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Understanding Strategic Advantage

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Many business people use the terms competitive advantage and strategic advantage synonymously. However, to be really precise, you could argue that these two terms relate to slightly different aspects of your business.

A competitive advantage is something that’s different from, better than, or not offered by your competitors. For example, if a town has two hairdressing salons and one offers a mobile service but the other doesn’t, the first salon has a competitive advantage because they’re providing something their competitors aren’t.

A strategic advantage is something that stems from capabilities within your business that are hard for others to copy. These capabilities tend to be a unique blend of assets, knowledge, people networks, skills or technology. For example, imagine the owner of the salon with the mobile haircutting service has a background in nursing, and so has a natural understanding of the needs of her many elderly housebound clients. Imagine also that the owner’s husband is a mechanic, which means the vehicle used for providing the salon’s mobile service is kept on the road at minimal cost. This unique blend of skills and cost efficiency forms part of this salon’s strategic advantage.

Having said all this, competitive and strategic advantages tend to overlap so much that I try to avoid getting bogged down in arguing about the distinction. I use the term strategic advantage in most of this chapter (because, after all, a true strategic advantage should ultimately result in a competitive advantage — an idea I return to at the end of this chapter) but if you’d rather use the term competitive advantage, that’s just fine.

Small Business for Dummies

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