Competitive advantage can be defined as superior performance compared to other industry average performance. A company is said to have a competitive advantage over its competitors when its profitability is greater than the average profitability and profit growth of other companies competing for the same set of customers (Jones and Hill, 2008). Organizations need to stay relevant for as long as possible and to do this they need to create clear objectives, strategies and operations to create sustainable competitive advantage. Michael Porter outlined the three different strategies that businesses can use to gain a competitive advantage. Say no to plagiarism. Get a Tailored Essay on “Why Violent Video Games Should Not Be Banned”? Get an Original Essay This strategy involves choosing a business model that will do everything possible to reduce its cost structure so that the company can manufacture and sell goods or services at a reasonable price. a lower cost than its competitors. These strategies include functional strategies designed to improve its operational performance and competitive strategies intended to influence industry competition in its favor. Using the cost leadership model, a company will seek to achieve competitive advantage and above-average profitability by developing a model that positions it on the frontier of value creation, as close to the axis as possible. of the lowest cost. This strategy gives the company an advantage because it will be more profitable than other companies due to lower costs and cost structure. This is achievable by offering the same type of value from a product at a lower price which will attract more customers, leading to increased sales and profits (Jones & Hill, 2008). This strategy allows an organization to create a unique product that is seen by consumers as distinct in an important way. A company that differentiates its products gains a competitive advantage because it has the ability to charge higher prices by satisfying consumer needs in a way that its competitors cannot. A company can differentiate itself by providing a unique or high-quality product that is valued by consumers at the same or higher price (Johnson, Scholes, & Whittngton, 2008). Companies generally manage to differentiate themselves through innovation, quality or customer service. Innovation means you meet the same needs in a new way. Quality means you provide the best product or service. Differentiation strategy allows a company to position itself more on branding, advertising, design, quality and new product development rather than on efficiency, outsourcing or process innovation. Customers are willing to pay a higher price only for unique features and the best quality (Barney, 1995). Keep in mind: this is just a sample. Get a personalized article from our expert writers now. Get a Custom Essay In this strategy, the company chooses to combine differentiation and generic and targeted business strategies to specialize in manufacturing distinctive products for one or two market segments. The company can differentiate on cost when targeting market niches where consumers are price sensitive, or by focusing on differentiation when targeting niche markets with products, 2008).