Competitive Advantage Definition

What is the definition of competitive advantage?

Competitive advantage is where a business’s goods or services are superior to or outperform the competition’s. Companies with a competitive advantage may have it because of:

• Price. They have the best price around, and the competition can’t keep up. 
• Quality. The goods or services are unique and high-quality. 
• Customer service. The company provides stellar customer service. 

These qualities don’t guarantee a competitive advantage, but they can help businesses get an edge over the competition.

Think of McDonald’s dollar menu. Everyone can make a burger. But not everyone can make a burger, sell it for a dollar, and have it ready in less than five minutes. That’s what gives McDonald’s its competitive advantage over the other fast-food restaurants out there.

Competitive Advantage Benefits

Competitive advantage increases a business’s profits and brand loyalty. If a business has customers with brand loyalty, then it can use its excess funds to reinvest in the business. For creative companies, having a competitive advantage means that they can try out the new project they’ve been eyeing. 

ZenBusiness Money Pro makes it easier for business owners to see the financial impacts of their competitive advantages. The app allows entrepreneurs to create and send invoices, categorize business expenses, prepare for tax season, and more.

How to Develop a Competitive Advantage

Having a competitive advantage is the sweet spot for businesses. It’s where all the hard work pays off, and the team can finally take a breath. It’s also a chance for a business owner to try something creative or to batten down the hatches for the slow season. 

But how does a business achieve a competitive advantage? Like with most things, there’s no magic bullet. Here are some tips for developing a competitive advantage:

• Start off strong. Having a solid business plan and focus from the beginning helps set the company up for success in the long term. 
• Know the company’s audience. An entrepreneur can help encourage people to buy what they’re selling by knowing exactly who their target customer is and what they want.  
• Understand (and crush) the competition. Knowing what the competition offers is essential information. Business owners who know why customers are choosing their competitors can adapt their strategies as needed. 
• Track the numbers. The wise business owner will take time each month and quarter to take the pulse of their business. That way, they can see where their business is thriving and where it’s just surviving. 

These are just a few tips for any limited liability company or corporation. 

Summary 

Competitive advantage is where a business consistently outperforms the competition. What drives a competitive advantage is usually unbeatable price, customer service, or quality. 

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