Competitive advantage is the favorable position an organization seeks in order to be more profitable than its rivals. To gain and maintain a competitive advantage, an organization must be able to demonstrate a greater comparative or differential value than its competitors and convey that information to its desired target market. For example, if a company advertises a product for a price that’s lower than a similar product from a competitor, that company is likely to have a competitive advantage. The same is true if the advertised product costs more, but offers unique features that customers are willing to pay for.
Albert Humphrey at the Stanford Research Institute to help companies get a sense of their position within a competitive landscape. Porter taught his students at Harvard about SWOT analysis, but felt the tool had limitations because it placed too much focus on individual companies rather than on industries. Porter saw the need for a framework that also looked at the competitive landscape holistically, in the context of an entire industry.
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