Strategy
Competitive advantage
What lets a firm earn more than its rivals over time.
Facts checked against sources onWhat does Competitive advantage mean?
A competitive advantage is something that lets a company earn higher returns than its competitors over a long period, such as lower costs, a product customers value more, or assets rivals cannot copy. Michael Porter described the two basic routes as cost leadership and differentiation.
Where does it come up in case interview prep?
- What competitive advantage really isLesson in Why some businesses win: competitive advantage and the economics of strategy
- Brands, trust and pricing powerLesson in Why some businesses win: competitive advantage and the economics of strategy
- Cost leadership or differentiation: what must be trueLesson in Why some businesses win: competitive advantage and the economics of strategy
- Moats that erode: technology, rules and new rivalsLesson in Why some businesses win: competitive advantage and the economics of strategy
- Using it in a case: is the advantage real?Lesson in Why some businesses win: competitive advantage and the economics of strategy
- Brand economics: the price premium and the repeat rateLesson in Customers and growth: the economics of marketing
- Corporate and in-house strategyLesson in The same acumen in other roles
- Aviation players, trends, and how to crack the casesLesson in Airlines, airports, and aircraft leasing
Related terms
- Porter's generic strategiesCompete on lowest cost, on being different, or by focusing on a niche.
- Porter's Five ForcesFive pressures on how profitable an industry is; vocabulary, not a case structure.
- Economies of scaleCost per unit falls as volume rises.
- Economies of scopeCost falls when related products share resources.
- Barriers to entryWhat makes it hard for new competitors to enter a market.
- Switching costsThe cost or effort for a customer to change supplier.
- Network effectsA product becomes more valuable as more people use it.
- Vertical integrationOwning more stages of your own supply chain.
Learn it in context
See Competitive advantage at work in a lesson from Why some businesses win: competitive advantage and the economics of strategy, with checks as you go.
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