Building brand loyalty is a competitive advantage.
A competitive advantage is a quality that allows a company to achieve a favorable position to compete in its sector. This is a distinctive characteristic that allows the company in question to surpass its competitors.
Before continuing, it is important to indicate that, according to the dictionary of the Royal Spanish Academy ( RAE ), an advantage is the preeminence or superiority of something or an individual over another element or subject. The term also refers to a favorable situation or state. Competitive , meanwhile, refers to that linked to competition: the rivalry or dispute between those who seek to achieve the same thing.
Characteristics of competitive advantage
Competitive advantage is a sustainable factor over time that takes an organization to differentiate itself from its competitors . This aspect is unique (no rival has it) and cannot be easily copied or reproduced.
Simply put, a competitive advantage is what differentiates an entity from others , placing it in a superior place to compete. By standing out from the rest, the firm that has the competitive advantage finds a favorable environment to expand and obtain profitability .
In general, competitive advantage contributes to attracting more customers , either directly or indirectly, because the company's proposal is more valuable than that of its competitors. Product quality, operational efficiency and brand management are some of the competitive advantages that help achieve market leadership .
Competitive advantage can arise from product design.
Origin of the concept
The origin of the concept of competitive advantage is attributed to the American economist Michael Porter . This Harvard professor coined the term in a book he published in 1980 : "Competitive Strategy: Techniques for Analyzing Industries and Competitors" , translated into our language as "Competitive Strategy: techniques for the analysis of industrial sectors and competition" .
For Porter , competitive advantage is related to the value that a company is able to generate . Value, in this context, is what consumers are willing to pay . Continuing with the reasoning, said value grows when the company can set prices lower than those of its competitors or provides exclusive or differentiating benefits that compensate for a higher price.
Porter emphasized the importance of information as a resource. For this specialist, competitive advantage arises from taking advantage of information to positively distinguish oneself from the competition.
It is important to note that Porter 's theories soon managed to arouse great interest in both other economists and businessmen. Today the notion is usually taken into account when designing or modifying the production cycle, marketing strategy and customer service.
A disruptive innovation is possible to generate a competitive advantage.
Types of competitive advantage
Competitive advantages can be classified in different ways. When a company has a characteristic that allows it to stand out, whether for its brand or a product, it is called a differential competitive advantage . In this case, the firm has an attribute (such as product differentiation) that allows it to distinguish itself and stand out.
If the privileged position arises from the properties of the offer, it is a comparative competitive advantage . Compared to similar services or products, the company's proposal achieves preference since it is considered better performed or offered.
Another categorization refers to the competitive advantage by approach : it arises from the development of a service or a product that is intended for a specific segment. The competitive cost advantage , meanwhile, is achieved by saving in the production process, which allows lower prices to be set.
How to get it
As we already indicated from what was explained by Michael Porter , information is key to competitive advantage. It is necessary to do a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to be clear about the company's position and then study the competition . This knowledge management must be effective to be clear about the market positioning and work towards obtaining a competitive advantage.
It should always be considered that the competitive advantage has to be original: trying to imitate a competitor's advantage does not allow you to stand out. One of the ways to surpass competitors is to achieve innovation . In this sense, investment in research and development (R&D) can help achieve advanced technology or improve organizational agility through digital transformation and automation , to name a few possibilities. Innovation also contributes to meeting market needs in an effective way.
Beyond obtaining a competitive advantage, it is essential to ensure that it is sustained over time . If the distinctive characteristic is ephemeral or is closely linked to fluctuations in the economy or other variables, the improvement in positioning will not be firm or sustainable, which means it cannot be projected in the long term.
Examples of competitive advantage
Take the case of a mobile phone company that operates in a market where it has three competitors. All of its rivals provide automated customer support through chatbots; That is why this firm is committed to providing personalized attention through instant messaging, by telephone and even in person at its headquarters. This customer service constitutes a competitive advantage since many users aspired to this type of interaction.
Let's now think about a pizzeria . Its competitive advantage is to offer its products at a price that is 20% to 30% lower than its competitors. To do this, you save on costs and reduce your profit margin with the aim of increasing sales.