8 Competitive Advantage Examples

Many Entrepreneurs get confused when asked to define their competitive advantage.  They most likely know what it is, but don’t know what someone wants to hear their competitive advantage is, or the correct terms to define that competitive advantage.  Today, we’re going to make it dead simple.  No need for complicated MBA terms here today.

In the simplest terms possible for example purposes, a competitive advantage is what you have…that another business doesn’t have.  For example, why can I not just go out there and do exactly what you’re doing?  What’s stopping me from stealing your sunshine?

So let’s take a look at some competitive advantage examples

Skill Advantage

Skill advantage, while it may not protect your company 5-10 years down the road, is definetly a competitive advantage example in startup or new business situations.  Let’s admit it, starting a new business is always easier, and faster, when you can do most of the work yourself.

Intellectual Property

Intellectual property is probably one of the best competitive advantage examples out there, mostly because it’s enforceable.  It’s legal protection over the things that give you an edge.  Here are a few examples:

  • Trade secrets
  • Trademarks
  • Patents
  • Copyrights

Keep in mind, with this example of a competitive advantage….yes, it’s great.  But having a patent doesn’t do you any good, if the market won’t buy what you’re selling.  For example, I have trademarks for companies that aren’t even operating.  Competitive advantage?  By textbook, yes, but not in reality because the company isn’t operating.  A competitive advantage is more like “icing” on your cake.

Strategic Partnerships

Another great competitive advantage examples (and perhaps one that isn’t widely considered by Entrepreneurs) is strategic partnerships.  For example, let’s say I go out there and form a strategic partnership with a big industry player, that in itself will raise my business’s valuation (value) significantly.

Like American Express.  That one is a good example because they target the same market I do.  Now, if you are my competitor, you are now toast because my strategic partnership just blew your existence out of the water. I have gained the ultimate example of a competitive advantage.  (For disclosure purposes, that was purely an example.  I do not have a partnership with American Express, just one of their credit cards)

First Mover Position

The first mover position as a competitive advantage is an example used more widely by disruptive technologies, and the two examples usually go hand in hand.  So what is a first mover position?  Well it’s pretty self explanatory huh?  It means you’re the first mover in that market share or industry with that product.

First mover positions are also often high growth start ups; since they’ll grow quickly it’s important they come out the door with a “bang”.  For example, the TV.  The IPhone.  No-one saw those coming.  Keep in mind too, first mover positions are:

  • usually in your head, you always have a competitor
  • rarely accepted by the market

When I say “rarely accepted by the market” let’s take another example of this competitive advantage: there is actually (I’m not messing with you) a guy an investor told me about.  This guy has developed some way to make you live to 150 years old, his business has been in the university testing for about 10 years now.  Why has no one heard of it?  Because it will be long after this guy is dead too, before it is ever accepted by the market.  Why?  Because the first thoughts that go through a consumer’s head, are objections.  For example, now I’m wondering “do I really even want to live till I’m 150?  What will that do to the human race?” See what I’m saying?

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Added Value, Less Costs

Added value, less costs is a competitive advantage and is almost necessary for a business to survive unless you’re a disruptive technology.  Basically, you take an existing product and add value to the customer and reduce the costs.

Know How Competitive Advantage

I actually had someone argue with me with an hour over whether or not a founder’s know how competitive advantage exists.  I say “yes, it does”…and here is an example why: the most successful founders & business owners we have seen were previously working in their industry or with their customers before they founded their companies.  This often gives founders unique insight into problems that exist, and bam…their idea is formed (this is what happens when founders are bored at a 9-5, their creative juices start churning).  Or, they have have a natural skill or talent that gives them a competitive advantage (going back to the first example in this article).

Location as a Competitive Advantage

I didn’t even think of this as an example of a competitive advantage, so thank you to who ever left this in the comments.  Location is a big competitive advantage for retail spaces, such as stores, gas stations, restaurants, etc.  To really get the most use out of this, consider the type of business you are, and who your customers are.  More expensive does not always mean better.  For example, let’s pretend I am a boutique selling bath products.  I’m a little more upscale, so trying to choose between retail space in

a) A location in the financial district of town on a main street, which has a bank next door, and a shoe polishing station in front.  Or

b) An upscale, surburban shopping center with a Carrabas, nail salon, and Target.

More than likely B will make you more profitable.  Most people in a financial business district of town are there for business and lunch.

If I’ve forgotten any competitive advantage examples today, or if you have any more ideas we can add….please leave them below in the comments!