To achieve a competitive advantage in the business world, firms must demonstrate that the products or services that they sell provide a better value than the products and services of their competitors. This can be done by either providing goods to consumers at a lower cost than competitors do, or by providing goods that are clearly superior and more beneficial than those provided by competitors. Businesses must also decide whether to focus on a narrow or a broad market with their strategies. One effective way to achieve competitive advantage is to utilize resources and capabilities that can distinguish a single business from all the rest in the market.
The modern business world is extremely competitive and can overwhelm firms that don't do everything possible to stay ahead. Luckily, there are several ways that a business can go about trying to set itself apart from all of the other competitors in the same industry. Ideally, a business may be able to achieve competitive advantage over the other firms in the market, which they can ultimately exploit for higher profits.
One way that a business can achieve competitive advantage in a rugged business climate is to provide a value to customers based on lower costs. In this case, the product quality might have to be sacrificed somewhat to achieve the lower costs, although the product should still convince consumers that it is a capable replacement for higher-priced alternatives. Whether practiced in a broad or narrow market, the cost differentiation method can position a firm as an industry leader.
Another way to achieve competitive advantage is to create products that are simply better than the alternatives. These products might have to be priced higher since they will likely cost more to produce. Businesses have to convince customers that the benefits of the products far outweigh the higher prices attached to them. When practiced on a large scale, this strategy often focuses on luxury and quality. On a narrow level, it may entail filling a distinct niche in the market.
Whatever strategy to achieve competitive advantage is chosen, a business must have the capability to implement it. Competitive advantage often comes from the distinct qualities that a company possesses that separate it from the rest. This might refer to the quality of their employees, the funds they have at their disposal, a prime business location, or consumer familiarity with the brand. No matter what advantage exists, firms should be prepared to exploit it to gain an edge over their competition.