Sustainable competitive advantage is an important issue in business. It means having something that gives you an edge over your competitors, and will continue to do so. It can apply to both people and businesses. Show
For businesses, it means something that your customers see as a long-term reason to buy from you rather than your competitors. As an individual, you can ensure that you have the skills that mean that employers will continue to want to employ you in the longer term. This page explores the concept, and provides some ideas for tools that you can use to identify areas where you have an advantage, and then help you to maintain that. Defining Sustainable Competitive AdvantageA competitive advantage is anything that allows a business to outperform other businesses in the same industry or sector (its competitors). A sustainable competitive advantage is one that lasts in the longer term. Sustainable competitive advantage can arise from anything that means that your customers are more likely to buy your products or use your services. For example:
Because a sustainable competitive advantage leads to long-term gains over your competition, it is highly sought-after by businesses. Long-term, not forever A sustainable competitive advantage is a long-term concept, but will not last forever. As soon as any company develops one, its competitors will immediately start trying to copy what it does. Once one of them manages to do so, the advantage is gone. Businesses with a sustainable competitive advantage must therefore continue to innovate, to ensure that they stay ahead. Identifying Potential AdvantagesTwo useful tools for identifying your potential competitive advantages are USP analysis and core competences analysis.
Both USP analysis and core competence analysis start in the same place: identifying and understanding what customers want and value This requires you to dig down into what actually makes customers buy particular products or services, and how they make their buying decisions. It is a good idea to involve those in the organisation who have most contact with customers, such as the sales team. It is an even better idea to ask your customers and potential customers. The end result of this step is a list of criteria that customers use in their decision-making. USP analysisOnce you have your list of buying criteria, for USP analysis you then need to:
Core competence analysisCore competence analysis also starts with the list of buying criteria, but the steps that follow are rather different:
Further Reading from Skills You Need The Skills You Need Guide to Business Strategy and Analysis Based on our popular management and analysis content the Skills You Need Guide to Business Strategy and Analysis is a straightforward and practical guide to business analysis. This eBook is designed to give you the skills to help you understand your business, your market and your competitors. It will help you understand why business analysis is important for strategy—and then enable you to use analytical tools effectively to position your business. Using analysis to develop sustainable competitive advantageFor both businesses and individuals, the key to success is identifying and building on your strengths, and managing your weaknesses. The tools described here enable you to do that, and then build a long-term advantage for yourself or your business. This page focuses more on using this type of analysis in business, and as a manager or leader. For more about individual development, you may want to read our pages on Personal Development. As with any analysis, finding the answer is only the start. You then have to put them into practice, and develop the sustainable competitive advantage that will help you to get, and stay, ahead. What is the meaning of sustainable competitive advantage?an advantage that allows a business to be more successful than its competitors over a long period of time: Companies now recognize that good human resources are as important as products in building a sustainable competitive advantage.
What are the four sustainable competitive advantages?The idea here is that if a firm is to maintain sustainable competitive advantage, it must control a set of exploitable resources that have four critical characteristics. These resources must be (1) valuable, (2) rare, (3) imperfectly imitable (tough to imitate), and (4) nonsubstitutable.
Why is sustainable competitive advantage important?Sustainable competitive advantage is the key to business success. It is the force that enables a business to have greater focus, more sales, better profit margins, and higher customer and staff retention than competitors.
How do you identify a sustainable competitive advantage?Sustainable advantages fall into three categories: size in the targeted market, superior access to resources or customers, and restrictions on competitors' options. Note that these advantages are nonexclusive. They can, and often do, interact. The more of them, the better.
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