by Pankaj Mohan Prasad

Created on: August 24, 2007   Last Updated: January 15, 2008

The edge or the superiority which,a company has in a particular area, which it exploits for its advantage over its competitors in a market, is, in simple words known as the competitive advantage. This advantage can be developed on some or all of various fronts like manufacturing, quality, marketing, pricing etc.

It is with the objective of staying ahead in the market that a company chooses an area of having superiority or edge over its competitors. This edge gives it the advantage of having a space between itself and its competitors, difficult to bridge. It could be even technology or after sales. For example a company could choose to have a cutting edge technology to manufacture its products. This technology, if it becomes a factor leading to quality products, customer satisfaction, increased revenue and profits, it is said to be a factor of competitive advantage. In other words it does not face any competition on account of its having a superior or cutting edge technology and maintains a clear head-space over its rivals. This is an advantageous position that secures for itself and it becomes its competitive advantage.

It should not be confused with other similar terms such as :

1. specialization
2. Niche

1. Specialization: It is the area that a company might opt to specialize in. For example a company might choose to specialize in technical sales. But until this specialization becomes a factor to be capitalized on, it remains a common factor and does not become an area to compete with its competitors and gain advantage of it. Besides other companies and rivals may also imitate and copy the same. In other words they might also choose to specialize in same area, nullifying the resultant advantage to the initial company. It is the specific choice of area to be exploited which other rivals may not reach , that brings in the competitive advantage.

2. Niche: A niche is a particular place in the form of market or segment that a company might choose to cater to instead of the whole market on grounds of factors like product type, organizational size, competition, resources etc. It is in this niche that the company is able to survive and if possible earn profits. This niche is a relatively secure place that a company makes for itself. It need not be the only company catering to the market but there might be competitors also. The niche market gives a place for the company in a bigger segment to make or select an area of expertise and thrive and stand a better chance instead

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