What is a sustainable competitive advantage? The simplest explanation is it is a competitive advantage that is very difficult for competitors to imitate. But, let think about it for a moment. While the definition is easy to understand, it’s practically difficult to achieve this level. What would be your company’s sustainable competitive advantage – something that helps you to outperform the market and is hard to copy? If you can answer this question with confidence, your company’s position in the market is secure and it’s very likely that your company is very profitable. However, it’s not always easy to identify the source of a sustainable competitive advantage.
Let’s go through a quick list of what could be sources of a sustainable competitive advantage.
- Benefit of size – a company is the largest company in the industry or the market.
- Access advantage – a company gain a sole access to resources and/or a customer base.
- Know-how – a company has a superior access to information may reflect the benefits of scale or experience.
- Input – tying up inputs will lead to a sustainable advantage only if the commodity’s supply is bounded and the company has the right to use it on favorable terms.
Does your company own any of the above items?
Another way to secure sustainable competitive advantage is to develop a system that an imitation of its part is useless. For example, Walmart developed a system to enter the markets that everyone else thought there was no potential. Walmart also developed one of the best distribution system for its inventory to its stores. It’s not to hard for Walmart’s competitors to understand and copy some the items in the Walmart’s system. However, imitating only part of the system is pointless because of the interaction of all parts cannot be imitated.