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Competitive advantage: Certain conditions allowed to a company to produce goods and services at equal value but in a lower price rate is called competitive advantage. It allows the productive entity to generate more sales or higher margins as compared to its competitors. It helps to generate greater value to a firm and its share holders because of certain strengths and conditions.
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Types of Competitive Advantage
Comparative advantage and differential advantage are two types of competitive advantage
• Comparative advantage: It is created when an organization is able to manufacture a good or service at a lower cost than its competitor. It offers higher margin on sales and is derived from efficient internal systems, geographic location and economies of scale. A comparative advantage does not imply a better service or product.
• Differential advantage: It is created when a firm’s product or services are different and superior from its competitor. It can be derived from advanced technology, strong brand identity, patent protected products etc.
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