Definition: A competitive advantage is what distinguishes you from the competition in the minds of your customers. Whether you are an employee, a business, or a country, you need to have a clear competitive advantage and communicate it to your customers. Before you can determine your competitive advantage, you’ve got to know these three determinants:
- What you produce. Whether it’s a good or service, you’ve got to be very clear on what you are providing. New technology can redefine that for you, so you’ve got to stay on top of how trends affect the benefits you provide. For example, the Internet meant that newspapers had to redefine how they delivered the news.
- Target market. Who are your customers? You’ve got to know exactly who buys from you, and how you can make them happier. That increases demand, the driver of all economic growth. Newspapers found out their target market started to become older people, who weren’t as comfortable getting their news online.
- Competition. This is not just other similar companies or products, but anything else your customer does to meet their needs. Newspapers thought their competition was other newspapers until they realized it was the Internet. How could they compete with a news provider that was instant and free?
Once you are clear on these three determinants, then you can decide what benefit you provide better than the competition to your target market. Reinforce that message in every communication to your customers, including advertising, public relations, and even your storefront and employees. If you are the employee, treat yourself as if you were in business for yourself — because you are.
Make sure your competitive advantage is reflected in your appearance, your resume, and in how your communicate.
Sustainable Competitive Advantage
Just because a company is the market leader now, doesn’t mean it has a sustainable competitive advantage. A company can temporarily cut its prices to gain market share, but its competitive lead will disappear when it restores those prices to a profitable level.
A company must create clear goals, strategies, and operations to sustain its competitive advantage over time. The corporate culture and values of the employees must be in alignment with those goals, as well. It’s difficult to do all those things well, which is why very few companies can create a sustainable competitive advantage.
Michael Porter: The Guru of Competitive Advantage (…)
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