In Jaynie L. Smith's book, Creating Competitive Advantages, she quotes Jay B. Barney's definition of competitive advantages.
A firm is said to have a competitive advantage when it is implementing a value-creating strategy not simultaneously being implemented by any current or potential competitors and when those firms are unable to duplicate the benefits of this strategy. (pg 19)
That's a much fancier way of defining competitive advantages than mine. But I like mine better because it's simpler: competitive advantages in business are the things that make a company different and/or better than the competition. These are the reasons that customers choose one business over another.
Two Types of Competitive Advantages in Business
The two types of competitive advantages in business are internal competitive advantages and external competitive advantages.
Internal Competitive Advantages
Internal competitive advantages are essential for businesses that sell commodities because they often are competing primarily on price. These are the advantages that take place behind the scenes and include things like Walmart's purchasing power and Coca-Cola's distribution capabilities.
Internal competitive advantages can also include things such as owning intangible assets (like patents or trademarks) or having processes/systems that increase productivity and reduce costs.
External Competitive Advantages
External competitive advantages are "customer facing" and should be well known to your target market. These include things like quality claims, expertise claims, benefits of the network effect, and so on.
Your external competitive advantages are the ones that should be promoted and marketed to customers the most. Make sure that your claims are objective, quantifiable, and honest.
Bonus Competitive Advantage in Business
Sometimes you can create a competitive advantage by promoting something that other companies may also do, but they aren't telling customers about it. My favorite example of this is my copywriting case study on "free trial" vs. "free trial no credit card required."
If you want to learn more about competitive advantages, do yourself a favor and get a copy of Jaynie L Smith's book, Creating Competitive Advantages or, if you can't get a copy, check out my notes on the book (while you're on my LinkedIn, feel free to connect and in your message tell me you came from this post).
