by Leigh Goessl

Created on: March 12, 2010   Last Updated: March 16, 2010

Competition lies at the heart of open markets. Companies actively engage in ways to try and emerge as the dominant force in their industry and the one consumers turn to when they have needs to be met.

This is not an easy feat, especially with so much competition in the current markets due to the expansive visibility the web has to offer. Those businesses that want to win the bulk share of a market must offer something of value to customers that their many competitors are not offering. They must also focus on maintaining a top presence in the industry in order to reach competitive advantage.

Businesses can gain a competitive advantages through using several approaches, but in general competitive advantage is broken down into two segments: cost advantage and differentiation advantage.  

Here is a bit more information on the cost advantage and differentiation advantage:

♦Cost Advantage

Cost advantage occurs when a business can produce a product or service at a lower cost than the competitors are able to produce. The ability to do this decreases expenses in production and increases profitability with higher margins of cash flow.

♦Differentiation Advantage

Differentiation advantage occurs when a business is able to create a product or service that is unique and something no one else has; in addition the product/service must be considered to be superior and more desired than the competition's offerings.

Creating vision and developing appealing features, products or services that will attract customers is another advantage standpoint and can be applied under the differentiation advantage. Not all new innovations succeed, however those that are created through research and analysis of the markets have a higher chance of success.

The modern business environment has evolved significantly even in the last few decades. Today it has reached the point of being a global environment and due to this it is essential for companies to strive hard to maintain a competitive advantage in any given industry. Today's businesses have to work harder to cultivate and grow their desired market segments to become a part of their established customer bases.

One reason for this is today businesses must also compete with competitors located across the globe; competition is no longer limited to local markets. This means that consumers have more options and it might be harder to achieve both cost advantage and differentiation advantage.

Some businesses may insert outsourcing into their competitive advantage equation which can pose some challenges to those competing because it significantly lowers production expenses. In terms of differentiation businesses now have a lot more competition and a large pool of ideas to compete against; it is much harder to be unique in a global market as opposed to a localized one.

This is only a basic rundown of competitive advantages as there are many other facets to consider. Achieving the competitive advantage is more challenging in the 21st century than it was in previous times. However with a bit of innovative and dynamic thinking, companies can indeed achieve the desired competitive advantage.

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