Competitive Advantage

Competitive Advantage Concept: Competitive Advantage is a concept developed by Michael E. Porter in his bestseller “Competitive Advantage” and…

Competitive Advantage Concept

Competitive Advantage is a concept developed by Michael E. Porter in his bestseller “Competitive Advantage” and seeks to show the way how the chosen strategy and followed by the organization can determine and support its competitive success.

The competitive advantage emerges fundamentally from the value that a certain company can create for its clients and that overcomes the production costs. The term value, here applied represents what the clients are willing to pay for the product or service; a higher value results from the offer of a product or service with characteristics understood as identical to the ones of the competitors but for a lower price or, alternatively, from the offer of a product or service with benefits superior to those of the competitors that compensate most than a higher price.

According to Porter, there are two basic types of competitive advantage: the leadership in cost and the differentiation, which, together with the competitive extent, define the different types of generic strategies.

Porter also describes the basic instrument to diagnose competitive advantage and to find ways of intensifying it: the value chain. Through the value chain, the organization is divided in its basic activities (investigation and development, production, commerce and service) which help the identification of the competitive advantages sources.

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