Comparative and competitive advantage are different terms that mainly refer to what informs the decision behind the choice of what to produce in a competitive market. Comparative advantage occurs when a company or country can produce something at a relatively cheaper rate than can the competition or other countries. Competitive advantage occurs when a company emerges as a leader in its market sector due to the ability to produce goods or deliver services at higher profits than the competition and at a lower cost to the consumers.
In analysis of comparative and competitive advantage, the entities involved must conduct an assessment of their strengths and weaknesses with a view of finding out their areas of advantage. In the comparative advantage, one entity could have an advantage in the production of a product due to the fact that the raw material used for production is readily and cheaply available. An example is two countries that produce motor oil lubricants. Country A may be located in an oil-producing country in the Middle East, while Country B is located in Asia.