer. Which made me stay.

The point is, having a good plan and strategy when customers want to switch can definitely be a competitive advantage. Of course, sometimes it is not possible. Especially if the reason for leaving is a bad product or service.

Competitive advantage examples: Vodafone

31. Network effect

The network effect is a phenomenon in which the increased number of people that consume a service improves its value. The biggest examples of this phenomenon include powerful social networks such as Facebook, Instagram, and Twitter.

It is difficult to compete against that, putting social networks in advantage compared to other possible competitors. Or simply new companies that want to enter the market.

32. Differentiation

Of course, we cannot forget mentioning one of the biggest competitive advantage strategies proposed by Porter: differentiation . These are companies that take the approach to develop a unique product or service that customers will find better, or at least different, than the one offered by competitors.

One example is the handmade cosmetics company Lush:

Competitive advantage examples: Lush

Their differentiatior is providing an authentic alternative to traditional beauty products.

33. Long-term strategy

Having a solid long-term strategy, as well as the ability and resources to execute it, can definitely give you a significant competitive advantage in front of your competitors.

34. Financial liquidity

The last on our list of competitive advantage examples is having a good financial liquidity. Financial liquidity refers to how easily assets can be converted into cash, which can be a life-saver for many small companies. Especially in times of crisis!

unique selling proposition - marketing rules

For example, the coronavirus situation which put many of us in quarantine, and a lot of companies in risk of going bankrupt.

35. Corporate Social Responsibility

Just as we saw with the case of Sustainability, more and more customers are willing to support companies that participate in Corporate Social Responsibility (CSR) projects.

In fact, according to the Digital Marketing Institute, socially responsible companies are even more important for millenials and generation Z than ever. Some good examples Johnson & Johnson, Netflix and Spotify.

And that was all from me, folks! I hope you enjoyed this article on the best competitive advantage examples, and I hope to see you in the next one!

Want to see other Business and Marketing examples from the real world? You may also want to check the following articles:

16 Unique Selling Proposition Examples in 2021
73 Amazing Vision Statement Examples to Spark Your Creativity
101 Incredible Mission Statement Examples (in 2021)

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Hello, and welcome to my blog! Let me present myself.

My name is Ani and I am a trilingual Digital Marketing & Analytics Specialist with 10 years of experience across multiple sectors including Cloud-based services, SaaS, Digital payments, Mobile apps, and Executive Education, among others.

My expertise covers areas such as Google Ads, Google Analytics, Search Engine Optimization, Content Marketing, and Social Media.

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Write the Competition Section: Business Plan Writing

Aayushi Mistry

December 21, 2023

11 Min Read

How to write the Competition Section_ Business Plan Writing

What is the Competition Section?

Your business plan includes a lot of operational sections. Every section holds a different importance. In that case, competition is one of the most fundamental aspects of your business. And so, it needs to be added to your business plan. The section that explains your competition is your competition section.

While deciding where to add the competition section, pay attention to the flow of your business plan. Moreover, it also depends on the priority. So, it must come next to your objective, problem statement , product/services, and target audience.

Why Do You Need a Competition Section in Your Business Plan?

The why of your business plan depends on your purpose-

If your purpose is to direct your business growth:

Your competition status can play as your reference point. Here, the competition section serves as a medium for understanding your competition. So, you can develop strategic positioning.

This can help you and your team to look at comparative strengths and weaknesses exclusively. So, you can easily come to the strategies that work in your favor, and give you a competitive advantage .

If your purpose is to create a business plan to seek investment:

You must add it to inform your investors about your competition, market position, and brand promise.

You need to describe the competition to reassure probable investors that you know and understand your competition. And that you are ready to take advantage of opportunities and avoid the pitfalls.

Apart from this, your purpose also makes a difference in how to write your competition section in your business plan. However, the difference is minor, and the effect of it is profound.

How to write a competition section in your business plan?

Regardless of your purpose mentioned above, you have to include all the steps mentioned below. Wherever there is the need for that ‘minor’ change, we will include it under the same step.

While following this step, we suggest you take action side by side. So, it becomes easier to implement. Moreover, before putting up your competition section, be ready with your competition data.

Also, make sure that you have conducted a competitive analysis and processed data of at least 5 competition companies. Once you have everything you need, you can go through the following steps-

1. Determining and Documenting Your Business Position

Regardless of your purpose, you will have to follow this step. And there isn’t any major difference here. You need to know your business position in the market and document it properly. However, we will first talk about the determining part. And then, document it for the competition part of your business plan.

How to determine your market position?

Gather crucial details for your company and your competitors’ companies. When you have all the data, you compare them. And put it up on the competition graph.

The details you will need include:

Sales Figures
Profit margins
Distributors

You can also add the marketing column if you find the need. Here, your goal is to make clear positions with respect to your target markets.

However, there are two most reliable ways to determine your position:

1. Position Mapping Graph

You can do this for 5 main aspects of your business-

For product characters
The quality of products/services
The number of products/services
For user/customer friendliness

You can either put all the points in the same graph or use a separate graph for each.

How to do this?

Get graph paper and divide it into 4 quadrants
Add your parameter(s)
Start plotting your and your competition’s point

2. Competitive Matrix

A competitive matrix is a method that helps you determine your competitive advantages. Usually, you put together this tool to note your market credibility. It is an industry analysis tool that compares the characteristics of you and your competition.

How to do it?

You draw out a matrix
Position your company and competitors, at the top, the horizontal blocks
Put all the aspects you want to compete with, in the vertical blocks
Put the tick marks to draw the competition

How to document in the competition section for your business plan?

Once you complete the determination, the documentation is quite easy. In fact, you can put the final graphs in your draft. It will not only give color and variety but also make it easy to understand.

While you put all the graphs together, you have to explain your competition and the parameters that you have selected. Moreover, you can go ahead and explain why the companies are your competition. Also, explain why you picked particular parameters.

Mention the date and time frame in your graphs. It makes it easier to have a deeper knowledge of your competition.

Basically, the documentation is journaling the process of drawing the graphs. You may not want to add every detail. As that could make the entire section a little longer than expected. But at the same time, don’t leave out the important details.

As for the difference, you can follow the same process for both purposes. Only make sure that your draft for your investors has been relatively concise. As for your company draft, you can add as many details as you want.

Why is this step important?

When you follow this step, the process of putting the competition section for your business plan is literally half done. It brings you the clarity that you, your team, and your investors need to make your business successful.

2. Determine and Draft Your Competitive Advantages

Determining the competitive advantage.

This process may look hard. But it is not. In fact, it just includes one step to the above one. It can be done side by side while you are drawing the comparison and putting them together in different graphs.

You have to note and add the points where you are doing better (or can do) better than your competition. And then, note how that bonus point can bring you an advantage(s).

Drafting your competitive advantage

You have to note down your bonus points and explain them in detail. You can use those graphs too for more clarity and variety. It is better that you make this up to the point. If you are writing for the investors, they might just want the rounded points after seeing the graphs.

And if you are using it for directive purposes, even then, it is good to have a well-rounded point. However, you might need the back details along the way ahead. So, you can note it down too.

With this step, you became assertive about your success and future in the market.

If brought in front of your investors, they quickly get a clear idea of whether to invest in your business or not. In a way, it helps you store their faith in your business.

And if you are only planning to put the direction of your company’s success, it gives you a clear picture of your strengths and opportunities. In a way, it restores your faith in your product/services.

3. Put in the customers’ review

This step is just like putting that final nail in the coffin! Plus, regardless of the purpose of your business plan, this step and section remain the same. Even more interesting, it takes less time than the two above-mentioned steps.

Here’s how you do it-

Find out the reviews and ratings of all the competitors, you had begun the process with.
Be discreet. Don’t only add the good points or the bad points. Add the good, the bad, and the average rating and reviews.
You can go ahead and make three sections named- The Good, The Bad, and The Average.
Add 10-12 reviews in total and put them in the respective sections (3 or 4 in each).
You can find reviews from search engines, social media, websites, forums, and magazines.
If you want authentic reviews and have enough time and resources, you can even run surveys. Or contact agencies that run unbiased surveys.

How to draft it-

Put them just the way they are, even if they have typos. Try not to tamper with them.
Add them at the end of the competition section for your business plan.

Why is this step important

To add more clarity and favor to your business.
Gives a chunk of customer points of view.
Restores your, your team’s, and your investor’s faith in your company.

Basic Template

And that’s all about the competition section in the business plan. We hope we have given you all the information that you needed. However, regardless of how you find notes, we have listed the FAQs for the competition section for a business plan. You can refer to it for questions that look similar to yours.

FAQs for your competition section

What if we think that our business does not have competition?

Ideally, every business has competition. If not directly, then indirectly. Basically, there are three types of competition- Primary, Secondary, and Tertiary.

Primary: The business that has similar products/services as you and, serves the same target audience.
Secondary: The high-end or low-end services/products as you. There may be a slight change in the target audience, depending on the spending capacity location and more.
Tertiary: They have completely different products/services but satisfy the same needs of your target audience.

So, if you think that you don’t have primary competition. Look closely, you may have a secondary or tertiary competition.

What if that time my competition changes?

You have to run the test from the start and draft the section from scratch. It may be the same even when you want to add and remove the parameter.

Do we need a separate team to draw a competition analysis and draft it in the business plan?

Not importantly. However, it is important for everyone involved in your team to be qualified and have adequate experience. If you think that your team doesn’t have that, you can form or hire a separate team.

How long should the competition section be in the business plan?

It should be detailed. But it must not take up most part of your business plan. Moreover, it also depends on the number of other sections you are adding. And it also depends on what these other sections are. In any case, there is no harm in being concise. No matter who the reader is, we all prefer a quick read.

Where else can we showcase this analysis?

