Have you ever been loyal to one product and did not want to switch to another product because it was considered superior to all aspects of the product? That means that the product has a competitive advantage or competitive advantage.

Of course, by knowing competitive advantage, you can develop business strategies to be more profitable and get a special place for your customers. Then what exactly is a competitive advantage and how does it affect business management in strategy?

Competitive Advantage

Competitive advantage or competitive advantage is the company’s strategic ability in business competition. According to Michael Porter, a business strategist from the United States, competitive advantage must be able to explain and instill business value to consumers so as to form their own perceptions in the eyes of consumers. This means that businesses must convince consumers to be willing to spend time and money to get the benefits and value for money.

Competitive advantage can be said to be unique because every company has different advantages. But whether the company can maximize these advantages into the value that can benefit the company or vice versa.

4 Key questions in building competitive advantage

  • How do customers see your business?
  • How can you create value in the eyes of consumers?
  • What competencies does your business need in terms of resources and performance?
  • How do shareholders value your business?

Simply put like this, competitive advantage is the ability and strength of the company compared to other companies. For example, you sell a versatile jacket product that has many pockets and is waterproof and is sold cheaply. That’s better if competitors only sell the same jacket but not as complete as yours and in terms of price are not cheaper than your product.

Another example of why people tend to use Google Ads compared to other advertiser services? Because Google has a competitive advantage that is not shared by other advertisers. For example, providing a different price, integrated with data processing software, has full features, and also the most important thing is that Google is considered more valuable.

Maybe you are wondering, if so what distinguishes brand awareness from competitive advantage? Clearly different. If brand awareness only focuses on how the name and brand of the product can be conveyed and remembered by consumers, then the competitive advantage is a more complicated process than the branding process because it involves all aspects such as investment, accounting, and the economic value of the company. It can be concluded that branding is part of a competitive advantage.

1. Why is Competitive Advantage Important?

Your goal of doing business, of course, is to gain profit. To achieve maximum profits so that the company can survive, the company needs to have a competitive advantage. With a competitive advantage, you can compete in the midst of business competition. From here, you already understand the basis of the advantages of competitive advantage in business.

But competitive advantage does not only benefit you as a business person but also consumers and potential investors. For consumers, you can add value to your products, meaning you can answer the needs of consumers through your products.

For investors, competitive advantage can be a measuring tool for assessing business feasibility and performance. Does the company can provide a good return on investment for investors or not.

2. Competitive advantage strategy

Competitive advantage describes the business situation has the ability to achieve the desires of consumers compared to competitors. The process of competitive advantage is very sensitive because it is fast and changing. Actors in the business competition will always compete to improve competitive advantage.

In addition, competitive advantage is said to be sensitive because if you implement a wrong strategy, competitive advantage can be a nightmare for your business.

In developing a competitive advantage strategy, there are two factors that you need to consider. First, resources are how you can produce goods, and second is performance, that is how you can process the finished goods can be delivered to consumers.

3. Cost Leadership Strategy

This strategy was coined by Michael Porter. This low-cost strategy is actually the same as a trade-off strategy. Where companies increase product value but reduce prices.

Value in question is the value of consumer perceptions of your product. Usually, this strategy is aimed at consumers who are sensitive to low prices and do not need brand products to make decisions.

As mentioned before, you must pay attention to two factors; resources and performance. To implement this strategy, you must have good technology, the ability to optimize capacity, the ability to reduce prices, and easy access to raw materials.

The cost leadership strategy can be applied if you do business in the commodity or product market that is widely used by the community.

4. Differentiation Strategy

This strategy is actually a fairly common strategy carried out in the red ocean market or a market that has a lot of competition. In short, you must understand the differences that your product has in order to be able to get your own customers.

For example, you can add certain features to your product to provide a different experience than competitors cannot. Other, you can increase the durability of your product, or the unique taste, for example, making secret recipes on your product.

Examples of differentiation strategies in smartphone products where Apple has security features and exclusivity, while Android products are more customizable and open.

5. Focus Strategy

The focus strategy is arguably a combination of differentiation and low-cost strategies. This focused strategy is where you can target a more specific market or niche. But as the saying goes, different doesn’t mean you are great. Meaning different does not mean there are opportunities there.

There are conditions that must be considered in implementing the focus strategy. First, the market has good and sustainable potential, secondly, there are no competitors in it or have very few competitors.

Usually, this strategy focuses on serving certain markets, certain locations, and also certain community groups. For example, luxury car manufacturers are hard to find in India.

6. Innovation Strategy

As the name suggests, this strategy is suitable for you sailing on the blue ocean market. This means that there are still no competitors and allow you to be a pioneer in the market. This strategy is actually of two kinds; develop existing products or create new products that don’t yet exist.

An example of an innovation strategy is an online motorcycle taxi, at which time the motorcycle taxi online was a solution amid skepticism of the motorcycle taxi online and became a new market driver in the field of transportation.

7. Growth Strategy

This strategy is also common where you as a business person widens the range of products, diversifies, or adds supporting products.

8. Alliance Strategy

The alliance strategy or complementary role strategy is where there is a cooperation between business people, business-consumers, business-suppliers, business-producers, and other business relationships and presents practical and new solutions. An example of an alliance strategy is that Samsung and Google are working together to spawn the Android operating system.

9. Resource Analysis with VRIO

As mentioned earlier, competitive advantage is very dependent on resources and also organizational performance. How can both present a product that is of value to the community?

In identifying resource quality, there is a term called VRIO, which stands for valuable, rare, imitate, and organized. A good resource in creating a competitive advantage is that they must have these four points. The description of VRIO is as follows.


Companies must be able to provide economic value to human resources themselves, for example using technology in accelerating work and production and having a reliable workforce in developing strategies and driving business.


Resources that must be owned by the company must be unique and not owned by other companies. For example, the secret recipe that you have in running a culinary business.


This means that resources can be replicated and cannot be replicated. The easier the product to emulate, the more competitive the market will be, whereas if the resources you have are difficult to emulate, you can become stronger in the competition.


This means that how these resources can be managed and managed so that they can create resources that are valuable, difficult to imitate, and unique. In a way, organized is a combination of the four previous factors.

10. Competitive Advantage Measurement Tool

Competitive advantage in business also needs to be measured. Is it feasible or not said the business has excelled to compete. There are two measurement tools, the balanced scorecard and also the triple bottom line.

Balanced Scorecard

The balanced scorecard is a must-have measurement tool for companies both in business feasibility and also in excellence and competition. In short, there are four perspectives that must be assessed on your business whether it is feasible to hold a competitive advantage.

  • Financial perspective – How well can a company manage its business finances. Ranging from planning, operations, to the purchase of production materials.
  • Consumer perspective – includes how loyal your customers are, how satisfied your customers are, what value consumers perceive of your products, and also how many customers you get.
  • Internal perspective – measures how the quality of the overall process of internal business activities starting from planning, operating, and evaluating.
  • Company HR perspective ( learning and growth ) – As an indicator of how your employees can contribute to your business and the competencies that your employees have.

Triple Bottom Line

The second measuring tool is a triple bottom line consisting of people, profits, and the planet. Where a business can be said to have a competitive advantage if the three factors overlap or all three are owned by your business.

People means how your business has value benefits for you, consumers, and the community around your business environment. Planet how much your company cares about the environment, what impact your business has on the environment. While profit is how the business you run benefits you.

As explained earlier, competitive advantage is closely related to technology in improving your business’s ability to compete.

Starting from production technology, HR management technology, to financial technology such as accounting software. Where the role of technology in business is very important in the era of fast-paced internet and fast-paced industries.