Can you define your competitive advantage?

Can you define your competitive advantage?

8th of February, 2022

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Competitive advantage is a superior ability or resource that allows one business to out-compete all others in some area.

Your competitive advantage is what your business does better than anyone else. It is what makes you unique, and it is why your business prospers over time.

You should evaluate every part of your business to determine whether it supports or detracts from your competitive advantage. In the process, you discover what draws customers to buy the product or service from you rather than your competitors.

Most businesses do not know what their competitive advantage is, it is fuzzy and ambiguous at best.

The sources of competitive advantage include;

1. People
2. Organisational structure and culture
3. Systems
4. Processes and Practices
5. Products/Services
6. Intellectual Property
7. Capital
8. Natural resources
9. Technology

It is great to have an advantage over your competitors but for you to stay in the prime position in the market the advantage needs to last. Your customers' needs are evolving and changing faster and faster and your competitors are not sitting on their hands. For you to retain your position your advantage needs to be sustained. It needs to stand the time of time is a disruptive environment. The reality is that;

• most of all new products/services can be duplicated within one year
• most, if not all, of your process improvements (your collective internal learning), will eventually become apparent to your competitors.

Therefore, your need to ensure that your competitive advantage is something that is long-lasting and not easy to duplicate. Understanding when you have developed a sustainable competitive advantage is not an easy process. The three criteria below can help you through this process:

Consistent difference: customers must see a consistent difference between your product/service and those of your competitors. This difference needs to be obvious to your customers and it must influence their purchasing decisions.

Difficult to imitate: your competitive advantage must be difficult to imitate. You want to have an advantage that your competitors cannot easily duplicate or do not understand how to copy. Often this comes in the form of people, proprietary knowledge within your organisation or processes that are behind the scenes.

Constantly improved: the first two items in this list must create activities that can be constantly improved, nurtured, and worked at to maintain an edge over your competition.

Another way of thinking about is the acronym VRIO

A business that possesses VRIO (valuable, rare, hard to imitate and organised) resources has an edge over its competitors due to the superiority of such resources. If one business has gained VRIO resources, no other business can acquire them (at least temporarily). The following resources have VRIO attributes: Intellectual property (patents, copyrights, trademarks), Brand, Know-how, Reputation.

Your competitive advantages, after you have identified them, endure, and grow stronger. Other elements of your business tend to evolve but what makes you unique is that your competitive advantages stay constant.

Founding your business marketing based on your competitive advantages is the most important thing you can do. The leading businesses in the world have a clear understanding of their competitive advantage.

If you would like to define your competitive advantage, please contact us.