Venmo. Walmart. Warby Parker. Xfinity. Oberster. Macã. Of course, each of these companies is a huge success story. But as it turns out, the drivers of their success - albeit not without overlap - are vastly different. Today, with the help of these companies, let's explore six real examples of competitive advantage: let's dive The more people use it, the more valuable it becomes - and the more attractive it becomes in the eyes of those who haven't embraced it yet. This is the basic premise behind network effects. Venmo is a clear example. While beautifully designed and remarkably intuitive, Venmo would be useless to me if no one in my social circle used it; I would have no choice but to find another way to send and receive payments. On the other hand, ifatin my social circle used Venmo — and were unwilling to accept cold, cold money — I had no choice but to join them on the app.
1. Network Effects (Venmo)
Now put yourself in the shoes of a startup looking to compete with Venmo. Perhaps the biggest obstacle to its success is the need to reach critical mass - the number of users required to initiate network effects. Impressively, Cash App has overcome this hurdle by allowing users to participate in other types of transactions such as Bitcoin purchases.
Other companies enjoying this competitive advantage:Facebook, Uber, Airbnb
2nd stop (Walmart)
If you are a supplier of, say, youth balls, being on the shelves of Walmart is an asset.Millions of people shop there every day. Meanwhile, Walmart can buy an inordinate amount of soccer balls at once as the company ramps upmore than half a trillion dollarsof income per year.
Because of these two factors -- Walmart's ubiquity and its ability to buy large quantities of products in bulk -- the company can afford to charge extremely low prices from its suppliers. While sellers can sell to other retailers at higher unit prices, those other retailers can't buy as many units as Walmart -- nor can they offer the level of visibility that Walmart can. As a result, the Arkansas-based giant can shop cheaply and then pass those savings on to consumers -- keeping its stores busy year-round and maintaining the benefits of its unrivaled size.
In other words, if you're a smaller retailer that competes with Walmart, you must either (1) sell products at relatively high prices, thereby driving some potential customers to Walmart, or (2) sell products at relatively low prices, thus Walmart drive forward .out of profitability.
Other companies enjoying this competitive advantage:Kroger, Albertsons, Publix
3. Brand Reputation (Warby Parker)
Here's my solemn promise to you, dear reader: I will never - never - buy eyewear from any company other than Warby Parker.
Why? Because a few years ago, one of their customer service representatives took such good care of me that I spent days telling family, friends and co-workers.
Could I get better glasses somewhere else? Possibly. I could get onecheaperglasses somewhere else? Pretty sure. Regardless - they blew me away with the quality of their customer service and it has earned me a lifetime of loyalty.
And it's not just me. Open Twitter and do a keyword search for "Warby Parker" and you'll immediately find tweets like this one:
How often do you get customer serviceso goodWould you take the time to tweet about it? My guess is almost never. It's not the only way Warby Parker has managed to differentiate itself in the crowded and mainstream eyewear market, but it's arguably the most impactful.
By the way: while estimates vary (and finding deals can be a frustrating process), attracting new customers is a givensignificantly more expensiveto keep as a regular customer. food for thought.
Other companies enjoying this competitive advantage:Wistia, Trader Joes, Ritz-Carlton
4. Switching barriers (Xfinity)
Sometimes you stay with a company because they treat you so well that it changes the way you think about customer service. Other times, you stay with one company because you're moving to oneandersbusiness just isn't worth the hassle.
I'm not sure if it would cost me anything to switch my WiFi service from Xfinity to Fios. But even if I were unhappy with Xfinity and could make the switch for free, I honestly don't think I would. I would probably have to call someone, make an appointment with a Fios technician and have my Xfinity gear shipped to a store or warehouse.
Sounds like a hassle, not to mention the complications switching my phone plan (Xfinity Mobile) can cause. I cut the cable a few years ago, but I was also a ComcastCaboCustomer on top of that? Forget it.
By the way, none of this is accidental. Companies like Comcast understand that these barriers to switching get higher with every new service you add to your package.
But these barriers are of course not insurmountable. Much like Cash App, Mint Mobile is a case study in undermining an entrenched competitive advantage. By acquiring bulk access to T-Mobile's cellular network and driving down the cost of brick-and-mortar stores and human sales teams, Mint Mobile has managed to thrive at prices so low that many consumers are willing to overcome self-imposed tax barriers. Switch .
