High cost-benefit ratio
As an entrepreneur, you can achieve a high margin if you can offer your customers products that have a high cost-benefit ratio. This means that you can skillfully increase your prices over time without putting a lot of strain on the customer. As a rule, these are mostly ingredients or components in the low-price segment. These are hardly significant for your customer in terms of costs, but are still absolutely necessary.
In this day and age, network effects are one of the most important competitive advantages. New tech companies in particular owe their success to their structural network effects. However, that does not mean that other types of networks that have been around for a long time no longer represent a competitive advantage. A distinction is still made here between the radial networks and the individual nodes as a network.
Depending on the company, cost advantages can also be a competitive advantage. However, whether this is only a short-term benefit or whether you will benefit from it in the long term depends on the type of costs. There are economies of scale and advantages in terms of costs. The latter result primarily from efficient production. However, they have the disadvantage that they are easier for the competition to imitate.
A competitive advantage can be built-in inflation protection in a product. A notable example of inflation protection and its importance as a competitive advantage is the Mastercard. For every payment with the card, Mastercard receives a commission, the calculation of which is based on a fixed percentage. If prices rise, sales and profits also rise proportionally.
How companies can use digitization as an advantage
Digitization continues to advance. This means that entrepreneurs have to adapt to digitization. This does involve some risks, it creates new challenges, but also unique new opportunities. If you want to secure your company’s long-term success, want to develop your company further, then you must not close yourself off to digitization. This can result in the following advantages for you:
- Costs can be reduced
- production can be increased
- Processes and procedures in the company can be simplified
- the added value is increased
- The brand image is improved
- Information flows faster
- Sources of error are to be minimized or eliminated entirely
- customer satisfaction can be increased
As you can see, digitization is on the advance. It is also becoming more and more important in your workplace. In our blog we give you 10 important tips for digitization in the office and the advantages of a paperless office !
What is a sustainable competitive advantage?
A sustainable competitive advantage is an advantage for a company that can exist over a long period of time. The prerequisite is, of course, that this competitive advantage is constantly monitored and adjusted. If this is the case, a company is perfectly able to shield itself from the competition. In this way it is possible to secure high profits over long periods of time. If you can demonstrate a sustainable competitive advantage as an entrepreneur, you will also make yourself very interesting for potential investors.
When does an unfair competitive advantage arise?
In order to prevent unfair competitive advantages , there is competition law. As a rule, companies create a competitive advantage by working in a brand-oriented manner, being driven by innovations or by adhering to high standards in terms of quality. But there are certainly cases in which companies try to circumvent the applicable competition law. But what are actually unfair competitive advantages? Here are some examples:
- Price agreements with contractual partners or even with competitors
- Tax avoidance by locating the company in countries that are considered tax havens
- Disregard of statutory information obligations towards consumers
- Disregard of data protection laws. The best examples of this are corporations such as Google, Facebook and Amazon.
- Paying employees below the minimum wage
For every company, a competitive advantage represents an advantage over its competitors. How long this advantage lasts also depends on the company itself. Only those who fight for their competitive advantage, repeatedly improve or adapt, will position themselves successfully in the market in the long term. The competitive advantage is a company’s livelihood and only with it is it possible to generate profits. If a company does not yet have a competitive advantage, the aim should be to take appropriate measures to develop a competitive advantage. There are a few ways to do this.