A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by promoter of lower prices or by providing greater benefits and service that justifies high prices.
Michael Porter identified two basic types of competitive advantage:
cost advantage
differentiation advantage
A competitive advantage exists when the profligate is able to deliver the same benefits as competitors but at a lower cost (cost advantage), or deliver benefits that hap those of competing products (differentiation advantage). Thus, a competitive advantage enables the square to create sea captain value for its customers and superior profits for itself.
Resources and Capabilities
According to the resource-based view, in say to develop a competitive advantage the firm moldiness have resources and capabilities that are superior to those of its competitors. Without this superiority, the competitors simply could replicate what the firm was doing and any advantage quickly would disappear.
Resources are the firm-specific assets useful for creating a cost or differentiation advantage and that few competitors washstand acquire easily.
The following are some examples of such resources:
Patents and trademarks
trademarked know-how
Installed customer base
Reputation of the firm
Brand equity
Capabilities refer to the firms ability to hire its resources effectively. An example of a capability is the ability to bring a product to market faster than competitors. Such capabilities are engraft in the routines of the organization and are not easily record as procedures and thus are difficult for competitors to replicate.
The firms resources and capabilities together orchestrate its distinctive competencies. These competencies enable innovation, efficiency, quality, and customer responsiveness, all of which can be leveraged to create a cost advantage or a differentiation advantage.
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