Comparative Advantage vs. Competitive Advantage - Deepstash

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Comparative Advantage vs. Competitive Advantage

When a company is at a better position to provide strong value to the customer, it is said to be at a competitive advantage.

Example: A cable TV operator offers low cost wifi internet services at great speeds and no downtime, which isn’t offered by the competition in that area. The decades of experience in cable TV makes for a competitive advantage.

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The law of comparative advantage was first mentioned in 1817 by English economist David Ricardo.

Governments around the world impose rules, regulations and restrictions like:

Certain countries have unique strengths, local resources and talent that can be a comparative advantage to them, and make products at a cheaper cost than other countries. If they indulge in protectionism, the end result is higher costs and inefficiency for all.

An opportunity cost is the potential ‘alternative’ or benefit that is forfeited when one chooses a particular option.

  • Comparative advantage is only an advantage of a lower opportunity cost, and does not factor in volume or quality.
  • Absolute advantage is the pure ability of a company to produce better goods or services (in quantity or quality) than...

Comparative advantage is also measured by the salary yardstick, and how much a person’s time, skills and core skill sets are worth.

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