Other companies enjoying this competitive advantage:Verizon, Intuit, Salesforce
5. Exclusivity (highest)
Supreme, a New York streetwear brand founded and appreciated in 1994well over $2 billion, deliberately makes it very, very difficult for them to buy their products.
How heavy? Well, for one thing, if you don't live within driving distance of any of the 13 stores, you're out of luck - Suprema clothing isn't available anywhere else (except on the website). And even if youthey area short drive from one of their shops, you'll need to take the day off to stand a chance of one of their famous weekly drops. And even then, you could spend hours in line just to leave empty-handed.
Why would you (or anyone else) do that? Because when you successfully secure a Supreme garment, you gain instant access to an exclusive club of sorts – the very small, very cool group of people who own and wear Supreme. Also, if you wanted to, you could probably sell what you bought for a much higher price than you paid.
Supreme is sort of the anti-Walmart: it's the opposite of ubiquitous. But demand will always be extraordinarily high - because supply will always be extraordinarily limited.
Other companies enjoying this competitive advantage:Supreme is in a way its own category, but other luxury brands like Versace, Balenciaga and Cartier also enjoy the benefits of exclusivity.
6th Prestige Prize (Apple)
"You get what you pay for." Talk about ubiquitous - this is one of the most common sayings in the English language, usually uttered when a cheap product doesn't deliver good results.
This is of course the reverse implicationCarothe products aregebProducts. And that is exactly the idea behind prestige pricing (also known as image or premium pricing). When a company employs a prestige pricing strategy, it deliberately markets its product at a higher price than its alternatives to confer quality. In other words, the goal is to send a clear message to consumers:You get what you pay for and with our product you get the best.
Apple is a clear example. Relatively few people own an iPhone (at most13%, at the time of this writing), and yet Apple consistently capturesthe lion's sharesmartphone earnings. Why? Because an iPhone is several times more expensive than, say, an LG Xpression, and the money made selling the former midgets is the money made selling the latter.
To put it bluntly, to be successful with a prestige pricing strategy, there must be a functional or aesthetic difference between your product and its alternatives. Whether an iPhone is functionally better than one of its many cheap alternatives is up for debate, but almost everyone can agree that Apple's products are sleek and beautiful. And for those who can afford Apple products, that's enough to justify the high price tag. (Exclusivity is also at play here.)
Other companies enjoying this competitive advantage:Ritz-Carlton, Lululemon, Starbucks
The definitive introduction to competitive intelligence
If you want to help your business build a sustainable competitive advantage, read Crayon's Guide to Competitive Intelligence. Our CI guide has been downloaded thousands of times and recently updated for 2021. It teaches you everything you need to know about the process of tracking, analyzing and activating information about your competitors.
Get your free copy by clicking the banner below!
Conor Bond Conor Bond is a member of the content team at Crayon, where he speaks enthusiastically about everything related to the competition. If for some reason you ripped his headphones off his head and put them on, you'd probably be listening to The Strokes or Charli XCX.
FAQs
What is Ikea's competitive advantage? ›
Offering the lowest prices.
Cost effectiveness is one of the solid bases of IKEA competitive advantage. The global furniture retailer is able to offer low prices thanks to a combination of economies of scale and technological integration into various business processes.
Coca-cola effectively uses a low pricing strategy a lot to penetrate new markets that are very price-conscious. They set the prices around the same level as the competitors to enable Coca-cola to be distinct but affordable. They do this to beat the competition on price and raise the awareness of the Coca-Cola brand.
What is Amazon's competitive advantage? ›Range, price and convenience are placed at the core of Amazon competitive advantage. The global online retailer operates with a razor thin profit margin and succeeds due to a combination of economies of scale, innovation of various business processes and a constant business diversification.
What is Nike's competitive advantage? ›Nike's most valuable edge is its powerful brand, allowing it to dominate its industry and earn healthy profits. Thanks to its pricing power and premium status, it's hard to envision a world where Nike isn't on top. Investors who appreciate Nike's core strengths might consider buying the stock for the long term.
