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7 Strategies to Define your Competitive Advantage

What is a competitive advantage & why should it matter to you? This article provides the definition of competitive advantage & goes into detail on 7 strategies.

7 Strategies to

Define your Competitive Advantage

by Joel Garfinkle

Working with Joel was a turning point in my career as a leader at Genentech. By asking the right questions and using his sharp mind, Joel helped me change my intrinsic mindset as a leader.

Daryl Baldwin, Director ,GENENTECH, INC.

What is a competitive advantage and why should it matter to you? The definition of competitive advantage is defined as the ability to stay ahead of present or potential competition. This is typically done by evaluating strengths and weaknesses of competitors and seeing where you can fill in the gap or step up and improve.

Companies develop a competitive edge when they produce attributes that allow them to outperform their competitors.

Here are 7 ways to discover how to define your competitive advantage

Here are 7 ways to discover how to define your competitive advantage Cost Leadership Strategy.

Companies may place themselves ahead of the pack by offering attractive pricing. Wal-Mart and Amazon are two companies that have risen to the forefront by this strategy. While this is effective for companies, low pricing is seldom a desirable method for individuals.

Differentiation Strategy.

Branding is likely the most widely used method to differentiate one company from another. With this method, a name like Nike or Rolex automatically assumes a status distinct and apart from all other shoes or watches.Individual executives using this method must seek to find a core strength or talent that separates them from the pack. Then they leverage this unique skill or ability through increasing their visibility and the perception of its value to the company.

Innovative Strategy.

Companies may move ahead of the competition by doing things in new and different ways. Insightec has created a way to eliminate brain tumors and other cancers without cutting into the body. Clearly they gain a competitive edge over traditional surgeries by reducing pain, risk, and long recovery time.People can gain a competitive edge as they discover and offer innovative ways of doing things for the company. If your ideas consistently result in benefits to the company you’ll have that essential edge.

Operational Effectiveness Strategy.

Some companies just do what they do better than anyone else. FedEx started out with an innovative strategy. But it continued its leadership — even after dozens of other companies jumped into the overnight shipping business — by doing it very well.For individuals, this may mean creating systems of operating or new ways to analyze data. When you do what you do very well, you gain a competitive advantage over those doing it the longer and slower way.

Technology Based Competitive Strategy.

Since the time Henry Ford revolutionized the auto industry with the assembly line, companies have sought for a competitive edge using new technology or technology in a new way. Computers and applications continue to… perhaps briefly… give companies an advantage over the competition. Workers who embrace new technology and learn to master it nearly always redefine or increase their competitive advantage over those who resist new methods.

Adaptability Competitive Advantage.

As markets, economies, and other factors change in this increasingly unstable and unpredictable environment, companies that can adapt have a distinct advantage. Typically this includes smaller or trendy companies, however even Apple has successfully negotiated the waves of change. Executives can bring adaptability to their core strength by being open to change. They can cross train and bring new and more current skills to the table. Perhaps, adaptability is foremost a state of mind.

The Information Advantage.

Almost all the other strategies benefit from excellent information. The definition of competitive advantage is the skills needed to outpace your rivals. Most of those come through knowledge and information. Successful companies seek the latest in technology, strategies, and data.

Individuals who want to keep their competitive edge need to do the same.  There are many training programs available to help you work faster, smarter, and bring more value to yourself and your employer. Listening to audio books can also help you gain a competitive advantage.

In this cut-throat environment, it’s essential that both businesses and individuals work to keep their competitive edge. With these seven strategies, you can position yourself well ahead of the pack.

For more information on how to help yourself or your business take the competitive advantage, contact Joel.

Copyright ©2005-2022 Joel Garfinkle, All Rights Reserved.

JOEL GARFINKLE is recognized as one of the top 50 coaches in the U.S., and the author of 7 books, including Getting Ahead: Three Steps to Take Your Career to the Next Level. He has worked with many of the world's leading companies, including Google, Deloitte, Amazon, Ritz-Carlton, Gap, Cisco, Oracle, and many more. Visit Joel online at Garfinkle Executive Coaching. Subscribe to his [email protected] Newsletter and receive the FREE e-book, 41 Proven Strategies to Get Promoted Now!

