Types of Competitive Advantage
Competitive advantages can be broken down into comparative advantages and differential advantages.
Comparative advantage is a company's ability to produce something more efficiently than a rival, which leads to greater profit margins.
A differential advantage is when a company's products are seen as both unique and higher quality, relative to those of compititors
Now let us understand this in simple terms
In order to compete with your regular rivals your product and process orientation should be better and organised and this can be acheived by V-R-I-O method
V (Value of your product)
Adding value to products and services is very important as it provides consumers with an incentive to make purchases, thus increasing a company's revenue and bottom line
Simply make your product cost effective and easily accessible to your regular and upcoming customers
R(Rareness of your product)
Rare product attracts customer to a whole new level .While other are working on regular design and techniques you should try to be rare and different
I( Inimitable- that cannot be easily copied)
Cost of imitation is usually high in order to gain a competitive advantage due to the following reasons:
- Unique Historical Conditions - an innovative firm gains low-cost access to rare resources in a particular time and space,
- Causal Ambiguity - an imitating firm cannot tell the factors that lead to the competitive advantage of an innovative firm,
- Social Complexity - when the resources involved in gaining competitive advantage is based on interpersonal relationship, culture and other social background,
- Patents - a source of long-term competitive advantage certificated by authority in a few industries such as pharmaceuticals
O( Organised and scalable)
Without the correct organization, even firms with valuable, rare and costly to imitate resources and capabilities can suffer competitive disadvantage (Barney & Hesterly, 2011).
So basically VRIO framework is the most famous and successful business stategy that can help you grow your business multiple times.Learn basic business tips and apply techniques for your upcoming business and marketing products .
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