A SWOT analysis can consider a company’s advantages from an internal perspective.
A competitive advantage is a feature that allows a company to gain an advantage over its competitors, whether it is something that reduces costs, increases efficiency, or introduces a superior technique or process. When creating a competitive advantage analysis, one can look at potential threats from others in the market. Looking at the political, economic, social and technological (PEST) aspects of a market can also be beneficial. While looking at these advantages from an external perspective, an analysis of a company’s strengths, weaknesses, opportunities and threats (SWOT) can consider a company’s advantages from an internal perspective.
An analysis that considers a company’s competitive advantage can look at threats posed by other market players. Such an analysis may take into account the possibility of new market entrants and consider any barriers to entry that might make this unlikely. The bargaining power of suppliers in the market is another factor that can be a problem or an advantage for a company, as the need to make concessions to suppliers can increase production costs. The potential threat of substitute products making inroads into the market is another possibility that must be evaluated in a competitive advantage analysis.
Another aspect of a competitive advantage analysis can be a PEST analysis. This analysis examines the political, economic, social and technological factors in relation to the market in which the company is operating. The company’s competitive advantage may disappear or become less effective if a company operates in an unstable political environment with the threat of nationalization and expropriation. A volatile economic environment with a high rate of inflation, fluctuating currency and interest rates, or low or negative economic growth can also take a competitive advantage. Social factors such as taste and fashion can easily affect demand for products, while technological change can also challenge a company’s leading position in the market.
Other competitive advantage analysis techniques may include a SWOT analysis that examines the strengths, weaknesses, opportunities and threats a company faces. A competitive advantage analysis can also examine the company’s characteristics that differentiate it from its competitors and consider the extent to which those advantages are sustainable. These characteristics may include the quality of management, the resources available at the company’s location, the level of training of the workforce, or the relationship with other companies and innovative networks. A company’s ability to produce at low cost can also be analyzed in terms of economies of scale, asset utilization, supply chain integration or workforce skills, and the sustainability of these advantages.