A company's ability to produce goods or services faster, more efficiently, or for less money than its competitors is known as a competitive edge. These elements enable the producing unit to outperform its competitors in terms of sales or margins. Cost structure, branding, the standard of the product offers, the distribution system, intellectual property, and customer service are just a few examples of the variables that are thought to contribute to competitive advantages.

A company has a comparative advantage if it can produce a good or service more quickly than its rivals, which increases profit margins. The less expensive of any two perfect alternatives supplied will be picked by logical consumers. For instance, a car owner might choose to fill up at a station that offers petrol at a 5-cent discount over the competition.

Geographic position, effective internal systems, and economies of scale can all contribute to comparative advantage. However, comparative advantage may not necessarily imply a superior good or service. It merely demonstrates that the business can provide a comparable good or service for less money.

A company that manufactures a product in China, for instance, might have lower labor costs than a company that manufactures in the United States, allowing it to sell the same product for less money. Comparative advantages are determined by opportunity cost in the context of international trade economics.