Lesson 2: Competitive Advantage

Along with fulfilling needs and wants by producing goods and services businesses, another major tenet of business involves competition. In this lesson, we will examine what role competition plays in business.

A Case Study in Competition

For decades, the government of the United States sponsored all of our nation’s space flight programs and research through NASA. Recently, several private companies have entered this industry. As you watch the video below, try to identify one reason competition could be good for the space industry.

Competitive Advantage

As we examine competitive advantage, we can break things down further into two main categories. Comparative advantage and differential advantage.

  • Comparative Advantage: the ability to produce and sell a good or service at a lower cost than its competitors.
  • Differential Advantage: when a firm’s products or services differ in a manner other than price from its competitors and are seen as better.

Examine the two companies in each slide. What do you think each company would say is their competitive advantage?

Famous Quotes – Competition

Explain what each of the following quotes means in the context of business.

Opportunity

The company Shopify has leveraged the theory of competition in a very literal way. See the video below for more information.