Building competitive advantage allows a company to succeed in a particular area or areas. The company often succeeds in a manner that makes it difficult for other competitors to duplicate these advantages. A few of the more common ways for building competitive advantage include product features or benefits, physical locations, or staff. These advantages often work their way into the price at which a company markets its goods or services. The types of available competitive advantages typically depend on current economic conditions along with the number and stability of competitors in the company’s operating industry.
Product features and benefits can be one of the most important ways a company differentiates itself in the market. Companies can focus on what consumers want, the addition of new features not seen before in the market, and an ability to reach more consumers with a single product. All these elements plus more are common when building competitive advantage. In some cases, a company may even be able to use these elements to succeed in a product niche. A common niche, for example, is a substitute good that takes the place of a much higher-priced item that is out of reach for many consumers.
Another option for building competitive advantage is location, location, location. Companies often look for specific spots to place a business in order to reach the most consumers. Successful location may also be where little or few competitors exist in the current environment. Another approach is to simply blanket a market with business outlets. While this can result in lower profits on a per-location basis, the company has the advantage of easy access for any consumer looking for a particular product.
Manufacturing, retail, or service-based companies can use staff when building competitive advantage. The individuals working in a company can bring specific knowledge, skills, and abilities that do not exist anywhere else. Skilled workers often provide intelligent thought and strong work skills. In a low-skill market or one with few options for hiring strong employees, this can be a good starting point for a competitive advantage. Large companies can even hire all the talented employees in a market in order to gain an advantage over competitors.
All of these advantages and more will likely make their way into a company’s price for goods and services. When this occurs, a company can experience a cost leadership advantage because companies with lower costs often undersell competitors. In certain markets, companies may even be able to charge higher prices and earn better profits when experiencing cost leadership. This is possible because no other business can produce similar goods.