You can use this analysis in marketing and sales strategies. You can even use it to further research and develop your product/services.

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15 Examples Of Competitive Advantage Strategies That Work Great

Phrases like “sustainable competitive advantage strategies, types of brand positioning, and successful product differentiation examples” should be in your mind continuously, if you want to succeed.

On this page:

15 real-life examples of different business and marketing strategies for competitive advantage and competitive differentiation that work effectively today
Infographic in PDF

First, we will explain what is a competitive advantage.

To put it simply, a competitive advantage is what makes a product, service or a brand preferable to all of the other alternatives within a market.

In other words, it is an advantage over your competitors achieved by providing consumers with greater value. This value might be a lower price, better customer service, honesty, simplicity, and etc.

Competitive advantage is all about uncovering a “hole in the market,” something that other competitors cannot easily provide.

Before searching for strong competitive advantage strategies, you need to do your competitive market research as well as competitive product analysis to outline real opportunities.

Let’s look at some strategies, tools, and ways to help your business stand out from the competitors.

1. Provide Legendary Customer Service

The possibility to create exceptional and memorable customer service is available to almost any business if it truly cares about their customers’ experience.

Legendary service is achieved when a company serves the customer so well that the customers want and need to repeat the experience.

Those customers become promoters, generate viral media attention, and keep coming back.

To create memorable customer service always listen to your customers and try to understand them. Do your best to OVER deliver and to personally connect with your customers.

There’s never been a better time to exceed your customer expectation for delight.

Competitive Advantage Example:

Since the online shoe retailer Zappos first starts its e-commerce business in 1999, it is unwavering in focus on delivering one of the best service experience.

Zappos is like a rock star in customer service. They respond to customer emails at an unbelievably fast speed. They don’t argue about returns.

And they even shop at other stores for customers when they want something particular that is not in Zappos stock.

2. Simplicity – The New But Extremely Powerful Competitive Advantage

One of the most difficult things in business is to make simple products. However, it is one of the most profitable ways for product differentiation.

You should understand that less is more!

Making simple products means to keep the unnecessary out and put only the necessary in. These products save people time, efforts, and nerves.

In our noisy and dynamic life, people are desperate for automated and super simple products that require very little attention.

If you can give such a product, then you would have a super powerful brand positioning.

Aldi is a world-famous German-based grocer that offers much more than other groceries to the Americans.

Providing a straightforward shopping experience without confusing customers with complex promotions – is central to Aldi‘s simplicity.

The company puts efforts into understanding what size variants their audience wants and offers only the range that their customers really need.

Aldi manages to stay very profitable despite its amazingly cheap prices. One of the key reasons is their simple, streamlined approach to selling goods for the home.

The ability to save customers’ time and money while shopping is a vigorous competitive advantage as thus the customers can spend more time and money with friends and family.

3. Never Stop Innovating

This is one of the strongest product differentiation examples. Innovations allow you to look at customer’s needs differently and provide solutions that your competitors cannot.

Innovations are like a bridge from the current to the future. They are all about continuously seeking to make things better and improve people’s way of living.

The more you innovate, the more you will be able to stay ahead of competitors.

Always reinvent your products and services by adopting new technologies, new processes, and new solutions.

The best innovators can take well-known products and make them better. That is a power that makes brands stand out in the market.

To be innovative ask customers how you could improve your product. Also, the difficulties and complaints can be a great starting point for your innovations.

Competitive Advantage Examples:

Among the best world-famous examples of companies that never stop innovating are: Google, Amazon, Microsoft, Apple, Samsung, Tesla, Nike, P&G, Hewlett Packard, Alibaba to name a few.

Let’s take Samsung – a global leader in technology, batteries, and chip design. Their innovations seem to be endless.

They have the first bendable OLED screen, the first ultrathin double-sided LCD, and etc. Samsung always displays outstanding design and engineering within a cutting-edge technology.

This way the company has become the world’s fastest-growing consumer-electronics company.

4. Offer a Guarantee

Consider a strong guarantee as part of your marketing and brand positioning strategies.

You might know that one of the key reasons people don’t buy your product is that they are thinking of purchasing your product can bring them some kind of risks.

Avoiding regrets is all people aim. You simply need to prove to them that they won’t regret buying your products.

Also, a guarantee shows you are confident enough in your product so you can stand behind it 100%. It shows you truly care about the customer’s satisfaction.

To create a powerful guarantee look at your strengths, and research other business’ guarantees for ideas.

You can research your competitors’ guarantees with a variety of ways to collect data and tools such as free online competitor analysis tools .

Today the range of possible guarantees is quite impressive. You can use a lifetime guarantee, a free trial guarantee, a first-time guarantee, lowest price guarantee, and etc.

Cutco sells high-priced cutlery with a remarkable guarantee – “Forever Guarantee”.

At first, Cutco’s price might seem too high for many people.

However, the “Forever Guarantee” means by buying a set of knives today, customers can save a great amount of money by never needing to buy another.

This is a really impressive guarantee that allows Cutco to increase revenue and sales.

5. Offer Products That Break A Myth

Making products or services that break a well-established myth is one of the most sustainable competitive advantage strategies out there.

Do you know that Elon Musk and Tesla Motors have broken the stated myth that electric vehicles need to be slow cars with unpleasant design?

When considering this strategy, make sure the product is something people want.

Aim to create products that not only can break a myth but can extend your customer expectations and can bring them a huge and even unexpected value.

Elon Musk and Tesla Motors have proved the well-established myth that electric vehicles are ugly and slow is wrong.

Moreover, they have proved that electric cars can look absolutely gorgeous.

And in the electric sports car market, they still don’t have any serious competition.

6. Strong And Observable Business Ethics

Ethical buying is now one of the brand positioning and product differentiation strategies that are more important than ever before in creating a successful business.

If you manage to create strong and noticeable business ethics, you have a tremendous competitive advantage, because you are different from the crowd.

People are distrustful by nature. The world is like a scene where we all play a role. Public scandals and cheatings are almost everywhere.

And they come from the most trusted people – doctors, bankers, professors, etc.

If you can show that ethics are a core element of your business, then you have a marvelous customer benefit and a strong marketing tool.

To create business ethics, you can do many things such as to become a Certified Compliance & Ethics Professional (CCEP), get a degree in ethics, hire people with a degree in ethics, and maintain a strong business ethics culture in your company.

Competitive Advantage Example :

Lush is a different makeup brand with international reach. What makes them different from other cosmetics companies is handmade products.

LUSH is about ethical buying and purity that comes from a handmade thing. The Luch customers value social and corporate responsibility more than a luxurious image.

LUSH’s branding is simple and authentic. That’s why the company has strong brand loyalty.

7. Aim at Your Audience’ Emotions

People make decisions driven by their emotions.

And today, emotions are stronger than ever. The companies that understand the power of emotions and manage to connect with customers’ feelings receive a huge payoff.

Examples of emotional motivators that can drive customer buying behavior are: a sense of well-being, a sense of freedom, feel secure, and etc.

If you can offer products that provide these feelings to customers, you definitely have one of the most sustainable competitive advantage strategies.

A classic example of great product differentiation based on people’ emotions is Coca-Cola.

Coca-Cola is positioning its products as happy, meaning that they bring joy, harmony, etc.

Coca-Cola constantly implements emotional branding strategies and marketing campaigns that attach an emotional value to products.

That’s why a simple soft drink makes Coca Cola a global brand that keep people all over the world interested and excited.

8. Build A Brand Community

Building a community around your brand is one of the best things you can do for your business to grow nowadays.

A brand community is a group of people who use your brand as a platform to exchange ideas and share thoughts.

The community might consist of your current customers as well as potential ones.

An online community around your brand not only provides a great value to your customers but also keeps them engaged in long-term aspect.

Starbucks is a great example of creating a successful brand community. Starbucks has a platform where users can share their own ideas with the company and other people.

Starbucks generated more than 70,000 ideas in its first year.

9. Be Honest

Yes, it is quite unusual to look at honesty in terms of corporate advantage. But it works and it works great nowadays.

The most important thing that consumers want from brands is honesty! Businesses who remain honest soon or later are rewarded for it.

Being honest means being open about both your strengths and weaknesses. Honesty shows you truly care about your customers.

Honesty is a hidden competitive advantage that creates trust. When you are honest, you are able to create a relationship of trust with your customers and thus to stay ahead of your competitors.

In addition, honesty as a brand positioning can be a way of attracting top talents and improving motivation.

NPR (an independent, nonprofit media organization) is a great example of an honest company.

At the end of most programs, NPR shares listener feedback on past shows. Along with the glowing reviews, NPR also shares customer outrage and disappointment.

Moreover, NPR does not shift the focus when it makes headlines for less than desirable reasons. Instead, the station reports its own bad news without being afraid of admitting its mistakes or weaknesses.

10. Establish a Blog That Empowers Your Audience

Creating a blog is one of the most powerful competitive advantage strategies today if it is created in a way that empowers your customers and provides them with valuable information.

Blogging is and will remain, an essential tool to reach your audience and attract more attention than your competitors.

People trust blogs. Think about your blog as a human angle of your business. Your blog should be a place where your audience finds ways of resolving their issues and concerns.

The best business blogs answer painful questions their customers have.

Moreover, If you are consistently creating valuable blog posts, it’ll help establish you as an authority and an expert in the industry.

Zing by Quicken Loans is a wonderful blog that provides in-depth articles on different financial topics – from personal to business ones.

The blog design is clear and very modern.

The blog offers truly valuable information – great tips and detailed advice on the financial area, not just aggregation of information you see elsewhere.

With the help of its blog, Zing shows that they are experts in the industry and create trust among current and potential readers.

