How to build and acquire competitive advantage

Competitive advantage represents the superior position enjoyed by an organisation with respect to its certain factors when compared to its competitors.

Superior position in the industry enables a firm to occupy major market share. A firm can attain competitive advantage in various ways i.e. the firm may be efficient in performing manufacturing activity, economies of scale, it may possess good manufacturing equipment, highly skilled manpower, the size of the organisation, financial strength, lower cost, higher quality, brand image, loyalty, etc,

Firms put efforts to provide distinguished products which make the customers can be attracted easily towards these products; it helps in creating competitive advantage. It is closely related to the firm’s strategy, capability, resources, technology and acts as a fit between the firm and its strategy.

Competitive advantage helps the firm in successfully exploit its opportunities and to avoid threats and risks. It helps the firm to win the completion and also to protect itself against the competition. It helps in sales and revenue maximization.

If the firm does not have any suitable strength then it is not able to implement the selected strategy. It may lead to the failure of even a well-designed strategy of the firm. Without a competitive advantage, it may not be possible for the firm to attain its corporate objectives. Simply competitive advantage acts as the heart of the firm’s strategy and success.

How to build competitive advantage:

How competition affects the market

Incorporating competitive advantage as an essential aspect of the corporate strategy:

If firm desires to attain competitive advantage then it is required to integrate competitive advantage as an essential constituent of the corporate strategy. Objectives of the organisation act as a major source for the achievement of competitive advantage over its rival firms.

Organisation’s objectives and competitive advantage both are interdependent. Corporate strategy, objectives, mission and vision enable the organisation to attain the competitive edge over the other competitors. Merges, strategic alliances and partnerships make possible to attain competitive advantage.

Analysis of internal and external environments:

Firms need to analyse and compare their strengths and weaknesses with their competitors. By analyzing some distinctive features such as market share, customer service, brand image and customer satisfaction helps the firms in strengthening its market position by adopting various strategies.

Internal and External environments

Internal environment includes:

  • Employees
  • Financial position
  • Machinery
  • Size of the organisation
  • Employee satisfaction
  • Technology etc

External environment includes:

  • Customers’ tastes and preferences
  • Competitors’ strategies
  • Technological changes
  • Demographic changes
  • Market fluctuations
  • Economic environment
  • legal environment
  • political environment
  • Suppliers etc


Benchmarking is an effective tool through which achievement of higher levels of competition becomes possible. The process of measuring the performance of an organisation against the competitor’s performance and making use of the information as a basis for setting and modifying organisation goals, strategies, targets. It is the process of adopting the world-class best practices.

Bench marking

The benchmarking process not only helps the firm to identify its strengths and weaknesses but also helpful in increasing the production level by making effective use of technology and manpower.

Types of benchmarking

Performance or operational benchmarking

In this type of benchmarking the cost, quality, performance characteristics of products are compared with the benchmarked company. In performance benchmarking an in-depth analysis of products and services of all the firms in the same industry is conducted.

Process or functional benchmarking

This type of benchmarking concentrates mainly on the work processes like billing, employee training, etc, the effective practices of the organisations carrying out the same functions are determining in this type of benchmarking.

Strategic benchmarking

In this type of benchmarking the firms studies the way in which competitors formulate strategies and attain a competitive advantage over other firms in the industry and becomes successful in the industry.

Adoption of value chain approach:

The primary and support activities of a firm focus on improving its value by reducing or removing unnecessary costs and improving performance. Value analysis is also called as value engineering. Value refers to the relationship which exists between function and cost. Value can be increased by enhancing the function at constant cost or by maintaining the same function by decreasing the costs. It may be possible through making cost assignments, by identifying cost drivers, understanding cost dynamics, and through controlling cost drivers.

The value chain analysis deals with the activities which enhance the capabilities and economic performance of the firm. Elements of value chain analysis are as follows.

Value chain analysis

Primary activities

The primary activities are those activities which directly relates to the creation, manufacture, development, sales and serving. The series of activities are

 Inbound logistics include warehousing and inventory control, receiving, storing, and disseminating inputs.

The operation means transforming inputs into outputs which are the final product of the firm.

Outbound logistics perform collecting, storing, and distributing the semi-finished goods or finished goods.

Marketing and sales involve creating awareness about the product to the customers through various advertisement strategies. By using different marketing strategies marketers maximize the sales.

 Service means customer service it creates the brand image and loyalty. It helps in maintaining the value of the product.

Support activities

The remaining activities of the value chain analysis help in supporting the primary activities, which help the firm in enhancing and attains efficiency. Procurement, technology development, human resource management, firm infrastructure are involved in support activities.

Competitive advantage

For gaining the competitive edge over the competitors depends on the value that a firm is able to create for its customers. Offering quality products at low prices, providing quantity discounts on bulk purchases, maintaining good ambiance in restaurants, all these attributes acts as competitive advantage and constitute value in the eyes of customers.