Today, there is hardly any company that is unique in its kind and has no competitors. In any field or niche - even such new ones as AI and machine learning - there are rivals striving for a place under the sun. So, it is not surprising that every company wants to outperform others in its niche, i.e., to gain a competitive advantage.
So, companies have to invest a lot of time and resources to create value, offer unique features, make exceptional offerings and innovate. This gives them a special position in the marketplace that makes them - and their products - a special choice for consumers. This article answers the question ‘what is competitive advantage?’, outlines the main types of competitive advantage, and provides tips on how to create a competitive advantage that enables companies to achieve sustainable results.
Considered a factor ensuring the health of markets, competition is important to fight against monopolies that dictate their rules and prices. In today's highly competitive marketplace, it is not enough for a company to just offer a quality product or service. It must stand out and offer something - such as a unique technology, an effective business model or an exclusive product - that is difficult to copy or replicate.
According to Warren Buffett, relevant competitive advantage (CA) underpins long-term performance above the market average. That is, true CA is about the ability to outperform competitors plus the ability to protect your unique market position over the long term. As high technology plays a critical role in today's world, automation, sound risk management and innovation must be an integral part of the strategy for achieving competitive advantage.
Any ambitious business dreams of occupying a unique place in the market in the long run to outperform any competitors. By creating a unique product, a company can get CA, but only temporarily until somebody comes up with something better. So, to stay in the lead for years to come, you need to build a competitive edge sustained over the years.
Below, you can find some important things that characterise a competitive edge that is truly sustainable and not just a temporary phenomenon:
· Difficulty of replication by other market or niche players. For CA to be hard to copy, it must be underpinned by unique technology, corporate culture, a sophisticated ecosystem of partnerships, or something else that competitors cannot access.
· Constantly evolve and adapt to changing environmental conditions. If a company is unable to quickly modernise products, business processes and other things that give it leadership, more agile competitors will be able to overtake it after a while.
· High barriers to entry in the industry. For example, while DeepSeek has spent much less time and money to offer a product competing with OpenAI, it is still a significant monetary and time investment not available to every startup.
· Securing long-term customer loyalty through embedded value. As practice shows, industry-leading companies build their strategies on a deep understanding of their audience's needs. This approach helps them create products that solve customer pain points better than their competitors.
· Efficient use of key resources, including talent, intellectual property, business processes and more.
· Protecting CA in the long term and risk management. That is, to maintain leadership for years to come, a company must be able to both develop and protect its advantages.
Sustainable CA cannot be achieved by any plan, even a well-thought-out one. Ideally, a company should have a continuous process that includes analysing the market, improving strategies, innovating and much more.
While some businesses try to win the market by providing low-cost products, others innovate to offer something truly unique. In other words, the competitive advantages of companies can vary significantly. Below, you will find a comparative analysis of two key approaches to CA.
As technological advances have accelerated significantly over the past few decades, innovation is now one of the most powerful factors in creating and sustaining CA. Enabling companies to adapt faster to change, build long-term loyalty and create barriers to competitors, innovation can touch on a variety of areas: technology, business models, customer experience, supply chains, business processes and more.
Competitive advantage analysis often shows that some companies' leading positions in the market arise from the successful implementation of new ideas and solutions. Therefore, industry leaders are constantly spending large sums on research, development and new technologies.
So, having received an answer to the question ‘what is sustainable competitive advantage?’, any business owner will want to dig deeper and find out how not only to gain but also how to retain competitive advantage in a highly competitive environment. The answer is simple: without constant development, even the strongest market position can be shaken. So, a clear strategy and competent resource management are essential to a company's success.
Let's look at the three fundamental principles that underpin any CA strategy:
1. Focus on uniqueness and maximum efficiency.
2. A deep understanding of the market and the needs of the target audience.
3. The ability to adapt to changing market conditions.
That is, you need to highlight what you can do better than others, constantly analyse trends and audience behaviour to adapt strategies, and invest in research and development (plus keeping an eye on competitors) to stay relevant.
Achieving leadership is one thing (although not easy in an oversaturated market), but retaining it is even more difficult. A company achieves sustainable competitive advantage when it develops unique technologies and solutions, effectively manages human capital, creates barriers for competitors and improves process efficiency (as well as reduces costs) through innovation. In simple words, it is impossible to remain a leader for a long time without adapting to changes and developing its unique features.
Leading today does not guarantee your success tomorrow, as your CA can be nullified in the blink of an eye by the introduction of new technologies or by changing consumer preferences. Therefore, you need to learn to adapt and stay ahead of the competition in important aspects.
Sticking with outdated models may lead to a loss of leadership positions just as Nokia ignored the smartphone trend. Therefore, the first step is to develop a flexible strategy and monitor consumer behaviour. Ideally, a company should anticipate trends rather than just follow them.
By investing in research and development, companies gain protection from competitors through timely innovation. In addition, crises and technological breakthroughs (e.g., rapid development of AI) happen quite often. In such conditions, the leaders are those who can adapt quickly.
Surprisingly, many companies act blindly without realising what their real strength is. Therefore, realising your advantage is essential to retaining it.
Some companies are growing faster than their competitors, while others look clearly undervalued. The ability to find your strengths through systematic market analysis is crucial for modern companies wishing to have and maintain a leading position. Assessing your uniqueness, i.e., finding what your business is objectively better than others, will also help.
To better identify competitive opportunities, companies are using predictive analytics, which has advanced significantly in recent times thanks to AI and ML. In some contexts, the ability to quickly reconfigure is key to gaining a CA. So, it's no surprise that there are many brands leading in their niches because of their timely adoption of new technologies or operating models.
While some even highly successful companies (like Nokia mentioned above) fail, others maintain their leadership and CA for years. Let's look at a few competitive advantage examples where companies have built successful strategies for years to come:
· Apple has managed to create an ecosystem to retain customers. The company has secured its differential advantage by offering multiple products including iPhone, iPad, Mac, Apple Watch, AirPods and others. Since every product works as a single entity within the ecosystem, changing brands is very inconvenient for Apple users.
· Tesla has built a leadership position in electric vehicles through its emphasis on innovation. With advanced battery technology, an extensive network of charging stations, and proprietary software (autopilot), the brand has effectively held its CA for years.
· Microsoft has been able to get back in the game thanks to the development of cloud technology. Just 15-20 years ago, the company was considered obsolete and lost out to major competitors in the form of Apple and Google. However, thanks to its focus on the enterprise segment (Windows and MS Office), as well as cloud platforms and AI tools as part of Satya Nadella's new strategy, Microsoft has returned to the list of the world's most valuable companies.
Anticipating trends means not just reacting to changes on time, but creating them. The above examples of companies with competitive advantage show that when investing in technology and developing customer loyalty - as well as technology - the key is to stay ahead of the curve to prevent competitors from taking your place.
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