11. Craftsmanship As A Strong Competitive Differentiation

Believe it or not, craftsmanship still matters in our digital world and become to gain sustainable power. Why?

Now, it seems like everything we purchase is mass-produced.

Thereby, people are hungry for craft or something truly unique. Faster isn’t always better.

In addition, today’s generation is starving for authentic – be it searching for organic foods, handmade goods, or celebrating artistry.

The craftsmanship can be a strong promise for quality, reliability, beauty or precision.

Let’s take Mazda. When people generally think of artisans and craft, auto companies aren’t top of mind.

But to differentiate of their competitors, Mazda designers and engineers have managed to combine the crafts with the auto world.

Thus they earned the title of Takumi, master craftsman as well as a quite sustainable competitive advantage.

12. Create Compelling Brand Storytelling

Not only children but elders love listening to stories as tales and anecdotes are founded on emotions.

A brand story can connect you with customers on an emotional level.

If you manage to implement the magic of storytelling into your marketing campaigns, you are able to create a strong product differentiation strategy and brand loyalty.

Nowadays, you can tell your story through many marketing channels – social media, blog, case studies, or any other type of marketing content.

Just remember, to be successful, your brand story must be authentic, not a sales pitch.

It should be creative but based on reality.

Your brand story shouldn’t be just a part of your marketing campaign but a foundation on which your future growth strategy is built.

Johnnie Walker is an amazing example of brand storytelling.

Johnnie Walker’s tagline “Keep walking” is based on a story that dates back to 1819 when John was a young boy working at a farm.

As the farm was sold, John moved to work at a grocery shop as a salesperson. However, because of his huge love for whiskey, John is dedicated to producing the best whiskey. He never stopped to improve the whiskey and became very popular.

After John’s death in 1857, his son Alexander continued his legacy and improvements as introduced the square bottle to reduce breakages.

Later, the legacy is passed to Alexander’s sons.

Today, Johnnie Walker is one of the world famous whiskey brands with a great message to its audience, to keep walking.

13. Go Green

This is a serious brand positioning and product differentiation strategy now and will be in the future.

Going green shows your customers you don’t put profits ahead of the environment.

Consumers all over the world are becoming more and more passionate about protecting the planet.

They are ready to pay more for products and services that support the green cause.

The importance of words like “green revolution, wind power, solar energy, green business, recycling, green homes, eco-friendly products, and etc.” will grow exponentially in the very near future.

Timberland is a world-famous clothing manufacturer and retailer known for creating outdoor products with environmental benefits.

Timberland uses smart go green stories to launch new products to customers.

As dedicated LOHAS advocates, its clients choose the brand because of the green element in it.

“We’ve done a lot of consumer research, and we know that if we put two products side by side, one from our brand and one from a competitor’s, and if they’re comparable in price and quality, the majority of time a customer will choose our product if it’s made with some sort of ‘green’ element,” says Margaret Morey-Reuner, director of Timberland’s strategic partnerships and business development.

14. Business Intelligence As a Key to Gaining Competitive Advantage

In recent years, Business Intelligence (BI) has become a key advantage for all businesses that want to reach the next level.

BI is a process based on technology that allows you to analyze data and turn it to actionable information you can use for successful data-driven decision-making .

BI is known for getting the right information at the right time to the right people.

Today, BI is critical for business success as it allows you to understand customer behavior, to spot buying patterns and sales trends, optimize processes, and even predict sales, and financial results.

But the greatest power of BI is in its ability to help you see new opportunities and uncover what your customers would like in the future.

Thus, it is a powerful weapon that helps you stay ahead of your competitors.

Chipotle Mexican Grill is a famous American restaurant chain that has more than 2400 locations globally.

Chipotle switched to a modern BI software platform that allows them to gain a centralized view of restaurant operations. Before that their disparate data sources didn’t allow teams to see a unified view of restaurants.

With the new BI solution, they are able to track operational effectiveness at a national scale.

As a result, the speed of report delivery has tripled and saved thousands of hours. Moreover now, Chipotle can obtain understandings to the next level.

15. Make a Rigorous Hiring Process

There’s one thing that all the top companies in every industry have: talent.

The best companies have the best employees. Thereby those companies can deliver the best products and services.

No matter which sector you are working in, you should see people as your most valuable asset.

Talented passioned persons committed to their career are the applicants you want to hire.

So make sure, you have the right hiring process and always try to improve it.

When it comes to the power of hiring Google is one of the best examples.

Their people, as well as their hiring approach, make Google so difficult to defeat. There still no other search engines that match their quality.

Google’s rigorous hiring process makes it hard for even talents to get a job. Google has the best and most talented search engineers.

Moreover, their talented employees create efficient algorithms that deliver the best results in the world.

Today businesses operate in an ultra-competitive marketplace.

Almost every industry has well entrenched and excellent funded competitors. They use modern and effective ways and tools to win customers such as marketing intelligence , data mining companies , web competitive intelligence , and etc.

So you need an extremely powerful differentiation strategy and brand positioning in order to have success.

The list of above competitive advantage strategies and marketing tools aim to give you ideas for position your product so that it can thrive in any crowded market space.

Do you have other suggestions? Share your thoughts with us.

Download the following infographic in PDF

About The Author

Silvia Valcheva

Silvia Valcheva is a digital marketer with over a decade of experience creating content for the tech industry. She has a strong passion for writing about emerging software and technologies such as big data, AI (Artificial Intelligence), IoT (Internet of Things), process automation, etc.

How to Write a Competitive Analysis for Your Business Plan

Charts and graphs being viewed through a magnifying glass. Represents conducting a competitive analysis to understand your competition.

11 min. read

Updated January 3, 2024

Do you know who your competitors are? If you do, have you taken the time to conduct a thorough competitor analysis?

Knowing your competitors, how they operate, and the necessary benchmarks you need to hit are crucial to positioning your business for success. Investors will also want to see an analysis of the competition in your business plan.

In this guide, we’ll explore the significance of competitive analysis and guide you through the essential steps to conduct and write your own.

You’ll learn how to identify and evaluate competitors to better understand the opportunities and threats to your business. And you’ll be given a four-step process to describe and visualize how your business fits within the competitive landscape.

What is a competitive analysis?

A competitive analysis is the process of gathering information about your competitors and using it to identify their strengths and weaknesses. This information can then be used to develop strategies to improve your own business and gain a competitive advantage.

How to conduct a competitive analysis

Before you start writing about the competition, you need to conduct your analysis. Here are the steps you need to take:

1. Identify your competitors

The first step in conducting a comprehensive competitive analysis is to identify your competitors.

Start by creating a list of both direct and indirect competitors within your industry or market segment. Direct competitors offer similar products or services, while indirect competitors solve the same problems your company does, but with different products or services.

Keep in mind that this list may change over time. It’s crucial to revisit it regularly to keep track of any new entrants or changes to your current competitors. For instance, a new competitor may enter the market, or an existing competitor may change their product offerings.

2. Analyze the market

Once you’ve identified your competitors, you need to study the overall market.

This includes the market size , growth rate, trends, and customer preferences. Be sure that you understand the key drivers of demand, demographic and psychographic profiles of your target audience , and any potential market gaps or opportunities.

Conducting a market analysis can require a significant amount of research and data collection. Luckily, if you’re writing a business plan you’ll follow this process to complete the market analysis section . So, doing this research has value for multiple parts of your plan.

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3. Create a competitive framework

You’ll need to establish criteria for comparing your business with competitors. You want the metrics and information you choose to provide answers to specific questions. (“Do we have the same customers?” “What features are offered?” “How many customers are being served?”)

Here are some common factors to consider including:

Market share
Product/service offerings or features
Distribution channels
Target markets
Marketing strategies
Customer service

4. Research your competitors

You can now begin gathering information about your competitors. Because you spent the time to explore the market and set up a comparison framework—your research will be far more focused and easier to complete.

There’s no perfect research process, so start by exploring sources such as competitor websites, social media, customer reviews, industry reports, press releases, and public financial statements. You may also want to conduct primary research by interviewing customers, suppliers, or industry experts.

You can check out our full guide on conducting market research for more specific steps.

5. Assess their strengths and weaknesses

Evaluate each competitor based on the criteria you’ve established in the competitive framework. Identify their key strengths (competitive advantages) and weaknesses (areas where they underperform).

6. Identify opportunities and threats

Based on the strengths and weaknesses of your competitors, identify opportunities (areas where you can outperform them) and threats (areas where they may outperform you) for your business.

You can check out our full guide to conducting a SWOT analysis for more specific questions that you should ask as part of each step.

How to write your competitive analysis

Once you’ve done your research, it’s time to present your findings in your business plan. Here are the steps you need to take:

1. Determine who your audience is

Who you are writing a business plan for (investors, partners, employees, etc.) may require you to format your competitive analysis differently.

For an internal business plan you’ll use with your team, the competition section should help them better understand the competition. You and your team will use it to look at comparative strengths and weaknesses to help you develop strategies to gain a competitive advantage.

For fundraising, your plan will be shared with potential investors or as part of a bank loan. In this case, you’re describing the competition to reassure your target reader. You are showing awareness and a firm understanding of the competition, and are positioned to take advantage of opportunities while avoiding the pitfalls.

2. Describe your competitive position

You need to know how your business stacks up, based on the values it offers to your chosen target market. To run this comparison, you’ll be using the same criteria from the competitive framework you completed earlier. You need to identify your competitive advantages and weaknesses, and any areas where you can improve.

The goal is positioning (setting your business up against the background of other offerings), and making that position clear to the target market. Here are a few questions to ask yourself in order to define your competitive position:

How are you going to take advantage of your distinctive differences, in your customers’ eyes?
What are you doing better?
How do you work toward strengths and away from weaknesses?
What do you want the world to think and say about you and how you compare to others?

