how to build a competitive advantage
to build a competitive advantage a company must know what sets it apart from its competitors and then focus its message service and products with that difference in mind here are several strategies companies use to build a competitive advantage competitive advantage vs comparative advantagea firm s ability to produce a good or service more efficiently than its competitors which leads to greater profit margins creates a comparative advantage rational consumers will choose the cheaper of any two perfect substitutes offered for example a car owner will buy gasoline from a gas station that is 5 cents cheaper than other stations in the area for imperfect substitutes like pepsi versus coke higher margins for the lowest cost producers can eventually bring superior returns economies of scale efficient internal systems and geographic location can also create a comparative advantage comparative advantage does not imply a better product or service it only shows the firm can offer a product or service of the same value at a lower price for example a firm that manufactures a product in china may have lower labor costs than a company that manufactures in the u s so it can offer an equal product at a lower price in the context of international trade economics opportunity cost determines comparative advantages amazon amzn is an example of a company focused on building and maintaining a comparative advantage the e commerce platform has a level of scale and efficiency that is difficult for retail competitors to replicate allowing it to rise to prominence largely through price competition 