The meaning of competitive advantage refers to the advantage that a company, person or organization compared to other entities in the same sector, which ends up placing them in a position of superiority. In this way they will be much more competitive in the market.
There are several conditioning factors that can define competitive advantage, such as infrastructure, technology, personnel, distribution, the geographical location or the production process.
Types of competitive advantages
The concept of competitive advantage was developed in 1980 by Michael Porter, who had the purpose of looking for solutions to the problems to which the theory of comparative advantage was measured. He understood that by recommending that territories specialize in a specific service or product where they had a comparative advantage could lead other countries to specialize in primary sector production, leading to a situation of low wages and a lack of wealth.
Porter understood that there were primarily two types of competitive advantages:
- Product differentiation: the sale price of the product will be higher, competing with higher quality items. This is what happens, for example, with Apple, where users link the signature to high quality and performance.
- Cost leadership: compete in the market with the lowest possible rates. This is the case, for example, of outlet stores or low cost airlines.
A company can have different advantages in different aspects in relation to other companies. For an advantage to acquire the rank of competitive, it must meet a series of requirements:
- enable the organization to perform better than the competition.
- facilitate increased profitability: that allows you to be above the profitability industry average.
- sustainability over time: in the medium-long term it must have the ability to remain in the market.
- difficult to reach: that there is no possibility that the competition will copy or equal it. Make it unique.