January 31st 2018

5 Sources of competitive advantage

Competitive advantage is a set of circumstances or conditions (such as being first to take a product to market) that puts one company in a more favorable position than the other. Here are the 5 sources of competitive advantage that you can identify and build upon in your company every day.

Sources of Competitive Advantage:

  1. Superior Skills

“The distinctive capabilities of key personnel that set them apart from the personnel of competing firms”
“The benefit of superior skills is the resulting ability to perform functions more effectively than other firms” - Chadwick and Jobber

       2. Superior Resources

“The tangible requirements for advantage that enable a firm to exercise its skills” Such as;

  • The number of salespeople in a market
  • Expenditure on advertisement and sales promotion
  • Distribution infrastructure
  • Expenditure on R&D
  • Scale and type of production facilities
  • Brand equity
  • Knowledge

       3. Core Competencies

The distinctive nature of these skills and resources make up a company's core competencies. Capabilities that are critical to a business achieving competitive advantage. “Core competencies are the most important sources of uniqueness” 1990 Prahalad and Hamel. They are a “harmonised combination of multiple resources and skills that distinguish a firm in the market place”.

Are they Core Competencies?
         1. Relevance; they must give something that strongly influences the               consumer to choose the product/ service.

  1. Difficult to imitate; the competence must be difficult to imitate
  2. Breadth of Application; Something that opens new markets. If it only opens a few small niche markets then success in these markets will not be enough to sustain significant growth.

      4. Value Chain

The value chain is a high level model developed by Porter. It is use to describe the process by which businesses receive raw materials, add value through various processes to create a finished product, ready to sell to customers. The overall goal of the value chain is to deliver maximum value for the least possible cost to create a competitive advantage.

       5. Differential Advantage

Unique benefits/ selling points/ characteristics that set the product/ service apart and above its competitors in the customer's viewpoint.

Avoid ‘me too’, syndrome otherwise price is the only thing you can be different about and the market is damaged.

                                                                                              e.g. TkMaxx ‘big labels                                                                                                         small prices’

  • Promotion
  • Price
  • Distribution
  • Product

Read more: The extended marketing 3ps 

Apply this model when drawing up competitive strategies for market and explore what your companies sources of competitive advantage are and how you can leverage them in marketing plans.

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