A sustainable competitive advantage is an advantage in providing value to customers without it being able to be imitated.
Numerous cases abound where the first mover in a market develops a competitive advantage, but soon loses it. In the 1990s, AOL had a competitive advantage as an Internet Service Provider (ISP), becoming the preferred provider for consumers new to the internet. It offered more features in one easy-to-use platform. Some customers used “AOL Keywords” to search just as much as they used Yahoo and Altavista to search. Yet, as customers became more sophisticated and as competing ISPs launched cheaper substitutes (e.g. Netzero, Earthlink), that advantage became difficult to sustain. It can be a challenge to sustain a competitive advantage because once a product or service is made, other competitors can reverse engineer a companies success, taking the competitive advantage away.
Sources of Sustainable Competitive Advantages:
- Superior skills
- Superior resources
- Unique usage experience
- Unique product features
- Mode of delivery
- Market research
- High switching costs
- Entry barriers
- Cost leadership
An example of sustainable competitive advantage through differentiation is Starbucks. The company essentially serves a commodity: coffee. But it has made the coffee buying experience cater to its customers’ lifestyles and psychographics. Customers buy at Starbucks to relax and purchase many of its additional products in the meantime. This superior and unique customer experience is an example of a competitive advantage.
How Market Research Drives Competitive Advantage
Market Research is crucial in developing a sustainable competitive advantage because it uncovers what customers want. It can:
- Discover information that is not available to competitors
- Identify Key Success Factors
- Guide market positioning
- Adapt strategic movements to stay ahead of competitors