Standard Article

Competitive Advantage

Part 5. Product Innovation and Management

  1. Shikhar Sarin

Published Online: 15 DEC 2010

DOI: 10.1002/9781444316568.wiem05035

Wiley International Encyclopedia of Marketing

Wiley International Encyclopedia of Marketing

How to Cite

Sarin, S. 2010. Competitive Advantage. Wiley International Encyclopedia of Marketing.

Author Information

  1. Boise State University, Boise, ID, USA

Publication History

  1. Published Online: 15 DEC 2010

Abstract

Competitive advantage is the relative advantage one business has over another that is sustainable and translates into a benefit that is important to target customers. There are two basic types of competitive advantages: cost leadership and differentiation. When combined with the scope of a firm's activities, they give rise to three generic business strategies: (i) cost leadership – where the firm seeks to become the low-cost producer in an industry; (ii) differentiation – where the firm seeks to position itself uniquely along one or two dimensions that the customer values; and (iii) focus – where a firm tries to optimize its strategy by selecting a segment or a group of segments in the industry, and seeks to achieve competitive advantage in the target segment(s). Suggestions for sustaining these competitive advantages are explored.

Keywords:

  • competitive advantage;
  • sustainable advantage;
  • generic business strategies;
  • cost leadership;
  • differentiation;
  • focus;
  • niche