Overview of Competitive Advantage Example
Competitive advantage has been defined as the superior performance of the organization in comparison to other organizations in the same industry or superior performance relative to the sector average. It is also be defined as anything particular an organization does superior to its competitors.
Superior performance can be defined as in term of a higher return on investment (ROI), higher return on equity (ROE), profit margins, loyalty brand, goodwill, and reputation.
Examples of Competitive Advantage
Below are some examples
Competitive Advantage Example – 1
Let us look at an example of competitive advantage, Tesla Incorporation. Tesla is a company that produces luxury cars and high tech technology. If you look at all the aspects of their business, it can be said that they have no direct competitors based on the industry they operate in and based on the product/services they provide.
Tesla is known for investing most of its revenue in research and development activities. Their motive is mainly constantly to improve and make high tech personal transportation. They are trying to reduce the use of oil which is considered as the primary source of energy. Apart from this, they are looking to automate everything. Tesla, for all these reasons and more, is also considered as a highly eco-friendly company. All these factors make Tesla stand out from its competitors, and this is expected to stay the same in the future.
Tesla has a focused strategy to stay in the luxury market. However, it is not going to be the same in the future. Tesla is looking at producing cars for personal use on a large global scale. They are planning to launch more affordable products to the common man like Model three. This will help Tesla get a stronger position in the market as competitors start increasing in this space.
Competitive Advantage Example – 2
Apple products are known for having a differentiation advantage over all its competitors. They have the highest quality, newest technology, strong brand name, loyal customers, intuitive and interesting designs. Apple has always made a strong, impactful choice on all its customers as well as its competitors by its impactful design and innovative structure. For this reason, now its competitors have started making designs, features, and technology very similar to Apple. Apple can also be considered as a luxury product.
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Similar to our previous example of Tesla, Apple also invests a lot of revenue in research and development for developing new products. One more factor which differentiates Apple from its competitors is they don’t produce products in volumes as their competitors do. Their products are created carefully to provide the highest customer satisfaction.
This strategy has given them an edge over its competitors, and it lets them sell their products at a much higher price than the same product made by the competitors in the market. They have been able to do this over the years without taking a hit on the profit margins or market share.
All these factors make Apple the luxury brand that it is today
Competitive Advantage Example – 3
Now let’s look at a company that caters to the need and makes it its competitive advantage. The era of Facebook, Twitter, and LinkedIn all have emerged years before. However, now the attention is driven mainly towards messaging and communication. Facebook maintained its position by acquiring two companies with this potential, Instagram and WhatsApp.
Similar to this is a company called Pinterest. It has carved its niche in the market. The company is pretty young and still has a very high valuation ($12 billion). The company has 200 million subscribers and active users; most of them are from the US, and approximately 80% of them are women. At the beginning of its business, Pinterest grew its business using the referral model without using the expensive acquisition methods of customer acquisition.
What Pinterest has got is need-based positioning. It provides users who use the network to buy new things. It was a photo-based business model which then moved to the activities like sharing some creative arts, interior designs, and fashion ideas.
Like the other companies, Pinterest also would have tried to move in many segments but is choose not to and was stuck to its core competency of driving the value from an image-based design. This has also driven the other market of advertising and branding.
Pinterest not only made revenue but crossed $100 million in 2015, which then went up to grow by $300 million in 2016, a three-fold increase. Pinterest has created a lucrative environment serving a specific need and found opportunities in a similar segment.
Competitive Advantage Example – 4
Now let us look at three similar companies, which, even after being a similar standout, Google, Facebook, and LinkedIn.
Google stands out for being an effective search engine for the internet. Google was able to succeed because of the style, market positioning, innovation, and the network effect.
Facebook is the biggest competitor of Facebook. One strong competitive advantage that Facebook has over Google is that of the network effect. Which then lead to innovation, free advertisement business, and giving way for personalized content
LinkedIn, on the other hand, is not like conventional social media. Its main focus is on business professionals, and this is their competitive advantage. LinkedIn is known for being a niche media network.
All these companies being in a similar line, and competitors are still surviving and making good growing revenues.
Conclusion
While looking at a competitive advantage, it is also required that we look at a comparative advantage. Both these concepts are linked to each other but are not the same.
A company is said to have a comparative advantage when it is able to produce goods and provide services at a lower cost than its competitors. On the other hand, competitive advantage is more dynamic and can be created while the comparative advantage is determined by a few unchangeable factors.
Comparative advantage can help the company in getting a competitive advantage. However, even having a good comparative advantage does not necessarily mean that it will have a competitive advantage.
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