3. Visualize your competitive position

There are a few different ways to present your competitive framework in your business plan. The first is a “positioning map” and the second is a “competitive matrix”. Depending on your needs, you can use one or both of these to communicate the information that you gathered during your competitive analysis:

Positioning map

The positioning map plots two product or business benefits across a horizontal and vertical axis. The furthest points of each represent opposite extremes (Hot and cold for example) that intersect in the middle. With this simple chart, you can drop your own business and the competition into the zone that best represents the combination of both factors.

I often refer to marketing expert Philip Kohler’s simple strategic positioning map of breakfast, shown here. You can easily draw your own map with any two factors of competition to see how a market stacks up.

Competitive positioning map comparing the price and speed of breakfast options. Price sits along the y-axis and speed along the x-axis.

It’s quite common to see the price on one axis and some important qualitative factor on the other, with the assumption that there should be a rough relationship between price and quality.

Competitive matrix

It’s pretty common for most business plans to also include a competitive matrix. It shows how different competitors stack up according to the factors identified in your competitive framework.

How do you stack up against the others? Here’s what a typical competitive matrix looks like:

Competitive matrix example where multiple business factors are being compared between your business and two competitors.

For the record, I’ve seen dozens of competitive matrices in plans and pitches. I’ve never seen a single one that didn’t show that this company does more of what the market wants than all others. So maybe that tells you something about credibility and how to increase it. Still, the ones I see are all in the context of seeking investment, so maybe that’s the nature of the game.

4. Explain your strategies for gaining a competitive edge

Your business plan should also explain the strategies your business will use to capitalize on the opportunities you’ve identified while mitigating any threats from competition. This may involve improving your product/service offerings, targeting underserved market segments, offering more attractive price points, focusing on better customer service, or developing innovative marketing strategies.

While you should cover these strategies in the competition section, this information should be expanded on further in other areas of your business plan.

For example, based on your competitive analysis you show that most competitors have the same feature set. As part of your strategy, you see a few obvious ways to better serve your target market with additional product features. This information should be referenced within your products and services section to back up your problem and solution statement.

Why competition is a good thing

Business owners often wish that they had no competition. They think that with no competition, the entire market for their product or service will be theirs. That is simply not the case—especially for new startups that have truly innovative products and services. Here’s why:

Competition validates your idea

You know you have a good idea when other people are coming up with similar products or services. Competition validates the market and the fact that there are most likely customers for your new product. This also means that the costs of marketing and educating your market go down (see my next point).

Competition helps educate your target market

Being first-to-market can be a huge advantage. It also means that you will have to spend way more than the next player to educate customers about your new widget, your new solution to a problem, and your new approach to services.

This is especially true for businesses that are extremely innovative. These first-to-market businesses will be facing customers that didn’t know that there was a solution to their problem . These potential customers might not even know that they have a problem that can be solved in a better way.

If you’re a first-to-market company, you will have an uphill battle to educate consumers—an often expensive and time-consuming process. The 2nd-to-market will enjoy all the benefits of an educated marketplace without the large marketing expense.

Competition pushes you

Businesses that have little or no competition become stagnant. Customers have few alternatives to choose from, so there is no incentive to innovate. Constant competition ensures that your marketplace continues to evolve and that your product offering continues to evolve with it.

Competition forces focus & differentiation

Without competition, it’s easy to lose focus on your core business and your core customers and start expanding into areas that don’t serve your best customers. Competition forces you and your business to figure out how to be different than your competition while focusing on your customers. In the long term, competition will help you build a better business.

What if there is no competition?

One mistake many new businesses make is thinking that just because nobody else is doing exactly what they’re doing, their business is a sure thing. If you’re struggling to find competitors, ask yourself these questions.

Is there a good reason why no one else is doing it?

The smart thing to do is ask yourself, “Why isn’t anyone else doing it?”

It’s possible that nobody’s selling cod-liver frozen yogurt in your area because there’s simply no market for it. Ask around, talk to people, and do your market research. If you determine that you’ve got customers out there, you’re in good shape.

But that still doesn’t mean there’s no competition.

How are customers getting their needs met?

There may not be another cod-liver frozen yogurt shop within 500 miles. But maybe an online distributor sells cod-liver oil to do-it-yourselfers who make their own fro-yo at home. Or maybe your potential customers are eating frozen salmon pops right now.

Are there any businesses that are indirect competitors?

Don’t think of competition as only other businesses that do exactly what you do. Think about what currently exists on the market that your product would displace.

It’s the difference between direct competition and indirect competition. When Henry Ford started successfully mass-producing automobiles in the U.S., he didn’t have other automakers to compete with. His competition was horse-and-buggy makers, bicycles, and railroads.

Do a competitive analysis, but don’t let it derail your planning

While it’s important that you know the competition, don’t get too caught up in the research.

If all you do is track your competition and do endless competitive analyses, you won’t be able to come up with original ideas. You will end up looking and acting just like your competition. Instead, make a habit of NOT visiting your competition’s website, NOT going into their store, and NOT calling their sales office.

Focus instead on how you can provide the best service possible and spend your time talking to your customers. Figure out how you can better serve the next person that walks in the door so that they become a lifetime customer, a reference, or a referral source.

If you focus too much on the competition, you will become a copycat. When that happens, it won’t matter to a customer if they walk into your store or the competition’s because you will both be the same.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

Don't let competition derail planning

10 Min. Read

How to Write the Company Overview for a Business Plan

3 Min. Read

What to Include in Your Business Plan Appendix

24 Min. Read

The 10 AI Prompts You Need to Write a Business Plan

6 Min. Read

How to Write Your Business Plan Cover Page + Template

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How to Write the Competitive Analysis of a Business Plan

Written by Dave Lavinsky

If you are writing a business plan, hopefully by this point you’ve conducted thorough market research to identify industry trends and identified the target market for your business. Now it’s time to conduct a competitor analysis. This section is included in virtually every simple business plan template , and the information you include will depend on several factors such as how many competitors there are, what they offer, and how large they are in comparison to your company.

Download our Ultimate Business Plan Template here

What is a Competitive Analysis?

A competitive analysis is a type of market research that identifies your competitors, their strengths and weaknesses, the strategies they are using to compete with you, and what makes your business unique. Before writing this section it’s important to have all the information you collected during your market research phase. This may include market data such as revenue figures, cost trends, and the size of the industry.

Why Do You Need the Competitive Analysis?

If you are planning to raise capital, the investor will require a business plan that includes the competitive analysis section. This section will also come in handy while writing a business plan template , if your company is considering increasing prices or adding new products and services. You can use the information you find to determine how well-positioned your business is to perform in the competitive landscape.

3 Steps to Writing a Competitive Analysis

The steps to developing the competitive analysis section of your business plan include:

Identify your competition.
Select the appropriate competitors to analyze.
Determine your competitive advantage.

1. Identify Your Competition

To start, you must align your definition of competition with that of investors. Investors define competition as to any service or product that a customer can use to fulfill the same need(s) as the company fulfills. This includes companies that offer similar products, substitute products, and other customer options (such as performing the service or building the product themselves). Under this broad definition, any business plan that claims there are no competitors greatly undermines the credibility of the management team.

When identifying competitors, companies often find themselves in a difficult position. On one hand, you may want to show that the business is unique (even under the investors’ broad definition) and list few or no competitors. However, this has a negative connotation. If no or few companies are in a market space, it implies that there may not be a large enough base of potential customers to support the company’s products and/or services.

2. Select the Appropriate Competitors to Analyze

Once your competition has been identified, you want to consider selecting the most appropriate competitors to analyze. Investors will expect that not all competitors are “apples-to-apples” (i.e., they do not offer identical products or services) and therefore will understand if you chose only companies that are closest in nature. So, you must detail both direct and, when applicable, indirect competitors.

Direct competitors are those that serve the same potential customers with similar products and services. If you sell your products or services online, your direct competitors would also include companies whose website ranks in the top 5 positions for your same target keyword on Google Search.

For example, if you are a home-based candle-making company , you would consider direct competitors to be other candle makers that offer similar products at similar prices. Online competitors would also include companies who rank for the following keywords: “homemade candles”, “handmade candles”, or “custom candles.”

Indirect competitors are those that serve the same target market with different products and services or a different target market with similar products and services.

In some cases, you can identify indirect competitors by looking at alternative channels of distribution. For example, a small business selling a product online may compete with a big-box retailer that sells similar products at a lower price.

After selecting the appropriate competitors, you must describe them. In doing so, you must also objectively analyze each of their strengths and weaknesses and the key drivers of competitive differentiation in the same market.

For each competitor, perform a SWOT Analysis and include the following information:

Competitor’s Name
Overview of Competitor (where are they located; how long have they been operating)
Competitor’s Product or Service
Competitor’s Pricing
Estimated Market Share
Location(s)
Potential Customers (Geographies & Segments)
Competitor’s Strengths
Competitor’s Weaknesses

By understanding what your competitors offer and how customers perceive them, you can determine your company’s competitive advantage against each competitor.

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3. Determine Your Competitive Advantage

Perhaps most importantly, you must describe your company’s competitive advantages over the other companies in the space, and ideally how the company’s business model creates barriers to entry. “Barriers to entry” are reasons why it would be difficult for new companies to enter into or compete in the same market.

For instance, you may have a patent that provides value to your customers and makes them less likely to switch suppliers, which protects your business from potential competitors. Or, you may have more resources than the competition and thus be able to provide superior customer service.

