Competitiveness is the ability of a business to offer a better product or service than its rivals, whether in terms of price, quality, or service. In any market, businesses are in a constant race to win the customer's choice.

How Do Businesses Compete?

Businesses compete across several key areas to attract and retain customers. The main methods of competition include:

Price: Offering a lower price than competitors for a similar product (eg, Aldi vs. Tesco).

Quality: Offering a higher quality, more durable, or more reliable product, often for a higher price (eg, Miele vs. Beko).

Innovation: Creating new and unique products that rivals cannot offer, which is the process of creating a new product, service, or a better way of doing something. A good example is Apple's iPhone.

Customer Service: Providing a superior customer experience, from the point of sale to after-sales support (eg, John Lewis).

Convenience: Making it easier and faster for customers to buy (eg, Amazon's one-click ordering).

What is a Competitive Advantage?

A competitive advantage is a specific strength that allows a business to consistently outperform its rivals. The best competitive advantages are those that are sustainable, meaning they are difficult for competitors to copy. Examples include:

• A strong, trusted brand name (eg, Coca-Cola).
• Unique technology protected by a patent (eg, Dyson's early vacuum cleaners).
• Significant economies of scale that allow a business to operate at a lower cost base (eg, Amazon's distribution network).
• Dominant market share which creates barriers to entry (eg, Google in search).
• A unique and positive business culture that leads to outstanding customer service (eg, the John Lewis Partnership).

Benefits of Being Competitive

Achieving a competitive advantage leads to significant benefits for a business:

Increased Sales & Profitability: The most competitive firms typically win the most customers, leading to higher revenue and profits.

Higher Market Share: A strong advantage allows a business to capture a larger share of the market.

Customer Loyalty: Businesses that offer better value are more likely to retain their customers.

Ability to Attract Talent: Successful, competitive businesses are often seen as more attractive places to work.

Challenges of Maintaining Competitiveness

Maintaining a competitive advantage is a constant challenge, particularly in a dynamic market, which is a market subject to rapid and continuous change. Key challenges include:

Technological Change: A new technology can make an existing competitive advantage obsolete. For example, the superior mobile app technology of digital-first banks like Monzo has turned the large branch network of established banks from a strength into a high-cost weakness.

The Cost of Competition: Competing on price can lead to damaging price wars, while competing on innovation requires huge investment in R&D.

Globalisation: UK businesses often have to compete with rivals from low-cost countries, putting pressure on their prices and costs.