A competitive advantage is based on what a company does better than its competitors.  It involves the characteristics that allow a company to outperform its rivals.  A competitive advantage can be derived from a variety of sources.  It may involve intellectual property that is owned by a company that disallows rivals from making the same product or making the product in the same way.  It may involve specials skills or resources that a company possesses that are not held by competitors.  Lowering production costs below those of your rivals is a competitive advantage or it may arise in a number of other ways.

The paper Emerging Forms of Competitive Advantage: Implications for Agricultural Producers provides a literature review for identifying alternative approaches to creating competitive advantage that can be used even under conditions in which no differences in actual quality exists across products.

For more information on this topic, see the links listed below of articles posted on related Web sites.

• The Internal Analysis of Your Farm Business: What is your Farm’s Competitive Advantage – Purdue University Extension – Assessing the strengths and weaknesses of your farm business will help you identify those activities that will lead to a sustainable competitive advantage.
  
• Four Ways to Innovate in Operations – HBS Working Knowledge -- Innovation in operations—not to be confused with mere operational excellence or improvement—can yield competitive advantage.
• Operations and the Competitive Edge – HBS Working Knowledge -- Many managers expect operations organizations to fulfill only a support role. But an effective operations strategy can give you a competitive advantage.
  
• Building Competitive Advantage Through Operations – HBS Working Knowledge -- No longer focused on the plant floor or the day-to-day details of business-as-usual, operations strategies today are a source of competitive advantage across manufacturing and service industries alike.
  
• The HR Scorecard: Linking People, Strategy, and Performance – HBS Working Knowledge -- Maintaining competitive advantage in the new economy will require incorporating HR function into corporate strategy.