Below is a list of areas in which you might have a competitive advantage:

Size of the Company – Large companies have more resources and can usually offer lower prices than smaller businesses. This is a significant barrier to entry, as starting a small business and competing with a larger company may be difficult.
Product or Service Differentiation – If your product or service is unique in some way, this will make it less likely that customers will switch to a competitor.
Experience & Expertise – Experience and knowledge are valuable attributes that can help differentiate you from the competition.
Location – If you are located in an area where there is high demand for your product or service, this can be a barrier to entry because competitors will not want to open new locations.
Patents & Copyrights – Protecting intellectual property can prevent others from entering the same market and competing with your company.
Brand Recognition – Customers are loyal to brands they have come to trust, which protects the company from new competitors.
Customer Service – Providing excellent customer service can help you retain customers and prevent them from switching suppliers.
Lowest Cost Offerings – If you can offer a lower price than your competitors, this makes it more difficult for them to compete with you.
Technology – New technology that enables you to provide a better product or service than your competitors can be an advantage.
Strategic Partnerships & Alliances – Collaborating with a company that your customers want to work with can help keep them from switching.
Human Resources – If you have a highly skilled and talented workforce, it can be difficult for competitors to find and employ the same skills.
Operational Systems – Strong operational systems that lead to greater efficiencies can protect your business from the competition.
Marketing Strategy – Investing in strong marketing campaigns can make your business difficult to compete with.

For instance, you could say that your [enter any of the bullets from above] is better than your competitors because [insert reason].

The competitive landscape is one of the most important considerations in developing a business plan since it sets the stage by providing information on past and current competitors and their respective strengths and weaknesses. A strong understanding of the competitive landscape is needed before you can develop a strategy for differentiating your company from the competition. Follow the above competitive analysis example and you will be well-prepared to create a winning competitor analysis section of your business plan.

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Other Resources for Writing Your Business Plan

How to Write a Great Business Plan Executive Summary

How to Expertly Write the Company Description in Your Business Plan

The Customer Analysis Section of Your Business Plan

How to Write the Market Analysis Section of a Business Plan

The Management Team Section of Your Business Plan

Financial Assumptions and Your Business Plan

How to Create Financial Projections for Your Business Plan

Everything You Need to Know about the Business Plan Appendix

Business Plan Conclusion: Summary & Recap

Identifying your competitive advantage and value proposition

To stay ahead, you must show the unique value your business offers. Understanding your customers and your competitors can help you develop your value proposition.

Find your competitive advantage in 3 steps

Your competitive advantage is the combination of marketing elements that sets your business apart. It's about the unique benefit customers get when they do business with you. Practical examples include:

free home delivery
a money-back guarantee
personalised service.

Finding your competitive advantage will help you to make the most of your existing strengths and to prioritise improvements. A strong competitive advantage will:

highlight customer benefits
reflect your business strengths
be clear, simple and unique
change over time to adapt to new conditions.

The following 3 steps can help you find your competitive advantage.

To uncover gaps in the market, you need to analyse and understand your customers and competitors. This will show why you're making sales (the drivers for your business) and the reasons why not (the barriers against your business).

Use the free market research kit and refer to your marketing strategy .

Action item: Know your customers

Ask yourself:

why do customers buy from my business?
why do customers buy from my competitors?
why do potential customers choose not to buy at all?

Competitor profile chart

An easy way to better understand your competitors is to complete a competitor profile chart. It can show you:

where there are gaps in the market
how you can stand out from the competition.
download the print-optimised version of the competitor profile chart to fill out and save for future reference
use the online template to profile your competitors .

When customers buy a product or service, they actually buy the benefits they expect to get from it. They are buying the experience and the outcome.

How does your competitive advantage benefit your customers? For example:

do your products make their life simpler, or more exciting?
do your services make them feel better?

Remember that different benefits may appeal to different customers.

Imagine you're running an award-winning sandwich shop. You:

source fresh, chemical-free, local ingredients
make high-quality gourmet sandwiches to order.

Different customers will be attracted by different benefits. They may, for example:

like to have gourmet sandwiches for lunch
need sandwiches made to order to accommodate food allergies
want to support local growers and farmers.

It's about the customer

Find out what trends are shaping the market and what benefits your customers want. Then find practical ways to address those needs.

Action item: Determine your difference

Use our template for reviewing your 7 Ps of marketing to help identify:

the benefits you're offering
what makes your business unique.

While doing this, ask yourself:

how important are the added benefits you're offering to customers?
how well does your business offer these benefits compared to your competition?

Focus on, and promote, benefits:

that customers value
in areas where your business outperforms your competitors.

Check that your marketing collateral includes the most compelling benefits.

One way to stand out from your competitors is to innovate. Focus on solving problems, even problems your customers are not yet aware of. You could, for example, change existing or design new:

experiences
business processes.

Learn more about how to achieve growth through business innovation .

Action item: Look at your customers' journey

Map out the end-to-end customer journey to see where customers might:

experience issues when doing business with you (pain points)
be pleasantly surprised or impressed (wow factors).

This will help you plan and make business improvements.

Clarify your customer value proposition (CVP)

Your marketing programs will be more focused and effective when you:

know what your competitive advantage is
have a unique and relevant brand positioning .

Improve this further by being clear about your customer value proposition (CVP).

A good CVP is a short, powerful statement about how you deliver value to your customers.

It answers the question:

What value do you promise to deliver to customers in exchange for payment?

A business typically has 1 value proposition. It's about the big picture—your main and consistent difference.

Your value proposition links your:

business plan (business model and operations)
target segments (customer needs and expectations).
is often used as a core statement in business plans and marketing strategy documents
guides external communication and how you go to market. For example, it will enable you to promote your difference, effectively pitch to stakeholders and increase sales conversion .

Use these 3 points to clarify your CVP:

You know how... (the problems)
Well, what we do... (our solutions)
In fact... (our wow factors)

Example CVP

Think about the sandwich shop offering a gourmet alternative to customers.

You know how… it's hard to find a quality sandwich at a reasonable price in our local area? Lunch time can become just another chore in your day.
Well, what we do… is ask you what you really want. We then make every sandwich to order using the best, chemical-free, locally sourced ingredients.
In fact… we get to know you by name—and your favourite sandwich. And we like to have a chat. That's all part of our award-winning service.

To write a more comprehensive CVP, answer these questions:

What are the problems we're solving for our customers?
What outcomes do they want to achieve?
What benefits do customers get from our products and services? This can be practical or emotional.
What sets our brand apart from the competition in terms of value? Why should customers choose and use our brand?

Think about the sandwich shop and how it compares to a chain of sandwich shops.

'Lunch time should be your time. Time to relax and enjoy. Time to get away from it all. Something to look forward to. But all too often it's the opposite of these things—more stress and heavy food. That's why our sandwiches are made with love, for what you love.

Choose your ingredients and we'll make every sandwich fresh to order.

You'll be supporting the local growers and farmers and you'll be supporting us, a family-owned business in the local community. You'll enjoy the friendly chat and the gourmet food, without the gourmet price. It's the award-winning service and taste that will keep you coming back.'

Business is about exchanging value. Value is based on what the customers thinks about the price they paid relative to the benefits they received. What will the answer be if a customer asks: What's in it for me (WIIFM)?

Read more about pricing products and services .

Keep the following in mind when you evaluate your customer value proposition:

existing business capability – current state
proposed enhancements – ideal future
the roadmap to get there – action plan.

Customer value proposition template

Develop your customer value proposition (CVP) by:

reading the information above
searching online for 'customer value proposition examples'
using the template to write your CVP .

Create unique selling points (USPs)

Based on your competitive advantage, you'll have one or more unique selling points (USPs).

is a short, snappy and memorable line
conveys what sets you apart from competitors
is mostly used for marketing communications
is also known as a 'unique selling proposition'.

Why should customers buy from you?

You'll need a USP, or a series of USPs, when you run a marketing campaign. You'll also need to add it to the creative brief if you partner with an agency .

The most effective way to stand out in a crowded market is with a unique selling point and a distinctive brand .

The USP must convey the benefit you deliver, relative to competitors, that your target persona values most. This benefit may be real or perceived.

You'll likely need many versions of your USPs, depending on your:

products and services
target segments
direct competitors.

To create and deliver high-impact marketing communications, follow these steps:

Analyse your market research insights.
Identify potential gaps/opportunities.
Consider the needs of your customers.
Draft and test your USPs.

Use the name 'unique selling point' as a guide:

unique – highlight a meaningful difference
selling – deliver the message in a persuasive way
point – deliver a single-minded message.

Think about potential areas like:

products or services not currently offered by competitors
customer groups not currently catered for by competitors
aspects of your business that are different from competitors.

Your USPs should be true to your business—you must be able to deliver the promise.

Example USPs

Using the local sandwich shop as an example and looking at its CVPs, we can identify the main points of difference and write USPs to match:

Service: 'Every single sandwich made fresh with love.'
Choice of ingredients: 'Only the finest, chemical-free ingredients.'
Local: 'Our local farmers and growers say thanks.'

Meet your legal obligations

While competition may be fierce, it's important to still follow fair and legal practices. Every business must comply with the relevant laws while trying to find a position in the market.

The most important legislation to be aware of is the Competition and Consumer Act 2010 . It provides a fair and competitive operating environment and covers:

contract law and unfair contract terms
consumer rights when buying goods and services
product safety
unsolicited consumer agreements, including door-to-door and telephone sales
penalties, enforcement powers and the rights of consumers to seek compensation.

To understand your rights and responsibilities in the field of competition law, you can read:

Australian Consumer Law guidance – advice on how to comply with the Competition and Consumer Act 2010
Office of Fair Trading sales practice guidance – advice on making your sales practices are fair and legal.

Maintain your relevance

The only constant in business is change. That's why it's important to regularly review the trends that are shaping your market. These could include things like new:

technologies
competitors

You may need to evolve your business, but change also creates opportunities. This will require change management. Find out more about how to adapt and change your business .

