4.1.3 Where to implement competitive advantage?

Competitive advantages don't just come in one unique form, being possible for a firm to have many competitive advantages and in different areas. Let us illustrate with five areas where firms can stand out and ensure their long-term success: market share, brand management, networking, trademarks and patents, cost effectiveness, and high switching costs.

Market Share: Firms with significant market share create not only a problem for competitors but its also fine for the firm because meaning its products are well-known and well-received in the marketplace. Market share can be imposing but if the industry has significant profit potential for new entrants, market share can be eroded.

Strong Brand Management: Having a strong brand can ensure a company's long-term success and it also allows firms to earn profits because their brand allows them to charge a price premium. Strong brands tend to create the longest-lasting competitive advantage.

Network Effect: The network effect occurs when a product creates demand from consumers, which then enhance the product. A firm can benefit from the network effect by attracting more sellers; it has in turn attracted more buyers, establishing a dominant market share (ex. EBay Company). The network effect is fairly uncommon but it can be extremely lucrative when it occurs.

Trademarks and Patents: Trademarks and patents can be sources of competitive advantage for some companies, although it's not too common.

Cost-effective Structure: Being a low-cost producer has some advantages, although they're often short-lived. A firm can "weaken" its competitors and offer compelling prices on its products, thus attracting many customers.

High Switching Costs: Another way to earn excess returns and extend a firm´s life is to install switching costs into the business model. For example, wireless telephone companies require clients to enter into contracts that restrict their capacity to change service providers. Some software companies also have high switching costs because the learning curve to become skilled at a new software program is often quick.

Take some time to think on possible areas within your firm where it will be possible to create competitive advantages and write down the potential advantages you could gain from them.