In strategic management, what does the term 'competitive advantage' imply?

The term 'competitive advantage' primarily refers to a firm's ability to perform better than its competitors in the marketplace. This concept encompasses various factors that allow a company to create greater value for its customers, such as unique product offerings, superior service, more effective operational processes, or innovative technologies.

Achieving competitive advantage is crucial for long-term success as it enables a firm to differentiate itself and maintain profitability over time, despite the efforts of competitors to replicate or imitate its strategies. This advantage can manifest in different forms, including lower prices, higher quality products, or exceptional brand loyalty, all of which contribute to a firm’s overall performance relative to its peers.

While having reduced costs, a larger market share, or access to more resources can contribute to a firm's competitive advantage, these elements alone do not define the concept. They are tactics or outcomes of having a competitive advantage rather than the definition itself. The core idea is the firm's superior performance compared to its rivals.