The marketing field is always changing too. There's often an overemphasis on 'shiny new things.' It's good to stay up to date, but always:

refer to the fundamentals of marketing
adopt a strategic approach.

Your goal is to achieve your marketing objectives. To support this journey, make sure you refer to industry sources and external partners for:

Visit the Australian Marketing Institute to find information on best practice and standards.

Also consider...

Find help to write a marketing strategy and plan .
Learn more about branding your business .
Find information on how to become a customer-focused business .
Access tips and calculators to help you successfully price products and services .
Find out more about writing a business capability statement .
Watch our Price and profitability webinar for information and advice on how to price your products and services.
Last reviewed: 29 Aug 2022
Last updated: 8 May 2024

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What Are Core Competencies?

Understanding core competencies.

In Business
In Individuals
Identifying Core Competencies
Core Competency Importance
Pros and Cons
Core Competencies FAQs

The Bottom Line

Business Essentials

Core Competencies in Business: Finding a Competitive Advantage

Investopedia / Joules Garcia

Core competencies are the resources and capabilities that comprise the strategic advantages of a business. A modern management theory argues that a business must define, cultivate, and exploit its core competencies in order to succeed against the competition.

Key Takeaways

Core competencies are the defining characteristics that make a business or an individual stand out from the competition.
Identifying and exploiting core competencies is seen as important for a new business making its mark or an established company trying to stay competitive.
A company's people, physical assets, patents, brand equity, and capital can all make a contribution to a company's core competencies.
The idea of core competencies was first proposed in the 1990s as a new way to judge business managers compared to how they were judged in the 1980s.
Examples of companies that have core competencies that have allowed them to remain successful for decades include McDonald's, Apple, and Walmart.

A successful business has identified what it can do better than anyone else, and why. Its core competencies are the "why." Core competencies are also known as core capabilities or distinctive competencies. Core competencies lead to competitive advantages .

Core competency is a relatively new management theory that originated in a 1990 Harvard Business Review article, “The Core Competence of the Corporation.” In the article, C.K. Prahalad and Gary Hamel review three conditions a business activity must meet in order to be a core competency:

The activity must provide superior value or benefits to the consumer.
It should be difficult for a competitor to replicate or imitate it.
It should be rare.

The article pointed out the contrast of how businesses operated in the 1980s versus how they should operate in the 1990s. The article asserted that in the 80s, business managers were "judged on their ability to restructure, declutter, and delayer their corporations. In the 1990s, they'll be judged on their ability to identify, cultivate, and exploit the core competencies that make growth possible."

The core competencies that distinguish a business vary by industry. A hospital or clinic may focus on excellence in particular specializations, while a manufacturer may identify superior quality control.

Core Competencies in Business

A business can choose to be operationally excellent in a number of different ways. Below are common core competencies found in business:

Greatest Quality Products. This core competency means the company's products are most durable, long-lasting, and most reliable. The company will likely have invested in the strongest quality control measures, technically proficient workers, and high-quality raw materials.
Most Innovative Technology. This core competency means the company is an industry leader in its sector. The company will likely have invested heavy amounts of capital into research & development, holds many patents, and hires experts in respective fields.
Best Customer Service . This core competency means customers have the greatest experience during (and after) their purchase. The company will likely have invested in training for staff, large numbers of customer service representatives, and processes to manage exceptions or issues as they arise.
Largest Buying Power. This core competency leverages a company's economy of scale. This company will likely have invested in mergers or acquisitions and have built up strong relationships with vendors to gain favorable pricing or service.
Strongest Company Culture. This core competency promotes the internal atmosphere of the business. The company aims to attract the best talent by investing heavily in employee recognition, development, or collaborative, fun events.
Fastest Production or Delivery. This core competency means the company is able to make or ship items the fastest. The company will likely have invested in connected software systems as well as production processes and distribution relationships.
Lowest Cost Provider. This core competency means the company charges the lowest price among comparable goods. The company will likely have invested in the most efficient processes the reduce labor or material input.
Highest Degree of Flexibility. This core competency allows the company to quickly pivot in response to business opportunities or challenges. The company will likely have invested in cross-training across employees or nimble software solutions.

Core Competencies in Individuals

A variation of the principle that has emerged in recent years to pivot towards individuals looking for a new job. The variation recommends that job seekers focus on their personal core competencies in order to stand out from the crowd.

These positive characteristics may be developed and listed on a resume . Some personal core competencies include analytical abilities, creative thinking, and problem resolution skills. The notional of individual or personal core competencies gives an individual a platform during interviews (i.e. a candidate can identify themselves as the most experienced, most creative, or most technically sound candidate).

The core competencies an individual lists on their resume should be tailored to suit the job and demonstrate actual, highly proficient skills necessary for the role.

How to Identify Core Competencies

Some core competencies develop naturally, while other core competencies must be consciously and strategically formed over time. Whether a company is yet for form or has existed for a while, here are ways for organizations to identify what their core competencies are or could be.

Review the company's mission statement , value statement, or slogan. If a company has invested time and effort into developing a brand, chances are it has already put some effort into considering what it wants to be known for. A company's mission statement, value statement, or other branded content may identify what the company wants to be or how it wants to seen by customers.

Compare the company to its competitors. A core competency is a unique element that can not be easily replicated by other companies. Therefore, a company can identify its core competencies by thinking through how the company is different from other businesses. This includes differences in products, processes, market areas, delivery customs, pricing, or employee base.

Interview internal staff or major customers. Different key stakeholders of a company may have insights into its strengths (or weaknesses) of a company. In some cases, the day-to-day staff may have a better sense of what the company excels in. In addition, primary customers that have the most real-world experience with the company's products or services may yield feedback as well.

Brainstorm what benefits the company provides customers. Core competencies often relate back to the product or service the company provides. For example, is the product the lowest cost, most user-friendly, or highest quality? If customers gain a benefit from the company's goods (i.e. they pay the lowest prices), that can often be leveraged into a core competency.

Understand the processes required to make goods. In addition to considering the specific products, a company should review what it takes to make the products. This includes the labor, materials, knowledge, processes, equipment, or research that must be refined in advance.

Identify unique aspects of the company. If all else fails, it may be simplest to just consider what about the company is unique. This may relate to the company's history, certain benefits it can give its employees, the industry it resides in, or what it aims to achieve in the world.

Consider hiring an external consultant to evaluate your company's framework to determine what your core competencies are or could be.

Why Core Competencies Are Important

Core competencies allow a company to better understand how to allocate its resources. For example, it may make sense for a company to outsource certain tasks if it does not care to develop those tasks into company strengths. This also includes stronger direction on the staff to hire and what training to incur.

Core competencies also reduce a company's market risk . By being exceptional or proficient in specific areas, a company can rely on these areas to maintain consistency and reliability in operations. For example, companies with strong internal cultures will experience less employee turnover, training expenses, product deficiencies due to lack of knowledge, or unhappy workers.

As companies determine what they are best at, customers may often recognize and associate the company with that core competency. Therefore, core competencies help a company develop a stronger brand image or market presence. For example, many consumers associate Apple products with being the most cutting-edge and innovative.

Last, core competencies may help create stronger relationships between a company and its employees or customers. Both employees and customers may associate with a company better, knowing its strength or identity; in the example above, employees may take pride in creating the most innovative products, while customers gain satisfaction knowing they possess the most creative solutions.

Some core competencies do expire. Consider Sears' long-term dominance as the major retailor due to their catalog. Now, that core competency has faded, and an in-home printed catalog may no longer be viewed as a strength.

Advantages and Disadvantages of Core Competencies

Core competencies are difficult to imitate. It often takes a long period of time (or large sums of capital) to develop core competencies. Once a company has achieved a core competency, it often has a major advantage over its competitors in the marketplace.

Core competencies may also be transferrable across different industries or product lines. For example, with a platform of being an incredibly innovative company, Apple has expanded into new product lines, different sectors, and varying geographical regions. An advantage of a company may be able to be applied widely.

Last, core competencies naturally enhance the marketability of a product. Spirit Airlines' core competency of offering the cheapest flights on average is not only its strength, it doubles as a company slogan. Though this may mean some consumers are naturally adverse to the company, it also means Spirit's brand image is clearly defined and recognizable.

Disadvantages

Just as difficult as a core competency is to create, it may be equally as difficult to change. This may inadvertently cause the company's brand image to falter and be confusing. For example, McDonald's was once known for indoor playgrounds and Ronald McDonald. Though the company has shifted away from this culture, long-time consumers may still associate the brand with old core competencies.

Core competencies also naturally limit the flexibility of a company. Consider a low-price retailer such as Wal-Mart. The company may struggle to launch high-end, more expensive product lines with greater margins because consumers may not appropriately associate the product with the company.

A company may also "lose the forest among the trees" if it gives too much attention to developing a core competency. The ultimate goal of a company is not to possess core competencies; its purpose is to generate revenue through the sale of products. Therefore, companies may spend tremendous amounts of time or capital without an overarching strategy that makes sense.

