This definition from Investopedia is probably as good as any;
"An advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers than its competition. There can be many types of competitive advantages including the firm's cost structure, product offerings, distribution network and customer support.
Investopedia explains 'Competitive Advantage'
Competitive advantages give a company an edge over its rivals and an ability to generate greater value for the firm and its shareholders. The more sustainable the competitive advantage, the more difficult it is for competitors to neutralize the advantage.
There are two main types of competitive advantages: comparative advantage and differential advantage. Comparative advantage, or cost advantage, is a firm's ability to produce a good or service at a lower cost than its competitors, which gives the firm the ability sell its goods or services at a lower price than its competition or to generate a larger margin on sales. A differential advantage is created when a firm's products or services differ from its competitors and are seen as better than a competitor's products by customers."
As a long term investor I have been giving this more and more thought lately, if a business can be found with these qualities and the price is reasonable, holding for the long term should work out OK for shareholders.
So with this in mind I thought to create a watch list of ASX listed companies that may have these qualities of particular interest to me would be any small or micro caps. Any contributions and arguments would be greatly appreciated.