In business, having a competitive advantage is one of the most important things you can have if you want to succeed.

A competitive advantage is something that differentiates your business from the rest and makes you stand out. Entrepreneurs should always be asking themselves the following question: “what is the one thing customers like about my business that other businesses don’t have?” If it’s nothing, then you have some re-structuring to do.  It sounds simple, and there’s more beneath the surface, but it does apply to every business?

Whether you are a small business owner or a large global corporation, the principle is the same.  This is how some businesses have been able to survive for many years and have succeeded in today’s very competitive and evolving business world.

McDonald’s is a good example of having a strong competitive advantage.  If you look at the fast food industry, particularly in the burger arena, you’ll see that the brands that have survived over the years are the ones that have a clear competitive advantage.

McDonald’s doesn’t have the best quality food out there, although their fries in my opinion are one of the best, but they do have something that others don’t:  the best meals and play areas for kids.

As a parent myself, I use to go to McDonalds periodically because it was an experience for my children.  Not because their food was great or even because their service was fast, but because my children wanted a toy from the latest movie out there and wanted to spent a couple of minutes running around in their play area.  Even though my wife hated it, we would still do it for the kids.

When analyzing McDonalds’ successful marketing efforts it is very clear that they are targeting the decision makers in the family which are not the parents. McDonald’s is still the number one burger chain in the U.S., and probably in the world.

Other fast food restaurants have tried to compete with McDonald’s over the years by establishing a competitive advantage and offering something different.  The Six Dollar Burger comes to mind when I think of Carl’s Jr.  When their commercials use the sex appeal of  models washing cars, it’s obvious they’re trying to market to men in general who want a big meal.  Value menus or 99 cents items come to mind when I think of Jack in the Box.  In analyzing their commercials, Jack in the Box is trying to compete by offering low price items and targeting the price sensitive market such as college students.

Retail stores also come to mind when analyzing competitive advantages.  It is obvious that Wal-Mart competes with low price items, but what about Costco? What Costco’s competitive advantage? Costco is unique in that they offer high quality products at very reasonable prices if you’re willing to pay for quantity. However, this advantage might not appeal to all; not every family needs 20 lbs of rib eye steaks or 30 rolls of toilet paper.

Costco is able to compete with Wal-Mart and other grocery stores because they do things a little different.  Instead of spending money in a good looking store, or a million dollar marketing campaign, they spend their money taking care of their employees and negotiating good prices for their consumers.  So when it comes to quantity buying, they are usually cheaper than many retailers out there.  But all in all, it’s not that Costco is better than Wal-Mart.  They’re just different and they’re able to differentiate their companies by establishing a good competitive advantage.

So what makes your business different than the rest?

Many like to compete by offering low prices, but they need to be careful and make sure the numbers work out.  If you are able to compete with low prices, make sure you’re making money at the end of the day.  In my career, I’ve seen many businesses fail because they end up decreasing their margins and working for free.   How about competing with something different like better service, better products, or more convenience?  Maybe you’ll be the only one that offers free delivery or a loyalty program.

However you choose to compete, make sure you have a clear understanding of what you want to accomplish, analyze the numbers, and stick to it!