Core Competencies

Are not easily replicable since they take long or large investments

Is often difficult for competitors to overcome once a core competency has been achieved

May be able to be translated to different products, sectors, or business opportunities

Enhances the company's brand image and may make marketing endeavors more easily understood

May result in a company being tied to an outdated, no-longer-used core competency

May reduce the overall flexibility of a company

May require large time or capital requirements

May result in a company focusing too heavily on core competencies instead of a single cohesive strategy

Real-World Example of Core Competencies

Part 1 of Amazon's 2021 annual report discusses the nature of the company's business. The company strives to "be Earth's most customer-centric company." As much, it discusses the following business activities:

Amazon has a core competency of operating scale as their stores "enable hundreds of millions of unique products to be sold by us and by third parties".
Amazon has a core competency of advanced technology as "customers can access our offerings through our websites, mobile apps, Alexa, devices, streaming, and physically visiting our stores".
Amazon has a core competency of being a budget-conscious option as it seeks "to offer our customers low prices, fast and free delivery, easy-to-use functionality, and timely customer service".
Amazon has a core competency of flexibility and product diversification as it serves "developers and enterprises of all sizes including startups , government agencies, and academic institutions" though a broad set of technology services.
Amazon has a core competency of self-reliance as it serves authors with its own publishing company (Kindle Direct Publishing, Amazon Publishing) to yield products in its own store (Kindle Store) for use on its own physical devices (Kindle).
Amazon has a core competency of innovation as it regards "our trademarks , service marks, copyrights, patents, domain names, trade dress, trade secrets, proprietary technologies, and similar intellectual property as critical to our success".

What Are the Main Types of Core Competencies?

Core competencies in business often relate to the type of product delivered to a customer or how that product is delivered. For instance, the main types of core competencies include having the lowest prices, best reliable delivery, best customer service, friendliest return policy, or superior product.

How Does a Company Develop Core Competencies?

A company should internally assess what it does best, and it should also assess how its competition approaches the market. Then, a company should evaluate where it feels it has the best chance to be industry leader. Though these areas may not currently be a company's strength, it can make capital investments and process changes to develop core competencies over time.

What Is the Best Type of Core Competency?

One type of core competency is not necessary better than the rest. However, some core competencies may be more difficult for other companies to overcome. For example, consider the Coca-Cola brand. The company's core competency of brand recognition may be very difficult for a new beverage company to overtake. However, Coca-Cola's approach to customer service or company culture may be easier for a competing company to overtake.

Why Do Core Competencies Matter?

Core competencies lead to operational excellence which leads to superior products, happier customers, and/or greater profitability. When a company is able to doing part of the sale process exceptionally well, it gains a positive reputation for its core competence. This reputation may lead to stronger sales, happier employees, and better business operations.

Core competencies are the advantages that one company has over its competitors. It's the areas of business that the company excels at, and it's often what the company is known for. Ranging from yielding the highest quality products to having the best customer service to being the low-cost provider, core competencies define a company's identity and guide its operational strategy.

Harvard Business Review. " The Core Competence of the Corporation ."

Smithsonian. " The Rise and Fall of Sears ."

Amazon. " 2021 Annual Report ."

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Business plan tips competitive advantage

Business plan tips: how to identify your competitive advantage

Morgan Beall October 23, 2017

At Vancity, we see hundreds of business plans each year from new and aspiring entrepreneurs. And from that experience, we know there are five areas in the business plan that entrepreneurs may not spend enough time on: business objective , SWOT analysis , cash flow projection , competitive advantage and market potential .

In this series, I’m going to share some tips on each of these five areas to get your business plan in top shape. In this post, I’ll cover ways to identify your competitive advantage.

Competitive advantage

What makes your business special? What are you doing differently than your competitors? Why should customers choose your product or service? These are the questions you should ask yourself when determining your competitive advantage. It’s something that often gets overlooked in many business plan s , but understanding your competitive advantage is a huge factor in starting and running a successful business.

https://youtube.com/watch?v=Nid9Frjiz3w

These three steps will help you realize what sets you apart from the rest:

1. Identify your competitors

Start by making a list of your direct and indirect competitors. Not sure who they are? Direct competitors are businesses that satisfy a similar need that you fulfill. Try Google searches and check online business listings in your area. If you are planning on setting up a physical location, walk the community around where your business will be. Even if there don’t appear to be other businesses directly competing with you, there are always other businesses competing for your customer’s time and money. Ask yourself who they are and what products or services are they selling?

2. Find their strengths and weaknesses

Identify what your competitors are doing right. Do a little research to determine what hooks people on their product or service. Next, identify what they’re doing wrong. What’s keeping people from shopping with them? What turns customers off? Make time in your calendar to observe and take notes, or go online and check out website, product and service reviews and see what past customers have had to say.

3. Figure out your “special ingredient”

Lastly, use the information you learned about your competitors to determine your own “special ingredient.” What makes your business stand out? Think about how your values align with your audience, your branding, story, and who you are as a business owner. Consider your customer service, the quality of your products, and where you source your materials from. You may have one very obvious special ingredient, or you may find you have a few special ingredients.

In essence, your competitive advantage is a compelling argument for why a customer should buy your product or service over someone else’s. It’s a vital part of your business plan that helps a financial institution, and your future customers, decide to invest in YOU.

Looking for more support?

Looking for more support to help you complete your business plan? Find out when our next Each One, Grow One small business workshop is happening. The workshop is offered free for members and non-members, and are a great starting place to create your perfect business plan.

Business plan tips: how to clarify your business objective, business plan tips: why you need a swot analysis.

Business plan tips: how to plan a cash flow projection
Business plan tips: how to figure out your market potential

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Business plan tips: how to figure our your market potential

Morgan Beall

70 Competitive Advantage Examples in Strategic Management

Competitive advantage definition and examples in strategic management is the ability to outperform competitors by being unique, or popular in products, and services. In other words, facility companies can only compete for pricing. It quickly becomes profitable, especially if the competition is low cost.

A competitive advantage is an ability or position that enables you to compare competitors. It is considered the basis for profit in a competitive market. Whatever you do better than your competition, usually adds to your competitive advantage.

What are the competitive advantages?

Competitive advantage is an optimal position that holds a business in the market, which results in more customers and profits. It feels brand, product, or service is higher than other competitors. Competitive advantage definition and examples in strategic management is a great consideration in business.

The brand can create competitive advantages when these three fixers are clear:

Target Market: Perfect knowledge about buying from the brand, what the brand wants from the brand, and if any strategies can start to buy from the brand, is essential to create a competitive advantage over competitors for business.

USP: Unique Selling offer is usually different from the main trigger of competitive advantage and business competition. The reason why customers choose a brand related to others is why customers. To make a competitive advantage of a brand, both USP businesses and customers should be transparent, cost leadership strategy examples.

Competition: The answer to these two business questions should be: Who are the current competitor and any possible competition in the coming years? How do production, evaluation, marketing, and branding strategies used to develop and market their products for competitive strategy examples?

Types of Competitive advantage

Although the definition of competitive advantage is the same, different marketers have described different types of competitive advantages.

Competitive advantage definitions and examples in strategic management have different types. Harvard University graduate, Michael Porter, wrote a name in 1985 – Competitive Advantage:

Creating and Staging Superior Performance, which identified three strategies that can be used to deal with business contests and create a sustainable competitive advantage. According to him, these three generic techniques are:

Discrimination: A Differential Benefit When the product or service offered by the business provides different benefits than the products offered by the competitors.

It defines the unique position of the market offer, explaining the unique benefits provided to the target group. This unique location can specify high quality, better delivery, more features, or any other specific features of the product or service.

Generally, innovation and large inventions are achieved by segregation, usually by industry disturbances, and making sustainable competitive advantages for the business.

An example of the differential advantage created by breaks is Uber. It is different from the services that are supplied by supplying it to the needs.

Cost leadership: This is a strategy where a business creates the same quality of products as competitors but sells them at a lower price.

Cost leadership improves consistent functioning efficiency (using fewer but more effective workers or outsourcing places were less cost) and achieves a benefit of Scale Economy (Greater business case in LD, Walmart, etc.).

Focus: Also called divisive techniques focus strategy involves targeting each other instead of a pre-defined segment. It understands the target market better than everyone else and uses data for a better offer made on target market demand.

This strategy was primarily used to compete with big companies in big business, but with the advent of the Internet and micro-titling, Amazon, Facebook, and Google used even the focus to separate even big businesses from others.

Competitive Advantage Examples

Competitive advantage definition and examples in strategic management decide the success of the company. Following are some useful examples of competitive advantage:

1. Customer satisfaction

Please consistently customers a favorable ability in every industry. Technology has accelerated this effect as many artists are powered by customer reviews, examples of focused cost leadership companies.

Variety is an operation, products and services are good competitive advantages.

Offering a great variety of products and services can be of expertise such as reduced costs. Customers can be valued as preferred by the big supermarkets, sustainable competitive advantage example.

Provide high-quality products and services to customers, competitive advantage examples business plan.

4. Reputation

Reputation is the opinion taken by your organization’s employees, customers, partners, regulators, and the public.

A good reputation is known to be an extremely valuable, focused low-cost strategy example.

5. Information Technology

low-cost differentiation and focus are examples of the technology which are built into your products, services, or processes.

6. Innovation

A power to develop a new approach that represents a leap forward in a particular area, competitive edge examples.

7. How to know

Your employees’ skills, skills, and experience are important factors in most industries, as examples of cost leadership.

The process to provide service, the time elapsed in production, and the uniqueness of the marketing process are companies with competitive advantage examples.

9. Organized Culture

Organizational culture is an ideal, standard, and practice that is unique to every organization. For example, some companies embrace aggressive inventions and others prevent the conservation of most conservatives, five generic competitive strategies examples.

Scalability is a good focused cost leadership example.

11. Capital

Access to deeper financial resources than the competition in capital-intensive industries can be one of the personal competitive advantages examples.

12. Risk management

The ability to optimize risk rewards through risk identification and control focused cost leadership strategy example.

13. Information

Better or faster data access than the competition, information technology competitive advantage examples.

The purpose and value of the ideas behind your organization that inspire your customers and encourage your employees, differentiation advantage example.

15. Brand recognition

The ability for customers to identify your visual symbol as a product or logo. Customers tend to believe they know what they are, cost advantage example.

16. Introduction

A unique introduction to your product, service, or brand standing in the minds of customers.

