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. Not everyone can make a burger, sell it for a dollar, and have it ready for you in less than 5 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 you have customers with brand loyalty, then you can use excess funds to reinvest in the business. For creative companies, having a competitive advantage means that you can try out that new project. 

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How to Develop a Competitive Advantage

Having a competitive advantage is the sweet spot for businesses. It’s where all your hard work pays off, and you can finally take a breath. It’s also a chance for you to flex your creative muscles. Or batten down the hatches for the slow season. 

But how do you 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 you up for success in the long term. 
• Know your audience. Get people to buy what you’re selling by knowing your base audience. Better serve your customer base by understanding who they are and what they want.  
• Understand (and crush) the competition. Knowing what the competition offers is essential information. Ask yourself why customers might choose them over you. 
• Track the numbers. Take time each month and quarter to take the pulse of your business. See where your 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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