8.2c - Competitive Advantage

Question 1

Comparative advantage definition

Answer 1

When a business gains an advantage through producing the product at a lower cost than competitors

Question 2

What can a business do with a comparative advantage?

Answer 2

• Sell the product at the same price as competitors and make a larger profit
• Reduce the price, but see an increase in sales

Question 3

Differential advantage definition

Answer 3

When a business gains an advantage through providing a product that has a USP to make it stand out

Question 4

What can a business with a differential advantage do?

Answer 4

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

Question 5

How can a business keep a competitive advantage?

Answer 5

• Invest in latest technology
• High quality staff
• First mover advantage (R&D)
• Marketing
• Patents