What company has a competitive advantage? ›| Rank | Company | Reinv. Rate (%) |
|---|---|---|
| 1 | Merck & Co. Inc. | 23.4 |
| 2 | Aon PLC | 226.4 |
| 3 | McDonald's Corp. | 40,300.0 |
| 4 | Vertex Pharma. | 32.8 |
There are three main types of sustainable competitive advantage: differentiation, cost leadership, and focus advantage.
What is the competitive advantage of Starbucks? ›Selling coffee of the highest quality.
Accordingly, the coffee chain giant focuses on the quality of its products and customers pay premium prices for high quality. Excellent customer services as one of the solid sources of Starbucks competitive advantage further increases the attractiveness of the coffee retailer.
- Highly Integrated Product Range. It's no secret that each of Apple's individual product offerings are top-notch. ...
- Effective Supply Chain Management. ...
- Innovative Internal Organizational Structure.
PepsiCo uses cost leadership as its primary generic competitive strategy. This generic strategy focuses on cost minimization as a way to improve PepsiCo's financial performance and overall competitiveness. For example, to compete against Coca-Cola products, PepsiCo offers low prices based on low operating costs.
What makes Tesla's competitive advantage? ›Other innovative features that Tesla offers are non-product related. They exist in the form of advanced logistics and manufacturing systems and processes. These include a reinvention of the retail car supply chain which does not rely on high servicing costs (electric motors need little maintenance).
What is Airbnb's competitive advantage? ›
One advantage for Airbnb is the almost limitless availability of places to stay on its platform (currently totaling around 7 million). This can help the company capture more demand and outperform other travel stocks over the long term.
Does Target have a competitive advantage? ›Target has some unique competitive advantages. A very strong brand and loyal customer. Although much of retail shopping has moved and will continue to move online, there is still a need for local brick and mortar businesses. People that shop at Target generally like the atmosphere and set-up of the store.
What is Lululemon's competitive advantage? ›The technological advances lululemon has made in clothing makes it harder for competitors to emulate its success. It also enables lululemon to charge higher prices and have merchandise that rarely goes on sale. lululemon's focus on innovation not only lies within its products but within its stores.
What are the 4 competitive advantages? ›The four primary methods of gaining a competitive advantage are cost leadership, differentiation, defensive strategies and strategic alliances.
What is Pumas competitive advantage? ›Puma's generic strategy is differentiation, broadly applied to business operations in the global market. Based on Porter's model, this generic strategy creates competitive advantage by developing the uniqueness of the business and its products, such as through innovation in the design of athletic footwear.
What is Costco's competitive advantage? ›When compared to other similar retailers, Costco's competitive advantage lies in its own private label, its discount prices, and its membership dues. This has provided customers with a product that they can rely on at low prices. It is also a stable business model that investors seek as a good investment.
What are some examples of comparative advantage? ›For example, if a country is skilled at making both cheese and chocolate, they may determine how much labor goes into producing each good. If it takes one hour of labor to produce 10 units of cheese and one of of labor to produce 20 units of chocolate, then this country has a comparative advantage in making chocolate.
What is competitive advantage in the workplace? ›What is a competitive advantage? A competitive advantage is the ability to stay ahead of your present or potential competition. People typically gain a competitive advantage by evaluating the strengths and weaknesses of their competitors and seeing how you could improve your own performance to obtain an advantage.
What are the 2 types of competitive advantage? ›There are two basic types of competitive advantage: cost leadership and differentiation.
What is Dunkin Donuts competitive advantage? ›Demands of the Market
The product line offered by Dunkin' Donuts is not only based on offering different kinds of donuts but also offers variety in coffees and has also diversified into the food market by offering snacks and food items like sandwiches and pizzas.
What is competitive advantage in food industry? ›
What is Competitive Advantage? Competitive advantage refers to one or more qualities, attributes, or aspects of your restaurant's food, beverages, service and ambiance that makes you a preferred choice within your market, when compared to other existing competitors or options (such as grocery stores).
What is an example of cost competitive advantage? ›One way companies can use cost advantage is by pricing their items close to their competitors, but then they earn more profits by reducing production costs. This type of cost advantage is a comparative advantage. A business can do this by reducing the costs of materials, processes and distribution.
What is the competitive advantage Samsung vs Apple? ›Samsung relies on vertical integration as a chief competitive advantage. While Apple still imports billions of dollars' worth of components from its rival every year, Samsung is beholden to nobody.
