Introduction
The essence of a company is to take inputs from the external environment, process it and offer it to consumers. In this world where all nations are capitalist in outlook, there are anti-trust laws that means that for any product a company produces, there are many sellers targeting the same or similar consumer. This forms the boundaries of an industry. Each industry has its market – which include the total number of consumers. And firms in the industry seek to gain or expand their market share. In order to capture a higher and bigger market share, a firm will need to present a competency that will make it more attractive to consumers as opposed to other suppliers. The purpose of this paper is to define the concept of competitive advantage which embodies the various competencies and offerings that firms put together to make their products and services more preferred to other suppliers in the same industry.
Competitive advantage refers to a distinct competency, an offering, an arrangement or something related to a company’s operations that makes it more attractive to consumers. It is that thing or set of things that makes a company’s offerings more appealing to consumers than that of the other producers and sellers in the industry. There are many options that a firm could have in order to gain competitive advantage. But the essence of competitive advantage is to capture and attract more consumers and outperform competitors in the industry.
In a static industry where there is no innovation and improved methods of satisfying consumers’ needs, the producers will only have to lower their prices in order to give the consumer an upper hand. This is the essence of consumer sovereignty in modern capitalist countries.
Competitive advantage can be achieved through three main ways, either a firm (1) lowers costs or (2) provide something different or (3) focus. The first option of providing products and services at a lower cost means competitors might also have to lower their costs to compete. Ultimately, the consumers come out to benefit from it because they get the businesses compete against each other and bring down prices to make things cheaper for them.
The second option involve providing something different. This is a way of adding up to customer value and providing something that will make life more convenient for the consumer. Thus, innovation is an important approach for competitive advantage. It leads to better methods of doing things and satisfies the needs of consumers in the best way and form possible.
Finally, focus means specializing in something that consumers want. Thus, wasting resources on things that everyone is doing, a firm can provide focus and increase the quality of the product or service on offer to the consumer. This makes the value offered by the company better and boosts the competitive value of the company’s offering as compared to the offering from other competitor.
In conclusion, competitive advantage is a competency or offering that a company has that makes its products more attractive consumers than that of competitors. There could be several elements of competitive advantage which could include lowering costs for consumers. However, this leads to an ultimate reduction in the earning power of suppliers in the industry. A second approach to competitive advantage is through differentiation. This is about finding innovative methods and ways of providing the services consumers want. And through this, consumer value is enhanced and they enjoy the product better. Finally, there is the option of focus where a company utilizes its resources to specialize in the provision of a specific service or set of products. This way, the consumers can have a much more enriched experience in the product and this becomes a competitive advantage for a firm.
