Academic Paper: What is Competitive Advantage

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Academic Paper: What is Competitive Advantage

What is Competitive Advantage?

Competitive advantage is the advantage that a firm possesses over its competitors (Porter, 1985). This advantage allows the firm to generate greater sales or margins. The company is also able to retain more customers than its competitors. This way, the company is able to get an edge over its rivals. The more sustainable the competitive advantage of a company is, the better the advantage of the company, over its competitors. There are two main types of competitive advantages.

These two are cost leadership and differential advantage (Porter, 1985).

Cost leadership defines the ability of a firm to produce a good or service at a much lower cost than its competitors. This allows the firm to have a wider scope of production using minimum costs. As a result of this, the firm is able to sell its produce at a lower cost than its competitors, thus capturing the wider portion of customers in the market.

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