Your competitive advantage is what makes your product better than what is currently available. A competitive advantage may be utilization of a new manufacturing technique, or a unique distribution concept, or a patented technology. It must be something quantifiable. Simply stating something along the lines of “we will do this better” or “we will have stronger customer service” does not make for a very compelling advantage.
One of the most important aspects of competitive advantage is the sustainability of that advantage. Simply having a better product will not ensure long-term success, since as others observe your successes, they will soon try to copy your idea. Ways of defending your idea include hiding it as a trade secret or protecting it with a patent.
Nobody expects you to have a competitive advantage that will last indefinitely. Even patents expire. It is important to address what your strategy is for dealing with the erosion of your competitive advantage.
AN EXAMPLE: THE BEST THING SINCE BREAD – SLICED BREAD
In 1927, a man in Iowa by the name of Otto Frederick Rohwedder invented a machine that sliced an entire loaf of bread into identical segments (hence sliced bread). He sold his first machine to the Chillicothe Baking Company, who used it to launch a product known as “Kleen Maid Sliced Bread” in 1928 (and thus cementing Chillicothe, Missouri in the annals of history as “the birthplace of sliced bread”). Selling pre-packaged sliced bread offered Chillicothe Baking Company a significant competitive advantage over other bakeries, since they owned the only bread-slicing machine in the country.
Since Rohwedder was eager to capitalize on his invention, he continued to sell it to other bakers, which eroded Chillicothe Baking Company’s competitive advantage. By 1930, a number of other bakeries (including the eponymous Wonderbread) were selling pre-packaged sliced bread. For the first couple of years however, Chillicothe Baking Company’s use of the slicing machine provided a distinct advantage over their competitors.
IF YOU REMEMBER ANYTHING, REMEMBER THIS
Everything you find here is designed to help you write a better business plan. Take what you like, ignore what you do not. The most important thing to remember is that there is no single “right way” to write a business plan.