Question

Using an example, explain why a business must identify and leverage its competitive advantages in order to gain and maintain market share in competitive industries.

Answer 1

Competitive advantage refers to efficient production of goods and services or superior production of goods and services. Competitive advantage can be of two types: Absolute advantage and Differential advantage. Absolute advantage refers to production of goods and services in a cost efficient manner while differential advantage refers to production of superior goods and services.

Understanding competitive advantage enables the firm to position itself in the industry. Firms can use market themselves on the basis of competitive advantage they enjoy. Understanding competitive advantage will put them in a better position place because they exploit their strengths.

Understanding of absolute advantage enables the firm to position it as the firm that provides goods and services at lowest cost. When this competitive advantage is communicated to the customers, they are drawn in huge numbers towards the firm. Amazon is an example of absolute advantage. Amazon has established itself as the firm that provides goods at lowest cost in the market. The strategy of amazon has paid off. Amazon is the leading retailer with huge market share.

Understanding of differential advantage enables the firm to position itself as the firm that provides unique and differentiated products. Customers get attracted towards the brands that are different and unique in the market. Apple is an example of differentiated competitive advantage. Apple has successfully positioned itself as the provider of high class, different and unique electronic goods. This strategy has attracted lot of customers towards it and Apple has a dedicated market segment.