Competitive advantage is a business concept that helps companies to outperform its competitors and create greater value above them. Companies can gain this advantage by offering consumers superior value, such as by providing other benefits or quality services that validate higher price or by offering lower prices. It is a business concept that allows a company or firm to flourish. But this needs to identify a specific target group with a distinct need, producing and offering a high-quality and suitably priced product and doing it better than any other competitor in market.
In simple sentence this business concept helps a company to churn greater sales or retain more customers than its competitors. As it has the potential to make or break a company, it is vital for all the managers to be well verse with it, how to create and benefit from them.
It has been noticed that the three generic strategies set up by Michael Porter that any firm can use to gain outshine the competitors-cost leadership, differentiation, and innovation proves quite effective:
Cost leadership strategy
The main aim of cost leadership strategy is to offer products at the lowest price in the market. The main challenge of this strategy is to garner good revenue for the organization despite offering products in lowest price rather going at loss. Companies who wish to outshine their competitors by following this strategy have to maintain relentless effort lowering the cost of the products and creating value for customers. Companies following this strategy, used to offer lowest prices on standardized products on which consumers are price aware, while selling other services at less discounts.
Another way of achieving it for organization is through differentiation strategy. The main aim of firms following this strategy is to develop and market variety of services and products for different customers that competitors are not yet offering. This strategy offers a prompt and direct advantage to the organization which is producing unique items that none of its competitors is offering yet. But to make this strategy successful, a firm has to sustain an expensive ad campaign. To make a success of a Differentiation strategy, companies need extensive research, development, innovation and the ability to deliver high-quality products.
The main aim of companies following innovation strategy is to determine how and to what extent they use innovation to come up with unique products or features. The objective of this strategy is to outrun other competitors by introducing a whole new or significantly better products or services. This strategy is typical for technology start-up companies.
Whatever business strategies you follow for advantage over your competitor, you must begin with focusing on the certain needs of a target audience group. Then only you will succeed in analyzing your competitors properly.
3 Tips For Developing a Competitive Advantage
How to develop your Competitive Advantage
Your business needs to have the edge over your competition to attract and retain the aware customers of today’s global marketplace. As a specialist in the field of competitive intelligence and business training I am still amazed at how few business owners know what a competitive advantage is and that they need one to survive.
To help you develop your own business, competitors advantage, I have three essential tips to get you started.
1. Make a list of all the things your business does really well
Here is where a true in depth understanding of your business processes is important as you compile the list of all key activities that your business is good at. Brainstorm as many as possible in a single list down the page.
Our shipping to customers is very quickWe have highly skilled service staffThe owner is a member of a professional associationCustomers are always speaking well of you on the internetYour product price is very attractive
Once you have made this list we move on the next tip.
2. What do your competitors do really well
Hopefully you have already identified who are your real competitors before this stage. Review your competitors and make a list of all the things they do really well.
It doesn’t matter if you also do it well or if you don’t at this stage. Just write down everything they do well.
Now the easy part, go down both lists and cross of any activity that you and your competitors do well. I am not saying that you stop doing them, but for developing your competitive advantage we can ignore them for the moment.
Don’t worry if you end up crossing off nearly all the activities on the lists because if you have selected your competitors well, your performance will nearly be the same. In most cases this will leave you will only a few activities that you do really well and that they don’t do well.
3. Create a new list with the remaining activities
Take the remaining activities that your business does really well and the competitors don’t do well and write them in a new list. This list is the final stage of developing your competitive advantage.
Look at the list and cross out any activities that the customer does not care about or is not relevant to the customer. This is because a true advantage is only useful if the customer desires this activity.
You should only be left with 2-3 possible competitive advantages now and have to choose the best one. How do you choose the best one, well the final choice is yours, but you can consider the following reasons to choose your real business, competitors advantage,
Cross out any that can easily be copied by a competitor or new entry to the industryCross out any that cannot be marketed or advertisedCross out any if the advantage could be turned against you by a competitor
The activity that you do really well, that the competitors can not do well, and is valued by your customers becomes your competitive advantage.
Once you have selected you competitive advantage you are now able to develop a consistent brand image for your business that highlights your advantage in every message.
written by: omulamaken