Investopedia

Competitive Advantage

Dictionary Says

Definition of 'Competitive Advantage'

An advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers than its competition. There can be many types of competitive advantages including the firm's cost structure, product offerings, distribution network and customer support.
Investopedia Says

Investopedia explains 'Competitive Advantage'

Competitive advantages give a company an edge over its rivals and an ability to generate greater value for the firm and its shareholders. The more sustainable the competitive advantage, the more difficult it is for competitors to neutralize the advantage.

There are two main types of competitive advantages: comparative advantage and differential advantage. Comparative advantage, or cost advantage, is a firm's ability to produce a good or service at a lower cost than its competitors, which gives the firm the ability sell its goods or services at a lower price than its competition or to generate a larger margin on sales. A differential advantage is created when a firm's products or services differ from its competitors and are seen as better than a competitor's products by customers.

Articles Of Interest

  1. The Financial Characteristics Of A Successful Company

    There are many factors that contribute to a profitable business. Find out what they are here.
  2. Competitive Advantage Counts

    What's the best indicator of a company's future success? Its ability to succeed when others fail.
  3. Evaluate Your Investments With SWOT Analysis

    Using this method, investors should be able to focus on a company's advantages and vulnerabilities.
  4. Advertising, Crocodiles And Moats

    Memorable advertising is a brick in the fortress that keeps competitors at bay.
  5. Economic Moats: A Successful Company's Best Defense

    Find out why some companies thrive while others flounder.
  6. Warren Buffett's Bear Market Maneuvers

    This esteemed investor rarely changes his long-term investing strategy, no matter what the market does.
  7. Adam Smith And "The Wealth Of Nations"

    Adam Smith's 1776 classic may have had the largest global impact on economic thought.
  8. What is an economic moat?

    The term economic moat, coined and popularized by Warren Buffett, refers to a business' ability to maintain competitive advantages over its competitors in order to protect its long-term profits ...
  9. 3 Secrets Of Successful Companies

    Make smart investments by spotting up-and-coming success stories early.
  10. Why The Consumer Price Index Is Controversial

    Find out why economists are torn about how to calculate inflation.
comments powered by Disqus
Marketplace
Hot Definitions
  1. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.
  2. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.
  3. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.
  4. Angelina Jolie Stock Index

    An index made up of a selection of stocks from companies associated with actress Angela Jolie.
  5. Consequential Loss

    The amount of loss incurred as a result of being unable to use business property or equipment.
  6. Lease To Own

    An arrangement where an individual enters into a lease agreement with an owner with the inclusion of a clause that typically gives the individual the right, but not the obligation, to purchase the item leased at a predefined price and time.
Trading Center