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 factors influence competition in microeconomics?

    Find out what influences competition in microeconomics and how perfect competition, monopoly and oligopoly vary in their ... Read Answer >>
  2. What are some real life examples of absolute advantage?

    Learn about absolute advantage, comparative advantage and their impact on trade through a real-world example involving call ... Read Answer >>
  3. Are perfect competition models in economics useful?

    Take a look at some of the arguments made by the proponents and critics of the theory of perfect competition in contemporary ... Read Answer >>
Related Articles
  1. Insights

    Competitive Advantage Counts

    What's the best indicator of a company's future success? Its ability to succeed when others fail.
  2. Insights

    Explaining Comparative Advantage

    Comparative advantage is the ability of an individual, company or country to produce a good or service at a lower opportunity cost than its competitor. Having a comparative advantage doesn't ...
  3. Small Business

    How to Make $1 Million in Your Small Business

    Learn how to help make your million dollar small business dreams a reality. Find out what steps you need to do for you to reach this financial goal.
  4. Small Business

    Is Your Business Model Viable? An 8-Point Test

    You have a great business idea, but now you wonder: is my upstart business model really viable?
  5. Managing Wealth

    4 Steps To Creating A Better Investment Strategy

    Make your trading safer and more streamlined by following these simple guidelines.
  6. Investing

    Tips for Managing Your Portfolio Before Turning 30

    Young investors have some advantages over their older counterparts. Learn how to build a portfolio to grow both your financial education and bank account.
  7. Investing

    Understanding First Mover Advantage

    Someone has to be first into a market. Find out when this can be an advantage for a company (and when it's not).
  8. Insights

    How Sustainable Is Whole Foods' Competitive Advantage? (WFM)

    Whole Foods Market has built an economic moat on strong brand identity, but it could be threatened by large grocers entering the organic market.
  9. Personal Finance

    The Secret to Organizing Your Finances is Cash Flow

    A careful analysis of cash flow and spending are two crucial steps toward forming a realistic savings or retirement plan. Here's how to get started.
RELATED TERMS
  1. Competitive Pricing

    Competitive pricing is the process of selecting strategic price ...
  2. Economic Moat

    An economic moat is a competitive advantage that one company ...
  3. Competitive Bid

    A competitive bid is a price submitted by a vendor or service ...
  4. Market Leader

    A company with the largest market share in an industry that can ...
  5. Price War

    Price war refers to a circumstance where rival companies continuously ...
  6. Dog Eat Dog

    Dog eat dog refers to intense competition in a market.
Hot Definitions
  1. Futures Contract

    An agreement to buy or sell the underlying commodity or asset at a specific price at a future date.
  2. Yield Curve

    A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
  3. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  4. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  5. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  6. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
Trading Center