How to achieve a competitive advantage in any business?
What is a competitive advantage?
A firm’s ability to achieve a competitive advantage is to stay ahead of any present competition and work more productively. Certain factors allow the firm to produce goods more efficiently at a lower price, hence generating more sales. It is about making your product more desirable than your rivals.
Companies can achieve a competitive edge when they outperform their competitors, and this could be done through the following strategies:
Cost Leadership Strategy
This strategy allows a company to be ahead in the market by offering attractive prices. A rational consumer will always choose the cheaper of two substitutes, which then leads to greater sales of the product.
The more time this strategy takes, the more effective it is. Differentiation is about attaching a name to your company and its products. This is achieved by firstly finding a unique talent or production which separates the firm from others. Working on it to increase the firm’s value and making a brand name.
Companies may move forward in the competition by introducing products innovatively and differently. It is about thinking out of the box to introduce a product that results in benefit for the company.
Operational Effectiveness Strategy
The basic rule behind this is to keep working on what you do until you turn the best at it. FedEx started with an innovative strategy and eventually started working on its operations. This made the company reach the top despite the competitors’ companies jumping into the business. It is about delivering your services, being efficient at operation work, and creating new ways of analyzing data. Doing well at what you do helps to achieve a competitive edge.
Technology-Based Competitive Strategy
The modern era of technology requires a skill set of using it to give an advantage over the competition. The computers and applications require the workers to learn and master them for better productivity and efficiency.
Adaptability Competitive Advantage
Companies can often find themselves in situations where they are forced to leave behind their normal way of working at operations and adapt to a new one. An example of such a situation could be COVID-19. This transition comes after a lot of effort, which helps to change your ways and results in an edge over your rivals.
Competitive Advantage in the Real World
McDonald’s: McDonald’s uses Cost Leadership Strategy to stay ahead in the competition. All the products are made through economies of scale, business plans, and low costs. They are then sold in the market at a lower price than their competitors.
Apple: Steve Jobs worked for ages on his company to create a brand name through differentiation strategy. Apple is a market leader and charges high prices because it has a high value attached to the products.
Walmart: The company offers the lowest prices, along with delivering the best products. This results in increasing the customer base and their loyalty.
Importance of Competitive Advantage
A company needs to communicate and plan on keeping relevant departments and management together to achieve a competitive advantage. They need to invest their time and resource to work for it which is eventually paid off by
- Marketing: Once you develop a competitive advantage, it attaches a brand name to your firm in the market. This makes your marketing efforts easier and more efficient. Your customers will see you as a market leader, which will always make them interested to stay updated with the new productions.
- Resources: More companies and investors will be willing to work with you as the firm’s value increases as the market leader. Your competitive advantage will attract more vendors and suppliers who would want to join your business. This will eventually be increasing your options of choosing high-quality resources to maintain your position in the market.
- Pricing: The most important benefit is of dictating and setting your own prices after developing a competitive advantage. If you’re best at what you deliver through your products, then you can charge higher prices than your competitors. Your customers will always be sure that the product they’re receiving is worth the money.
- Entering New Market: There is a high demand in the new market when the firm’s name reaches the top. Planning for the expansion of your business requires a lot of time and effort. Once you achieve competitiveness, this makes it easier to know where the demand is higher and where to expand.
The basic goal is not only to run fast in the race, but it is also about providing reliable products. This helps to gain customer loyalty. Choosing a strategy and planning to work on it helps the firm to be the best at what they deliver. The competition does not only exist between other rivals, but it is also about how better you get at your previous performance.
A competitive advantage makes your name stand out among the other competitors. In this world of technology, it is difficult for a firm to survive without enough knowledge of the market and rivals.
We, at Oak Business Consultant, are specialized in providing consultation on these matters. We have helped many companies in building a robust financial model and business plan along with Pitch Deck. Therefore, you can visit our website Oak Business Consultant to consult with us for free.