Difference Between Competitive Advantage and Sustainable Competitive Advantage

It’s true that we live in a very competitive world where businesses compete with each other to gain an upper hand in their respective industries. Because of the constantly changing environment, businesses keep exploring new avenues to stay in the game. Every business has its area of expertise, or you could say strengths and weaknesses. Competitive advantage is figuring out the best possible ways to compete with one another and do something better than what others are doing in the same space. However, as the technology is constantly evolving, simple having just a competitive advantage over competitors is not enough. A long-term plan is required to keep up with the pace and this is where the concept of sustainable competitive advantage comes into play. In this article, we break down the key differences between competitive advantage and sustainable competitive advantage.

What is Competitive Advantage?

Competitive advantage is a critical business topic that’s often misunderstood. Competition is at the core of any business. It determines the competitiveness of a firm in terms of its unique strengths and attributes. It is the appropriateness of a firm’s activities that contribute toward its overall performance, such as innovation, superior customer service, skilled workforce, a cohesive culture, or good implementation. Essentially, it’s all the factors that give a firm an edge over its competitors. Competitive advantage describes the attractiveness of an industry and their underlying causes. Something you can do better than others gives you a competitive advantage over your competitors.

What is Sustainable Competitive Advantage?

One downside of competitive advantage is that it’s not long-term and it’s often difficult to establish. Now if a firm maintains a competitive advantage over a long-term period without being imitated by its competitors, it becomes a sustainable competitive advantage. It is when a business constantly and efficiently outperforms its rivals in the same industry over a long period of time. It is the idea of implementing effective business strategies, such as proprietary technologies, improved customer connections, an innovative culture, strong brand recognition, and more. 

Difference between Competitive Advantage and Sustainable Competitive Advantage

Culture

– Competitive advantage is often associated with a culture that aims to establish a profitable and sustainable position within an industry based on immediate and quick gains. It may prioritize quick wins over long-term sustainability and may not necessarily factor in the impact of its actions on the environment or the society. Sustainable competitive advantage, on the other hand, is often based on an innovative culture that embraces constant change and values long-term planning and sustainability.

Knowledge

– Explicit knowledge brings competitive advantage. Explicit knowledge is something that is stored and retrieved quickly, and shared efficiently through visual communication techniques and other formal means. It is most easily accessible and recorded and can help firms to streamline their processes, reduce costs, and improve efficiency. Sustainable competitive advantage of an organization often relies on the implementation of tacit knowledge – knowledge that is acquired through personal experiences, observation, and practice.

Tactics/Strategies

– Competitive strategy aims to maintain a profitable position against the forces that determine industry competition. It involves creating a unique value proposition that gives a firm an upper hand. There are many ways competitive advantage can be achieved, such as efficient production and supply chain management, customer intimacy, effective marketing and branding, product differentiation, cost leadership, and more. Sustainable competitive advantage can be achieved through constant innovation, fostering a culture of learning, adaptability, superior customer service, and so on.

Competitive Advantage vs. Sustainable Competitive Advantage: Comparison Chart

Summary

In a nutshell, both are related concepts that are crucial to business success. Competitive Advantage determines the competitiveness of a firm and its ability to outperform its rivals in the short-term. It is something you can do better than others in the same industry/field. But in today’s ultra competitive business landscape, simple having just a competitive advantage over competitors is not enough. Businesses need a long-term competitive advantage that is difficult to replicate. The idea is to create a culture that embraces constant change and values long-term sustainability.

What is meant by sustainable competitive advantage?

Sustainable competitive advantage means creating value for customers in a way that is unique, superior, and difficult to replicate. The goal is to achieve and maintain long-term success and growth.

How does a competitive advantage become a sustainable competitive advantage?

When a firm or organization constantly strives for excellence and is able to maintain its competitive edge over a longer period of time, even in the wake of the current evolving market trends and best practices, competitive advantage becomes long-term and sustainable. 

What is the difference between comparative advantage and competitive advantage?

Comparative advantage is a firm’s ability to produce goods and services more efficiently and at a lower opportunity cost that its rivals, while competitive advantage is a firm’s ability to provide goods and services at a much stronger value to customers.

What are the 3 types of competitive advantage?

The three types of competitive advantage are cost leadership, product differentiation, and focus advantage.

What is an example of a sustainable competitive advantage?

One of the best examples of sustainable competitive advantage is Patagonia, an outdoor apparel brand that has established a reputation for environmental and social responsibility by implementing ethical business practices.

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