Fair & Unfair Competitive Advantage

Nowadays it is meant to talk about thorough competitor analysis, ad nauseam, after you have already chosen the appropriate market segment and are ready to start promoting and developing your product.

Learning to compete is very important.

Let us first consider the terms Competitive Advantage and Unfair Competitive Advantage. Both are a key ingredients in the formation of new ventures.

Competitive Advantage

Businesses using competitive advantage offer its consumers greater value than their competitors do.

We can talk about competitive advantage, when:

• value is created so anything increases income over costs;
• the properties or dimensions of each firm enabling it to offer better value than the competitors to customers;
• these values outweigh the price paid by the customer.

It seems that a direct relation between customers’ expected values, values offered by the company, and those offered by the competitors determine the dimensions and conditions of competitive advantage.

Competitive advantage is reached if the venture is able to develop new products or provide services superior to those of competitors, or alternatively if they can provide the same at a lower price and/or higher quality.

Action to be taken: to gain various production factors ignored by competitors.

What’s different about an “unfair” competitive advantage?

Companies using unfair competitive advantage access the production factors inaccessible by competitors. Therefore, such advantage is not based on the principles of equality, where all benefits are meant to be distributed evenly. It looks like the startup founder has acquired this significant advantage for his new venture almost by default.

An “unfair” advantage meant to be unequal, like getting picked for a job because of your race or whatever. A fair advantage is one that is deserved.

How an unfair competitive advantage might occur for a startup?

• insider knowledge;
• existing alliances;
• access to lists;
• ethnicity;
• a gift (intellectual, creative, social, perceptual or physical);
• other.

The idea of “unfair competitive advantage” comes from the work of Jay Barney, Professor of Strategic Management at the University of Utah where he developed the VRIN (valuable, rare, inimitable , not able to be substituted) framework for resources under a company’s control. Central point of the VRIN is the concept of “causal ambiguity,” it means the advantage is not completely understood by the business itself, making it almost impossible to copy.

VRIN Analysis

Example of the ultimate unfair competitive advantage

Tesla is Professor Barney’s concept of causal ambiguity. The interaction of resources creates an advantage that is not completely understood, making it almost impossible to copy.

Creating a competitive advantage is the true challenging!

After interviewing many CEO I’ve decided that my ‘fair’ advantage is a company culture. A strong company culture is directly tied to team engagement and employee satisfaction. This way you attract and retain top talent, which affects every other aspect of your business.

a strong thriving company culture → top talents → enjoying while working → a substantial economic gain

When your team enjoy their work more, they’ll consistently perform better, leading to a higher quality of work and increased productivity. This means happier customers, happier managers, and bigger margins of profit.

This is why Zappos candidates are required to go through a cultural fit interview, which makes up 50% of the total decision of whether or not the candidate is hired. Btw, the company defined its corporate culture with its ten core values:

1. Deliver WOW Through Service
2. Embrace and Drive Change
3. Create Fun and A Little Weirdness
4. Be Adventurous, Creative, and Open-Minded
5. Pursue Growth and Learning
6. Build Open and Honest Relationships With Communication
7. Build a Positive Team and Family Spirit
8. Do More With Less
9. Be Passionate and Determined
10. Be Humble.