Question

Describe what is a competitive advantage and give an example. (200 word)

Answer 1

Competitive advantage refers to the situation when any company or business is performing better than their competitors. Competitive advantage can be achieved in form of more value to customers, more efficiency, high profits, etc. There are two types of competitive advantage –

1. Lower Cost of product and service advantage
2. Product Differentiation advantage

A company can gain competitive advantage in following ways –

• Offering Unique features to the customers
• Good marketing and advertising
• Lower prices
• Latest technology driven products
• Faster responses by way of changing as per the customer needs
• Greater efficiency and effectiveness
• Changing their value chain system

Anything which is done better than their competitors will be a competitive advantage for the company.

Example of competitive advantage–

ABC Ltd and XYZ Ltd is producer of soft drinks in market. There ingredients, quantity and quality were similar but ABC Ltd provides their drinks at lower prices to customers as compared to XYZ Ltd.

ABC Ltd uses unique machinery which minimises the wastage and optimally use the resources. Hence, their cost of production is less which help them to provide their drinks at lower prices than competitors. In this way they enjoy competitive advantage.