Strategic Positioning: Competitive Advantage and Value Creation (B) Key concepts - Background Note

Definition of competitive advantage: A firm has a competitive advantage when it earns a higher economic profit than its rivals in the same market. This is achieved by creating and delivering more economic value.• Value creation: Value creation is central to competitive advantage. It is defined as the difference between the perceived benefit (maximum willingness-to-pay) and the cost incurred in producing the product/service (hereafter, product).