Competitive Advantages

There are three major dimensions over which competitive advantages can be challenged:

Added value. A high added value implies a technical or managerial expertise that is very difficult to replicate and could even be protected by patents. This implies that a product is offered at a lower cost or is of higher quality than a competing product.
Scarcity. Often related to the existing market size or to the resources sector. If a market for a good is relatively small and thus scarce, potential competitors may be unwilling to enter this market. A good that has a mass market (low scarcity) is also subject to intense competition.
Imitation costs. A simple product tends to have low imitation costs and competitors can thus easily enter the market. A complex product, such as a high tech device, is much more difficult to replicate.

Depending on the combination of these dimensions, an actor may find itself at some level of competitive advantage in regard to its competitors. If the added value provided is high and the imitation costs are also high, an actor can be in a situation of sustained competitive advantage and achieve a market dominance. On the other range of the spectrum, if a good has limited added value (cost parity or even a higher cost), is concerning a mass market and can easily be replicated, then the concerned actors are facing a situation of competitive disadvantages that could put them out of business. Globalization has placed pressures on each of these dimensions by making a larger array of resources available (labor, parts and raw materials) as well as a larger number of actors that can potentially compete.