Why, within a particular industry or market, do some companies outperform others? When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rival. The competitive advantages translate into the ability to win market share or earn a higher profit than competitors. A successful business model results from business-level strategies that create a competitive advantage over rivals and achieve superior performance in an industry, that is, they must optimize competitive positioning. They must first decide on (1) customer needs, or what is to be satisfied, (2) customer groups, or who is to be satisfied, and (3) core competencies, or how customer needs are to be satisfied. These decisions determine which strategies they formulate and implement to put a company’s business model into action.
This essay will examine the nature of competitive advantage and why managers need to perform internal analysis, just as they must conduct industry analysis, to achieve superior performance and profitability. And it will find out as well how business is looking to maintain competitive advantages beyond the present, well into the future. In other words, what are the difficulties the enterprise would face and have to overcome to maintain its competitive advantages over a longer period of time?
According to Colin White, competitive advantage is “the ability to provide utility to, or to satisfy, customers better than competitors can”. Or “a competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices” (tutor2u, 2006). Competitive advantages exist thanks to the combination ...