what is your company action plan to achieve a sustainable competitive advantage
The question is, what is this Sustainable Competitive Advantage? Even more than that, the question would be how to develop this competitive advantage.
In the last Strategy article – Competitive Advantage – the Messi of your business, I talked about competitive advantage and the two types, i.e., Cost Leadership and Differentiation.
A quick recap of that:
A business firm enjoys a competitive advantage when it provides its customers benefits similar to its competitors but at a lower price. That's because information technology manufactures its products at a much lower toll as compared to the competitors. The lower cost of production gives information technology the cost advantage assuasive information technology to toll its products lower than competitors.
The same firm also enjoys a competitive reward when it provides its customer's benefits superior to what is beingness offered past its competitors, only at the same cost. These first-class benefits give the firm a differentiation reward.
What Do These Advantages Mean?
These are 2 strategies for the same objective. Both these advantages translate into superior value cosmos for customers and higher profits for the firm. The price and differentiation advantages give the firm a positional advantage – either in whatsoever 1 or both.
What are the Sources of Sustainable Competitive Advantage?
The sustainable competitive advantage sources for whatever company include Brand Loyalty, Innovation, Proprietary Information Scale, Intellectual Holding, Innovation, Network- result .
Make Loyalty
The forcefulness of the make drives brand loyalty. Consumers tend to purchase ane make product continuously.
Ex: Google, Samsung, Amazon.
Innovation
Innovation is the essence to propel. It is the fashion you use technology to solve the bug of the customer and create value.
Ex: Apple, Microsoft
Proprietary Information
Any kind of knowledge that the firm possesses which will assistance in generating value.
Ex: Amazon possesses the buy information of buyers, which helps them target customers and provide customized solutions.
Scale
More than scale over competitors gives you the advantage to sell at a lower price and achieve economies of scale.
Ex: Toll differentiation (Walmart)
Intellectual Property
The possession of rights over specific formulas, processes, or patents.
Ex: Intellectual holding rights of Toyota Lean manufacturing Process
Network Effect
When the value of the product increases with increases in the number of consumers.
Ex: Facebook
How exercise Firms Gain a Sustainable Competitive Reward?
A firm uses its capabilities and resource to offer products and services that customers want. When a firm uses them optimally to produce a product at the everyman toll and with more features, it creates a cost or differentiation advantage.
The concept becomes clear through the post-obit diagram.
The resource-based view dictates that the firm must have better resource and capabilities than its competitors to leverage them for a cost or differentiation advantage. If it is not so, the competitors would hands copy the firm's offerings.
The challenge to firms is to reach a sustainable competitive advantage through deploying their resources capably. Porter suggests a style through his matrix incorporating a source of cost and differentiation advantage juxtaposed against broad and narrow markets in which the house competes. This matrix helps to create generic strategies that can offering a competitive reward to the firm.
Porter's Generic Strategies Matrix is every bit per the diagram below.
A house tin achieve either cost leadership or differentiation leadership or derive the maximum competitive reward using generic strategies.
Porter further adds that a house creates value through the value chain, which is the gear up of activities performed by the house and everyone else in the value system in which the firm operates.
In the earlier blog, nosotros saw how Messi delivered the competitive advantage to Barcelona. We as well introduced another idea – whether the competitive advantage is plenty or we need to sustain it.
Using the concepts as developed by Porter, let the states encounter how they apply to real businesses.
What Will Barcelona Do When Messi Retires?
In the last commodity – Competitive Advantage – the Messi of your business, I analyzed how Competitive Reward is like Messi for Barcelona.
As long as Messi is with Barcelona, the order has a competitive reward. So, the club sustains the competitive border by retaining Messi – he has not played for another club autonomously from his state. Of course, Barca tin can maintain its competitive advantage to remain successful if it can notice a player such as Messi equally a replacement when he retires, provided other elements remain abiding.
Our example of Barcelona is an excellent representation of an entity sustaining competitive advantage. Information technology has been at the top division of the football scene since information technology was founded in 1899 without relegating to a lower division. Innumerable records of the team and its players speak volumes almost the success of the cub.
Thus, from the Barca example, it is articulate that the lodge acquires a competitive advantage for many years. This advantage that a company carries for many years is known as a sustainable competitive advantage.
The Example of Coffee Day
A powerful brand tin provide a sustainable competitive advantage to the visitor. Information technology takes a lot of attempt and investment to build a powerful brand, and Coffee Solar day is a good example. Its powerful brand equity helped information technology to overcome some disruption due to an IT raid in September 2017. Information technology also has successfully warded off competition from other entrants and players – Barista, Starbucks, and Costa Java.
If a company can sustain its low-toll advantage, information technology can extend its competitive advantage as long equally information technology has that reward.
Competitive Advantages of Coffee Day
Java Mean solar day is an splendid example of its price of making coffee, it is the everyman in the marketplace. Its low-toll reward comes from a business that is fully integrated into the dorsum terminate and front end. It owns its plantations, curing works, roasting plants, enquiry labs, and cafes.
A low-cost advantage gives the visitor tremendous pricing ability. Information technology is a truism that price is a fact and cost is a strategy. Thus, with a low-price advantage, a business firm tin use the marketing mix'southward price chemical element judiciously to derive maximum profits for the firm without losing out on customers. This perchance is one reason why Starbucks cannot easily suspension into Java Solar day's strongholds.
Over a period, a company acquires assets that tin catechumen into strategic assets. In the case of Coffee Solar day, its plantations, curing works, and research labs have transformed into strategic assets giving it a singled-out competitive reward.
Another strategic nugget is the quality of people working in Coffee Day. Information technology has trained its people at its vocational grooming center prepare in Chickmagalur, its manufacturing headquarters.
Porter'due south second type of competitive advantage is product differentiation. Java Day has distinct advantages in its continually changing menus in line with the seasonality and evolving preferences of its customers. While make loyalty can do so much, production differentiation lends a more considerable competitive advantage. The company has grown from starting equally an Internet café to a way statement where youngsters love being at the café to spend time with their friends with a lot happening over a cup of coffee.
There are several ways in which one tin can maintain a competitive advantage.
- Look into the time to come and locate new markets to expand your business
- Create entry barriers so that competition finds it challenging to enter your market
- Continuously tweak the elements of the marketing mix to stay ahead of the competition. Launch new products, do aggressive pricing, stay on top of consumers' listen with appropriate ad strategies, ensure your products and services are ever available, listen to customers' feedback and human action upon them
The moment Coffee Day fails to retain its competitive advantage, you can run across a host of competitors entering the fray and carving a decent market share for themselves.
Source: https://www.superheuristics.com/sustainable-competitive-advantage/
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