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Competitive Advantage

Competitive Edge vs Competitive Advantage

I’ve been guilty of using the phrases “competitive edge” and “competitive advantage” as synonyms for each other and to a large extent I think that’s valid.

Both can relate to a benefit one business has over a particular competitor or all the other competitors in the practical market.

But I’ve been forced to have a little rethink when a prospective client asked me “Paul what’s the difference between a competitive edge and a competitive advantage?”

He didn’t know the answer, so he wasn’t testing me but he wanted to understand the subtle distinction.

That got me thinking. Is there a difference between competitive edge and competitive advantage? It was the business strategy guru and Harvard professor Michael Porter who popularised the term competitive advantage in his two classic books Competitive Strategy and Competitive Advantage.

Porter argues that there are two basic forms of competitive advantage:

  • cost leadership – which gives the business the choice of selling at lower prices or making higher profits
  • differentiation – which creates buyer preference

These advantages can be applied to the broad market or to a focused niche market.

I don’t associate the phrase competitive edge with any particular business thinker but a quick search on the internet came up with two very different definitions.

Competitive edge “is the ability of an organization to produce goods and services more effectively than competitors do, thereby outperforming them. This means they must stay ahead in four areas: being responsive to customers, innovation, quality, and efficiency.”  (Answers.com)

“Competitive Edge is having a clear advantage over the competition in terms of one or more elements of the market mix that is valued by potential customers.” (The market mix is the seven P’s of marketing – Product, Price, Place, Promotion, People, Process & Physical evidence) (Coursework.biz)

It’s this second answer which I think is closer to the mark.

For me, a competitive edge is establishing a buying preference with the customer in comparison to the other options available.

I see competitive edge as a sub-set of competitive advantage more closely related to differentiation than to cost advantage.

A lower selling price can give you a competitive edge (since it influences buyer preference) even if the business doesn’t have a cost advantage over its competitors but instead accepts a lower margin.

But I don’t want you to focus on price. Far from it.

I want you to develop competitive edges which are strong enough to justify preference at the same or higher prices than competitors. This is where you need to be thinking about the 7 Big Questions of Business Success.

For most people, I don’t think there is a difference between competitive advantage and competitive edge.

But, if I’m asked again, at least I’ve thought through an answer.

in 3 – Your Strategic Positioning

The Customer Value Attribute Map is an essential tool to help you focus on establishing and maintaining a competitive advantage based on differentiation (i.e being different in ways which matter to the targeted customers.)

It goes by different names:

  • W. Chan Kim and Renee Mauborgne call it the Strategy Canvas in Blue Ocean Strategy, (This is probably the most famous of the names due to the popularity of the book.)
  • Cliff Bowman calls it the Customer Matrix in Competitive and Corporate Strategy,
  • I call a Customer Value Attribute Map (because I feel that’s the most descriptive) and
  • others call it a Customer Value Matrix.

It doesn’t really matter what you call it as long as you use the basic concept to get crystal clear about what particular customer segments or niches want and what you and your closest competitors offer. This way you can see areas where you are better than them, where they are better than you and where one of you offers a unique attribute.

Just don’t confuse it with the Customer Value Map which shows the fair value line of value for money between low price, low value brands and high price, high value brands and where your business lies in relation to that fair value line. [continue reading…]

in 3 – Your Strategic Positioning

What Customers Value – Order Winners & Qualifiers

I introduced the concept of order winners and order qualifiers in my article on key success factors and now I want to delve into this important topic in more detail.

How Customers Chose To Buy Or At Least Rationalise Their Purchase Decisions – Order Winners, Orders Qualifiers & Customer Value

Customers make their purchasing decision emotionally and logically on a perception of customer value for money.The unconscious mind communicates the decision to the conscious mind at lightning speed and leaves the conscious mind to look for the logical reasons to back up the purchase decision. [continue reading…]

in 3 – Your Strategic Positioning, 4 – Lead Generation

Stop Competing on Price by David Gomez

The full title of this book by David Gomez is

Stop Competing on Price: What every salesperson, entrepreneur and business professional needs to know to differentiate their product or service and make price irrelevant“.

In my review at Amazon.co.uk, I rated it as a Four Stars book, which means that I consider it to be good or very good.

Here is what I posted.

Thoughtful guide to differentiation

I read a lot of books about differentiation strategy and how to communicate those differences quickly and believe there is always room for more to increase understanding and clarity over what to do. [continue reading…]

in Best Business Books

Creating Competitive Advantage by Jaynie Smith

The full title of the book by Jaynie Smith is

Creating Competitive Advantage: Give Customers a Reason to Choose You Over Your Competitors

In my review posted on Amazon.co.uk, I gave it 3 Stars.

Here is my review.

Competitive advantage or benefit statement?

Every now and again I read a book that plenty of other people rave about but I don’t get. This is such a book. Sometimes the writing style just doesn’t click with me. Sometimes it’s the message in a book that’s the problem and that’s what happens here. [continue reading…]

in Other Business Books

Competitive Advantage by Michael Porter – 5 Stars

The full title of this important book by Michael Porter is

Competitive Advantage: Creating and Sustaining Superior Performance“.

In my review posted on Amazon.co.uk, I gave this book a rating of Five Stars. This means I think it is Excellent and is Very Highly Recommended to anyone with a deep interest in business strategy and how competitive advantage is created.

Here is my book review.

Very challenging but very rewarding if you’re interested in competitive advantage

I first read this book in 1990 when I realised strategy was the subject that combined (and reconciled) my interest in finance and marketing. I’d been very impressed with his book, “Competitive Strategy” and wanted to understand more about how you create competitive advantage through cost leadership, differentiation and focus. [continue reading…]

in 3 – Your Strategic Positioning, Best Business Books

The full title of this book by Rita Gunther McGrath is

The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business

In my review posted on Amazon.co.uk, I gave the book Two Stars.

Here is my review.

Old wine in a new bottle

I had high hopes of this book as I was interested to find out how the author could justify the argument of how the old ways of strategic planning were wrong and that she had a new play-book for dealing with a world of continuous change.

I was left disappointed. [continue reading…]

in Other Business Books