8.2c Competitive Advantage

Question 1

Two main types of competitive advantage:

Answer 1

• Comparative advantage

- Differential advantage

Question 2

What is a comparative advantage?

Answer 2

The business can produce the product at a lower cost than its competitors

Question 3

What are the two options for a business with a comparative advantage?

Answer 3

• Sell the product at the same price as competitors and make a larger profit
• Reduce the price, but have a higher overall profit level due to the increase in sales

Question 4

When does a differential advantage occur?

Answer 4

When a business can provide a product that has a USP to make it different to all other comparable alternatives in the market

Question 5

What are the two options for a business with a differential advantage?

Answer 5

• Increase sales by having similar prices to competitors but attracting potential customers with a USP
• Charge a higher price

Question 6

Ways to keep a competitive advantage:

Answer 6

• Improve quality
• Patents/trademarks
• Invest in latest equipment