What is the competitive advantage of Coca-Cola and Pepsi? ›Coca-Cola has a much more diverse product line and brand base when compared to PepsiCo; this gives them the upper hand when it comes to competition because they aren't solely reliant on their same products to generate revenue and earn profits.
What is the competitive strategy of Coca-Cola company? ›Through its competitive positioning strategy, Coca-Cola stays ahead of its competitors by offering an extensive product line, providing superior customer service, and expanding its advertising efforts. Coca-Cola dedicates a significant portion of its net revenue to advertising, contributing to its high market share.
What is the competitive strategy of Coca-Cola and Pepsi? ›Coca-Cola is focusing on “choice, convenience and the consumer” while Pepsi-Co is focusing on “performance with a purpose” and derives almost half of its revenues from health-oriented products.
Which competitive strategy does IKEA use? ›Focus Strategy
The cost focus and differentiation focus are the two aspects of the company's main strategy. IKEA uses a combination of these strategies to achieve its vision. One of the strategies it uses is its cost leadership strategy.
Using mono-segment, adaptive and aesthetic types of product positioning. The furniture retailer targets cost-conscious customer segment that prefers to get value for money they pay. Accordingly, IKEA has adapted the lowest costs of its products along with the widest range as the unique selling proposition of the brand.
What makes IKEA unique? ›IKEA is renowned for being transparent about its production process and designs and creates simple, good-quality furniture. The company is also known for paying the employees a living wage at the least. Like we said, it's a brand that cares about more than just profits.
What is unique about IKEA's business model? ›In 1956, IKEA introduces “flatpacking” and turns customers into a free workforce that takes over part of the traditional furniture manufacturing value chain. Customers buy furniture in pieces in stores and assemble it in a DiY fashion at home.
What is Starbucks differentiation strategy? ›
Starbucks business strategy can be classified as product differentiation. Accordingly, the coffee chain giant focuses on the quality of its products and customers pay premium prices for high quality.
What are the 5 competitive strategies examples? ›- Cost leadership strategy. ...
- Differentiation leadership strategy. ...
- Cost focus strategy. ...
- Differentiation focus strategy.
In its defence, Walmart invests considerable resources and efforts to help suppliers find ways to reduce costs. Walmart then seeks to pass on most of these savings to customers in the form of reduced prices.
Who is Ikeas biggest competitor? ›...
Related posts:
- Wayfair. Boston-based Wayfair is the biggest online shopping platform for home furnishings, décor, and appliances. ...
- Amazon. ...
- Ashley HomeStore. ...
- Walmart. ...
- Home Depot. ...
- Restoration Hardware. ...
- Kartell. ...
- Williams-Sonoma Inc.
Ikea Target Audience
Single people not living at home. Newly married couples. Families with the youngest child under six. Older married couples with dependent children.
'Home is where it all begins' has been IKEA, the Swedish furniture giant's tagline ever since it made its foray into India.
What does the word IKEA stand for? ›IKEA is named after the initials of founder Ingvar Kamprad, Elmtaryd, the farm on which he grew up, and Agunnaryd, the nearby village.
What is Ikeas most popular item? ›1. Billy bookcase. The Billy bookcase has cemented itself firmly as one of the most popular products in the IKEA family. It is estimated that every five seconds, one Billy bookcase is sold somewhere in the world.
Why did IKEA fail in India? ›Additionally, Indian consumers' lack of interest in do-it-yourself culture and IKEA's remote store locations are major hindrances to its growth in India. As a result, Indian furniture majors argue, IKEA will find it difficult to crack the local furniture market like it has managed to do in Europe or the US.
What are real life examples of business model? ›For instance, direct sales, franchising, advertising-based, and brick-and-mortar stores are all examples of traditional business models. There are hybrid models as well, such as businesses that combine internet retail with brick-and-mortar stores or with sporting organizations like the NBA.
Why is Zara known for their business model? ›
It is able to almost instantly react to fashion trends by vertically integrating its supply chain. Zara is a global fashion retailer whose success stems from its ability to reduce lead times and react to trends almost instantaneously.
Why is IKEA so successful globally? ›IKEA is successful for many reasons, but mainly for reducing operating costs, designing original and inexpensive furniture, and executing the upsell. IKEA customers are also familiar with the stores' maze-like construction.