top » strategy » business strategy » competitive advantage

55 Examples of Competitive Advantage

John Spacey, updated on October 07, 2023

A competitive advantage is a capability or position that allows you to outperform competitors. This is considered the basis for profitability in a competitive market. In other words, firms that have no advantages can only compete on price. This quickly becomes unprofitable, particularly if the competition have lower costs. Anything that you do better than your competition typically adds to your competitive advantage. Examples include:

Brand image	Brand recognition
Compliance capabilities	Cost efficiency
Customer loyalty	Customer relationships
Customer service quality	Customer support
Customization options	Distribution network
Ecommerce presence	Economies of scale
Efficient processes	Efficient systems
Employee productivity	Employee talents
Existing customer base	Experience
Facilities	Fair terms
Fans & brand advocates	Faster turnaround time
Financial resources	High customer retention
Influencer relationships	Intellectual property
Know-how	Locations
Low customer acquisition cost	Low cost of capital
Market share	Marketing and promotional prowess
Partner relationships	Perceived as good for people & planet
Positive ratings & reviews	Positive word of mouth
Product functions & features	Product quality
Product styles & aesthetics	Product variety
Reputation	Research & development
Risk management capabilities	Service environments such as rooms in a hotel
Service quality	Social media presence
Sourcing advantages	Speed to market
Strategic alliances	Strategy & tactics
Technologies	Trade secrets
Usability of products	User base
Visionary leaders

Scale

Leveraging economies of scale to drive unit costs down.

Variety

Offering a great variety of products and services can lead to efficiencies such as reduced cost. Customers may also value variety such as the selection offered by a large supermarket.

Know-how

The skills, abilities and experience of your employees is a critical factor in most industries.

Processes

Efficient operational processes that get things done faster, cheaper or better.

Organizational Culture

Organizational culture are the norms, values and habits that are unique to every organization. For example, some companies embrace aggressive innovation while others tend to resist the most conservative of changes.

Capital

Access to deeper financial resources than the competition can be a major advantage in capital intensive industries.

Risk Management

The ability to optimize risk-reward by identifying and controlling risks.

Quality

Delivering products and services that are high quality in the eyes of customers.

Reputation

Reputation are the opinions held by employees, customers, partners, regulators and the public about your organization. A good reputation is known to be extremely valuable.

Information Technology

Technology built into your products, services or processes.

Innovation

An ability to develop new approaches that represent a leap forward in a particular area.

Customer Satisfaction

An ability to consistently please customers is important in virtually every industry. Technology has accelerated this effect as many industries are driven by customer reviews.

Information

Access to better or faster information than the competition.

Trade Secrets

Things that you know that your competitors don't. The term implies that such knowledge advantages aren't explicitly protected by property law but are carefully kept secret. For example, employees may be required to sign non-disclosure agreements that bind them to keep your secrets.

Intellectual Property

Legal protections such as copyrights, patents, and industrial design rights that prevent competitors from using your content, designs and inventions.

Business Connections

Your network of business relationships as an organization. Some companies do well with connections as their primary competitive advantage.

Location

A superior location such as the only restaurant in a well known hotel.

Experience

A rich experience associated with your products, services and brand that is valued by customers. For example, you might be the friendliest restaurant on the block or the one with the most sophisticated feel.

Governance

Governance is the practice of directing and controlling an organization to ensure alignment with stakeholder interests and compliance to relevant laws. Over the long term, governance is critical to reputation, risk management and access to capital.

Values

A sense of purpose and values behind your organization that inspires your customers and motivates your employees.

Brand Recognition

The ability for customers to identify your visual symbols such as products or logo. Customers tend to trust what they recognize.

Identity

A unique identity associated with your products, services or brand that stands out in the minds of customers. Identity includes both your visual symbols and anything that gives your organization personality.

Work Ethic

Some organizations are simply harder working than the competition resulting in significant advantages over time.

Strategy

A superior long term plan and an ability to execute it.

Tactics

An ability to quickly take advantage of opportunities as they present themselves.

Partners

A strong partner or network of partners that offer something the competition can't match.

Customers

Key reference customers, major accounts or strong advocates of your brand.

Labor Costs

In some industries, low labor cost is a significant advantage putting competitors who operate in high cost countries at a disadvantage.

Bargaining Power

Bargaining power is the ability to exert influence in negotiations.

Natural Resources

Superior access to natural resources such as spring water with a reputation for quality.

Aesthetics

A sense of taste and style in your designs such as products, services, locations and content. A component of visual branding.

Barriers To Entry

Barriers to entry are obstacles that new competition faces to enter your market. In many cases, barriers to entry is the strongest or sole competitive advantage of a natural monopoly.

Critical Mass

Getting to the ideal competitive size for your industry. The term critical mass also applies to overcoming the difficult adoption phase of a new product or technology.

Market Power

Market power is the ability to influence the market price for something. Most small competitors have no ability to affect market prices. In a commoditized industry, large firms also have virtually no effect on prices. For the few firms that are able to establish market power, it can be a potent competitive tool as changing the market price impacts your competitors.

Network Effect

The network effect is the tendency for the value of a technology, product or service to be proportional to the number of people using it. It can be difficult to compete with anything that enjoys a strong network effect such as a popular social network.

Energy

Access to inexpensive power is a major cost factor for many industries.

Switching Barriers

Switching barriers are obstacles that your customers face if they want to switch to your competitors. A pool of customers that face significant switching barriers can be a valuable asset. It is also a competitive advantage, particularly for incumbent firms with a large customer base.

Economies Of Density

Locating in a city or in close proximity to multiple cities is more efficient for logistics and provides better access to resources such as skilled employees.

Business Principles

Principles are foundational statements that are designed to guide strategy and operations. When implemented properly they help organizations to make consistent, high quality decisions at speed.

Sustainability

The pursuit of social and environmental practices and goals can be a competitive advantage that has implications for business fundamentals such as branding, compliance, access to capital and reputation.

Next: Examples of Competition

More about competitive advantage:

Competitive Differentiation

Competitive Parity