A strategic advantage refers to a position that gives a company an edge over its competitors and makes it likely to outperform them in the long term. Strategic advantages can take many forms, including a unique product or service offering, a strong brand or reputation, efficient operations, access to valuable resources or networks, and the ability to adapt to changing market conditions. Companies that have a strong strategic advantage are often well positioned to succeed in their market and achieve long-term growth and profitability.
To build and maintain a strategic advantage, companies must engage in ongoing strategic planning and analysis. This may involve assessing the company’s strengths and weaknesses, as well as identifying opportunities and threats in the market. Companies may also need to make investments in areas such as research and development, marketing, or operational improvements in order to maintain their strategic advantage. By continuously evaluating and improving their strategic position, companies can ensure that they are well positioned to succeed in the long term.
Overall, strategic advantage is an important consideration for companies that want to achieve long-term success in a competitive market. By continuously assessing and improving their strategic position, companies can gain a valuable edge over their competitors and set themselves up for long-term growth and profitability. The following are common types of strategic advantage.
Talent
The talent of your people including at the governance and executive management level.
Relationships
Relationships with stakeholders including investors, governments, partners, customers and the communities in which you operate.
Home Country
The country where you are located. For example, a lower tax rate can be a significant advantage over the competition as it allows you to invest more of your profits back into your business.
Processes
Your business processes such as a production line that produces high quality items at low cost.
Capabilities
Things that you can do. For example, a firm that is able to consistently design products and services with high perceived value.
Organizational Culture
The norms, expectations and symbols of your organization. For example, a firm where people take pride in their work.
Brand
How well your brands are recognized and your reputation.
Business Model
How you capture value. For example, a company that provides a two-sided market versus a firm that sells its own products.
Products & Services
The position, quality and unit cost of your products and services. For example, the cheapest organic coffee on the shelves.
Costs
Your overhead and unit costs. All else being equal, a firm that spends 5% of revenue on general administration has an advantage over a firm that spends 30%.
Productivity & Efficiency
The amount of output you produce for an hour of work or unit of a resource such as energy.
Knowledge
Your know-how, designs, methods and information capabilities. Includes things like intellectual property, data and the talent of your people.
Scale
A large firm tends to have more brand recognition and lower unit costs due to economies of scale. A small firm can typically change more quickly. Generally speaking, a firm that is large enough to achieve significant market share without becoming slow to change has a significant strategic advantage over both the small and the slow.
Capital
Capital including things like land, facilities, infrastructure and equipment. For example, a hotel with beachfront access to a popular beach.
Sustainability
Your ability to keep up with the changing values of society and to manage risks to your firm and the greater community.
