Competitive advantage is a condition or circumstance that puts a company in a favourable position relative to its competitors, allowing it to generate greater value, lower costs, or higher prices. It is the basis for superior performance.

Michael Porter identified two main types: cost advantage and differentiation advantage. A company can also achieve focus by targeting a narrow market. Sustainable competitive advantage is difficult to maintain and requires continuous innovation, strong branding, or unique resources.

Key points

• Favourable position over competitors
• Cost or differentiation advantage
• Can be focused on a niche
• Requires continuous renewal