A:

Most companies are either founded on a competitive advantage or can apply a certain criteria toward finding their competitive advantage. Much of this can be performed through deduction and a process of elimination. After all, your competitive advantage is, by definition, something your competitors do not have. To find a lasting competitive advantage, look for something that your competitors cannot easily replicate or imitate.

Competitive advantages can be found almost anywhere. Some restaurants thrive because of their location. An airline company might have locked in a low-price fuel contract before prices rose, allowing it to price customers away from other airlines. There are car manufacturers that have better production processes than their competitors. It is possible that Berkshire Hathaway's competitive advantage is perfectly unique: Warren Buffet's mind. Coca-Cola, of course, has that secret recipe and huge brand name recognition. Walmart has enormous economies of scale.

Take the time to look at the differences between your competitor's goods and services and your own. Conduct customer surveys to see why consumers chose your company. It could be that you are able to offer a comparable service at a lower price, in which case it is time to review your process to determine where you reap cost savings.

Once a potential competitive advantage is identified, find out how rare it is. The easier it is to replicate, the faster competition catches up. Sometimes the competitive advantage is only accessible through a certain target market, with a specific product or service or with a specific location. In these cases, it might be best to focus business strategy toward these areas, highlighting and pressing your advantage. Most companies have a competitive advantage of some kind if they are making a profit. After all, something is compelling consumers to do business with them.

RELATED FAQS
  1. What is the difference between CI (competitive intelligence) and competitive analysis?

    Understand the difference between competitive intelligence and competitive analysis. Learn why a company conducts both types ... Read Answer >>
  2. Is it possible for a country to have a comparative advantage in everything?

    Learn whether one country can have a comparative advantage in everything and what the difference between comparative advantage ... Read Answer >>
  3. What factors influence competition in microeconomics?

    Find out what influences competition in microeconomics and how perfect competition, monopoly and oligopoly vary in their ... Read Answer >>
  4. What does a company use CI (competitive intelligence) for?

    Take a brief overview of the art of competitive intelligence, or CI, and how companies compete with one another for information ... Read Answer >>
  5. Do all economists believe in perfect competition?

    Find out why neoclassical economists use unrealistic perfect competition models, and learn why other economists criticize ... Read Answer >>
  6. What parameters are required for a market to exhibit perfect competition?

    Learn what parameters are required for a market to exhibit perfect competition and how perfect competition is more of a theory ... Read Answer >>
Related Articles
  1. Investing

    What's a Competitive Advantage?

    A competitive advantage is an advantage a firm has over its competitors.
  2. Insights

    Basic Concept Of Absolute Advantage

    Absolute advantage is the ability of an individual, country or company to produce a good or service at a lower cost than any competitor. An entity with an absolute advantage requires fewer inputs ...
  3. Small Business

    Starting A Small Business In Tough Economic Times

    We provide 6 tips for creating a winning business in a losing economy.
  4. Small Business

    How To Make $1 Million In Your Small Business

    Make your dream a reality. Find out what you can do to reach this financial goal.
  5. Small Business

    9 Tips For Growing a Successful Business

    Give your business what it needs to thrive by following these tips and it will reward you for years to come.
  6. Small Business

    Tips for Choosing the Right Location for Your Business

    Discover five good tips concerning factors to carefully consider in the process of choosing the best possible location for your business.
  7. Managing Wealth

    4 Steps To Creating A Better Investment Strategy

    Make your trading safer and more streamlined by following these simple guidelines.
RELATED TERMS
  1. Perfect Competition

    A market structure in which the following five criteria are met: ...
  2. Competitive Intelligence

    The process of collecting and analyzing information about competitors’ ...
  3. Dog Eat Dog

    Intense competition in a market. Dog eat dog competition most ...
  4. Economic Moat

    The competitive advantage that one company has over other companies ...
  5. Price War

    When companies continuously lower prices to undercut the competition. ...
  6. Comparative Advantage

    The ability of a firm or individual to produce goods and/or services ...
Hot Definitions
  1. Earnings Per Share - EPS

    Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock.
  2. Trustee

    A person or firm that holds or administers property or assets for the benefit of a third party. A trustee may be appointed ...
  3. Gross Domestic Product - GDP

    GDP is the monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
  4. Debt/Equity Ratio

    The D/E ratio indicates how much debt a company is using to finance its assets relative to the value of shareholders’ equity.
  5. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.
  6. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
Trading Center