Competitive Advantage – Meaning, Types and Examples

When you have two or more organizations dealing with similar products and services, they will end competing with one another. In case you are looking to get an added advantage over your competitors, you need to take the right approach, which will help achieve better performance.

And when you want to achieve it, you would have what is called Competitive Advantage. What is a Competitive advantage? How to achieve it? We will explore all these things in this article.

What is a Competitive Advantage?

A competitive Advantage is a scenario wherein you have a particular advantage over other businesses or brands which offer the same products or services like yours. You would be able to outperform your competitors in your task. From a technical perspective, competitive Advantage is a scenario where the services of a company exceed the expectations of the customers in terms of product specifications.

Competitive Advantage is helpful in many ways. One significant benefit is that it will help you increase your sales. This will help you achieve the best in terms of the value of the company and the stakeholders.

How can you get a Competitive Advantage?

You can achieve a competitive advantage through multiple options. The significant options of making the best possible competitive Advantage can include two significant scenarios –

  • Through external changes
  • Through internal changes.

Let us discuss those individual cases here.

Competitive Advantage through External Changes

The external changes can involve the following characteristics.

Change the PEST factors

PEST stands for Political, Economic, Socio-cultural, and Technological factors. These factors would be one of the crucial aspects that would determine the external environment. You can exploit any of these factors and make optimum use of these factors to gain a competitive advantage over your competitors. Changes in customer preferences can be yet another factor that you would put to some definite benefits to your competitive Advantage.

In essence, you need to keep a close eye on what is happening around you, and devise means to get access to the best possible performance ever for your needs.

Your response to the changes

The key to achieving the best possible competitive Advantage rests on your capability to adapt to the changes in the external factors. The faster you can adapt to those changes; the quicker will be your ability to get access to the best possible Competitive Advantage. Any organization that is slow in adapting to these changes would be left with no benefits from these.

Competitive Advantage through Internal Changes

Just the way the external factors affect your capability to stay in an advantageous position in making the best options in terms of staying at an advantage in a competition, you will also need to focus on a few internal factors and make the necessary changes to achieve a better benefit.

VRIO Resources

Make sure you have access to the best possible VRIO standards. VRIO stands for valuable, rare, hard to imitate, and organized attempts you can employ the best possible options for the decisive competitive Advantage. These resources will have an added advantage over your competitors if you have a strong presence of those VRIO parameters.

Some of the critical factors that would be valuable in VRIO parameters would be brand equity, technological and market-centric know-how, the reputation of your company and company culture.


Competency would refer to your ability to get things done. This will include different things such as skills you have achieved, the processes and capabilities you have gained, and your knowledge in the processor product concerned.

The uniqueness of your competence can be one of the massive plus points. Make sure you have gained an excellent in the areas and thus can beat your competitors with your unique levels of competence. The competitors would be unable to replicate their level of expertise in processes and technology.


Innovation is what would help you achieve a better degree of success in helping you gain a better competitive advantage. Staying innovative with your products and services can be one of the excellent options for achieving a competitive advantage. That way, you would be able to have a first-mover advantage if you can design a new innovative product or service.

Types of Competitive Advantage

Types of Competitive Advantage

Competitive Advantage can be achieved in two different ways. In fact, these two types are much dependent on Porter’s Generic strategies for competition.

The two primary options for the Competitive Advantage would include

  • Cost Advantage
  • Differentiation advantage

Cost Advantage

The concept of cost advantage would involve gaining a competitive advantage over your competitors based on the pricing of the product. You can achieve a better performance in terms of competitive Advantage with the lowest possible cost for the product with the same features.

You can stay at a competitive advantage by reducing your production costs and thus ensuring a better market share. This is part of the Cost Leadership strategy, which forms part of Porter’s Generic Strategies.

Differentiation Advantage

This is once again based on the differentiation strategy put forth by Porter. You will offer a product or service that provides a high degree of differentiation in the product and thereby helping you achieve a tremendous competitive advantage compared to your competitors.

The concept makes use of the Differentiation strategy of Porter’s generic strategy and keeps your products in tune with customer expectations. You can make use of several channels to share information about your innovation and differentiation when you compare your product or service with that from your competitor. The significant factors would include branding, advertisements, new product launch, or even quality enhancements.

Well, do note that differentiation and cost advantage is not the only options to achieve the best possible competitive Advantage. Innovation is yet another perfect strategy that can come quite handy in this scenario. Developing innovative products can be one of the best alternatives you would want to focus on in achieving a competitive advantage.

Examples of Competitive Advantage

Whether countries or companies, most of the entities indulge in strategies to achieve a competitive advantage.

China, for instance, follows a cost advantage. It sells low-cost products to the entire world. In fact, they have a low cost of living and thus can pay their workers considerably less to reduce their production costs. In sharp contrast, India follows a differential advantage method.

If you take the example of Japan, it was following a cost advantage option, and now switched to differential advantage. The US, on the other hand, has been developing an Innovation strategy. US companies bring the best possible innovative products.

Well, that was what we have with respect to the best competitive advantage option you can opt for. We assume we have helped you understand the rather tricky concept a little quickly.