Competitive Advantage in the Modern Business

Competitive Advantage in the Modern Business

Introduction

Competitive advantage is the ability of the firm to outperform its competitors by earning higher profits. The source of gaining a competitive advantage over competitors lies in the value creation for the customer. A company has a competitive advantage when it has some characteristic that differentiates it from its competitors, an attribute which gives the company capability to achieve higher returns in a sustainable period of time. Competitive advantage consists of one or more characteristics of the company, and it can be manifested in many different ways (Gamble, Thompson, & Peteraf, 2013). A competitive advantage can be derived by a good image of an additional feature of a product, or simply by a prime location for a lower price than rivals. Through competitive advantage, the company aims to achieve superior performance. This performance is often materialized in a profit or high profitability for the company. The benefit is determined by the difference between the proceeds from the sale of products or provision of services and the costs that the company incurs to produce and distribute the products or provide the service itself.

Discussion

To excel in the current economic environment there are four building blocks that should be adopted by an organization to gain a competitive advantage. These building blocks are customer responsiveness, innovation, efficiency and quality. With the adoption of these four basic building blocks an organization can achieve differentiation and lower costs. All of these building blocks are generic in nature and can be adopted by any organization no matter what sort of service of products are being manufactured by that organization.

Building Blocks of Competitive Advantage

Efficiency

It depends on the cost of inputs that are required for producing a given output, because the more efficient a firms is the lower ...