The Impact of Competitive Advantage over competitors
Either starting a business or investing in one, it is very important to look at what is called competitive advantage if you will be staying long in the business and playing the business game for a long time. The reason why an investor will want to investment in company A over company B after checking growth, management, and potential profitability of company A is competitive advantage (the ability to keep competitors far away and remain the voice in the industry).
When starting a business, it is important to make sure that your next competitor will be scared of coming into the same boat as you because you are either too big or you have the resources they do not have. That’s why Walmart has been able to thrive in any community it goes no matter the number of stores around it. Also, stores are scared to open close to a Walmart superstore because the store is large and people do not know how to enter into the industry without being consumed. This is a good competitive advantage.
Another way to get competitive advantage over competitors who are coming into the same business is in managing the economics of the business. When a company knows how to get resources freely or at a very cheaper rate, enjoy cheaper and larger marketing, wide distribution, and a large administration, the competitors will have to crosscheck their economics if they can stand such competitive advantage.
Branding is another competitive advantage as customers prefer to buy from an already established name instead of buying from a new company which they know little or nothing about. Little wonder why people prefer the Starbucks coffee over the new coffee café over the street? Branding does the competitive advantage.
Getting the right to a particular trade, purchase or action in a particular industry is a very large competitive advantage which will always chase off competitors. For instance, when a company that produces cement buys the sole right to mine limestone in a region, it will be difficult to see another cement company in that environment unless they want the previous company to supply them with the raw materials at the price comfortable by them.