Identity includes both your visual symbol and some that give your organization personality, strategic advantage example.

17. Trade secret

The things you know that your competitors do not The term refers to such knowledge benefits are not explicitly protected by property law but are carefully kept secret.

For example, employees have to sign their non-disclosure agreements in order to keep their privacy, focused cost leadership examples.

18. Intellectual property

Legal protection, such as copyright, patent, and industrial design, prevents competitors from using your content, designs, and discovery, competitive advantage in a sentence.

https://static-web.upmetrics.co/assets/media/analyze-and-write-competitive-advantages-in-your-business-plan.png

19. Business Connection

Network your business as an organization. Some companies are good to connect as their business competitiveness examples.

20. Location

A well-known location is the only restaurant in a well-known hotel, cost leadership, and differentiation strategy examples.

21. Experience

A rich experience with your products, services, and brands valued by customers. For example, you can be one of the most friendly restaurants with blocks or the most sophisticated feeling.

22. Administration

The government is the practice to instruct and control an organization to ensure consistency with stakeholder interests and compliance with relevant laws.

In the long term, good governance fame, risk management, and capital are important for access, porter’s generic competitive strategies examples.

23. Natural resources

Superior access to natural resources such as spring water with a reputation for such quality, low-cost provider strategy examples.

A design of taste and style of your design as a product, service, location, and content. Visual branding is an element, competitive position example.

25. Access barriers

The entry barrier is a barrier that prevents the new market competition in your competition, low-cost leadership strategy examples.

In many cases, entry barriers are the only or only competitive advantage of natural monopoly power, competitive advantage sample.

26. Ethical work

Due to significant advantages over the time of some organizations, it is easier to work than the competition, competitive advantage examples real life.

27. Strategy

A power to take advantage of opportunities as they present themselves as a competitive example.

28. Partners

Some of the competing partner partners can not match a strong partner or network, innovation competitive advantage examples.

29. Customer

Key reference subscriber, big account, or strong support from your brand, example of focused cost leadership.

30. Labor costs

In some industries, the cost of low workers is a significant advantage, which puts competitors in high-priced countries in the competition, overall cost leadership examples.

31. Outward energy

The ability to influence the tendency of power negotiation, competitive advantage statement examples.

32. Critical mass

Get an ideal competitive shape for your industry. The critical mass term applies to the withdrawal of a new product or technology at the level of difficult acceptance, companies using cost leadership strategy.

33. Economy of density

Provide better access to resources such as more effective and skilled workers to provide a close location in a city or multiple cities for temporary competitive advantage example.

34. Business Policy

Policies are basic statements designed to manage strategies and activities. When properly implemented, they help the organization to make consistent, high-quality decisions as generic competitive strategies examples.

35. Stability

The pursuit of social and environmental practices and goals can be a competitive advantage, which can influence business principles such as branding, compliance, capital, and access to fame, porter’s competitive strategies examples.

36. Market power

Ability to influence market value for some of the market capabilities. Most small competitors have no power to influence the market price. In the merchandise industry, large companies also do not have any effect on the price for niche competitive advantage examples.

For some companies capable of establishing market power, it can be a powerful competitive tool because the market value change affects your competitors, as business competitive advantage examples.

37. Network impact

The effect of the network is to be equal to the number of people using a technology, and the trend for product or service quality. It is difficult to compete with a popular social network, such as has strong network effects.

Access to cheap industries is a major cost factor for many industries, porters 4 competitive strategies examples.

39. Switching barriers

Switching interruptions to your competitors will help prevent your customers from being confronted.

A pool of customers facing important switching barriers can be a valuable asset. It is a competitive advantage, especially for institutional organizations with a larger customer base as cost leadership strategy examples company.

40. Work from Home

After the pandemic, the work from home has been another competitive advantage, and companies are still growing with this great way of wark, even during the crisis as a strategic competitiveness example.

Casestudy on A Company with a competitive advantage: Google

Google enjoys the competitive advantage of being the only functioning search engine. Google Job Search Tool is an example. Competitive advantage definition and examples in the strategic management of google tell us a lot.

Modern Competitive Advantage

However, these three are not limited to modern competitive advantages. A strong brand, big pockets, network effects, patents, and trademarks use other competitive advantage strategies to overcome their competitors.

Big Pockets: Some companies interfere with ecosystems by entering the market through huge funds and supplying some really bridal offers or supplying products at a lower price. It acts as a competitive advantage as other companies often fail to respond to such strategies.

Network impact: When the network effect is used by more people, it makes it better or services more valuable. For example, for other players, Watts enjoys a competitive advantage over other competitors because their users are reluctant to use other applications because most of their contacts use Whatsapp.

Brand: Brand loyalty is one of the biggest competitive advantages that a business can capitalize on. An effective brand image and positioning strategy are becoming loyal to the customers’ brand and even more money than being the brand’s product owner. Apple is a perfect example when it comes to brand-related competitive advantages.

Entry and competition barriers: On the other hand, businesses use natural and artificial obstacles in an entry such as government policies, provider access, patents, trademarks, etc. to prevent them from being close competition.

Business basics: what is comparative advantage?

Professor, Australian National University

Disclosure statement

Martin Richardson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

Australian National University provides funding as a member of The Conversation AU.

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For the best part of two centuries, the principle of “comparative advantage” has been a foundation stone of economists’ understanding of international trade, both of why it occurs in the first place and how it can be mutually beneficial to participants.

Man wearing a plastic mask cuts material with an angle grinder, sparks fly

The principle largely aims to explain which countries produce and trade what, and why.

And yet, even 207 years on from political economist David Ricardo’s first exposition of the idea, it is still frequently misunderstood and mischaracterised.

One common oversimplification is that comparative advantage is just about countries making what they’re best at.

This is a bit like saying Macbeth is a play about murder – yes, but there’s quite a bit more to it.

Costs represent missed opportunities

Comparative advantage does suggest that a country should produce and export the goods it can produce at a lower cost than its trading partners can.

But the most important detail of the principle is that cost is not measured simply in terms of resources used. Rather, it is in terms of other goods and services given up: the opportunity cost of production.

An asset like land used for agriculture has an enormous range of other potential productive purposes – such as growing timber, housing or recreation. A production decision’s opportunity cost is the value forgone by not choosing the next best option.

aerial photograph showing land used for both housing and agriculture

Ricardo’s deep insight was to see that focusing on relative costs explains why all countries can gain from comparative advantage based trade, even a hypothetical country that might be more efficient, in resource-use terms, in the production of everything .

Imagine a country rich in capital and advanced technology that can produce anything using very few resources. It has an absolute advantage in all goods. How can it possibly gain from trading with some far less efficient country?

The answer is that it can still specialise in those goods at which it is “most best” at producing. That’s where its advantage relative to other countries is greatest.

Who’s best at producing wheat?

Here’s an example. In 2023, Canada’s wheat industry produced about three tonnes of wheat per hectare. But across the Atlantic, the United Kingdom yielded much more per hectare – 8.1 tonnes . So which country has a comparative advantage in wheat production?

The answer is actually that we can’t say, because these numbers are about absolute efficiency in terms of land used. They tell us nothing about what has been given up to use that land for wheat production.

Combine harvester in a wheat field during harvest in Saskatchewan, Canada

The plains of Saskatchewan, Alberta and Manitoba are great for growing wheat but have few other uses, so the opportunity cost of producing wheat there is likely to be pretty low, compared with scarce land in crowded Britain.

It’s therefore very likely that Canada has the comparative advantage in wheat production, which is indeed borne out by its export data.

Why does it matter?

We have recently seen a lot in the news about industrial policy: governments actively intervening in markets to direct what is produced and traded. Current examples include the Future Made in Australia proposals and the US Inflation Reduction Act. Why is comparative advantage relevant to these discussions?

Well, to the extent that a policy moves a country away from the pattern of production and trade governed by its existing comparative advantage, it will involve efficiency losses – at least in the short term.

Resources are allocated away from the goods the country produces “best” (in the terms discussed above), and towards less efficient industries.

Solar panels on assembly line in factory

It’s important to note, however, that comparative advantage is not some god-given, immutable state of affairs.

Certainly, some sources of it – such as having a lot of natural gas or mineral ore – are given. But innovation and technical advances can affect costs. A country’s comparative advantage can therefore change or be created over time – either through “natural” changes or through policy actions.

The big hard-to-answer question concerns how good governments are at doing that: will claimed future gains be big enough to offset the losses?

Does everybody gain from international trade?

Red car on a factory assembly line in Adelaide

Supporters of free trade are often accused of arguing that everybody gains from trade. This was true in Ricardo’s early model, but pretty much only there. It has been understood for centuries that within a country there will typically be gainers and losers from international trade.

When economists talk of the mutual gains from comparative-advantage-based trade, they’re referring to aggregate gains – a country’s gainers gain more than its losers lose.

In principle, the winners could compensate the losers, leaving everybody better off. But this compensation can be politically difficult and seldom occurs.

But the concept can’t explain everything

The theory of comparative advantage is a powerful tool for economic analysis. It can easily be extended to comparisons of many goods in many countries, and it helps explain why there can be more than one country that specialises in the same good.

But it isn’t economists’ only basis for understanding international trade. A great deal of international trade in recent decades, particularly among developed nations, has been “intra-industry” trade.

For example, Germany and France both import cars from and export cars to each other, which cannot be explained by comparative advantage.

Economists have developed many other models to understand this phenomenon, and comparative-advantage-based trade is now only one of a suite of tools we use to explain and understand why trade happens the way it does.

Read more: Australia is playing catch-up with the Future Made in Australia Act. Will it be enough?

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7 Competitive Advantage Examples for Business Success

Julia McCoy

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Map Competitors into Strategic Groups

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