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If you reprint this article, please advise us that you have done so and forward a copy of the article, or a link to the web page where the article can be viewed, to Joel Garfinkle.

स्रोत : garfinkleexecutivecoaching.com

Competitive Advantage

A competitive advantage is an attribute that enables a company to outperform its competitors. It allows a company to achieve superior margins

Competitive Advantage

The ability of a company to outperform its competitors

Updated January 23, 2022

What is a Competitive Advantage?

A competitive advantage is an attribute that enables a company to outperform its competitors. This allows a company to achieve superior margins compared to its competition and generates value for the company and its shareholders.

A competitive advantage must be difficult, if not impossible, to duplicate. If it is easily copied or imitated, it is not considered a competitive advantage.

Examples of Competitive Advantage

Access to natural resources that are restricted from competitors

Highly skilled labor

A unique geographic location

Access to new or proprietary technology

Ability to manufacture products at the lowest cost

Brand image recognition

Constructing a Competitive Advantage

Before a competitive advantage can be established, it is important to know the:

Benefit: A company must be clear about what benefit(s) their product or service provides. It must offer real value and generate interest.Target Market: A company must establish who is purchasing from the company and how it can cater to its target market.Competitors: It is important for a company to understand other competitors in the competitive landscape.

To construct a competitive advantage, a company must be able to detail the benefit that they provide to their target market in ways that other competitors cannot.

Strategies for Competitive Advantage

There are three strategies for establishing a competitive advantage: Cost Leadership, Differentiation, and Focus (Cost-focus and Differentiation-focus).

1. Cost Leadership

In a cost leadership strategy, the objective is to become the lowest-cost producer. This is achieved through large-scale production, where companies can exploit economies of scale.

If a company is able to utilize economies of scale and produce products at a cost lower than that of its competitors, the company is then able to establish a selling price that is unable to be replicated by other companies. Therefore, a company adopting a cost leadership strategy would be able to reap profits due to its significant cost advantage over its competitors.

2. Differentiation

In a differentiation strategy, a company’s products or services are differentiated from that of its competitors. This can be done by delivering high-quality products or services to customers or innovating products or services.

If a company is able to differentiate successfully, the company would then be able to set a premium price on its products or services.

3. Focus

In a focus strategy, a company focuses on a narrow target market segment. This strategy is successful if the company is able to successfully create products/services that can cater to these customers. The focus strategy also has two variants;

Cost-focus: Lowest-cost producer in a narrow market segmentDifferentiation-focus: Differentiated products/services in a narrow market segment

Competitive Advantage in the Marketplace

Three great examples include:

McDonald’s: McDonald’s main competitive advantage relies on a cost leadership strategy. The company is able to utilize economies of scale and produce products at a low cost and, as a result, offer products at a lower selling price than that of its competitors.Louis Vuitton: Louis Vuitton’s advantage relies on both differentiation and a differentiation-focus strategy. The company is able to be a leader in the luxury market and command premium prices through product uniqueness.Walmart: Walmart’s advantage relies on a cost leadership strategy. Walmart is able to offer “everyday low prices” through economies of scale.

Importance of Competitive Advantage

A competitive advantage distinguishes a company from its competitors. It contributes to higher prices, more customers, and brand loyalty. Establishing such an advantage is one of the most important goals of any company.

In today’s world, it is essential to business success. Without it, companies will find it difficult to survive.

Video Explanation of Competitive Advantage

Watch this short video to quickly understand the main concepts covered in this guide, including the definition of competitive advantage and how companies create it using various business strategies.

Other Resources

Thank you for reading CFI’s guide to Competitive Advantage. To keep learning and advancing your career, the following resources will be helpful:

Absolute Advantage Opportunity Cost Monopoly Law of Supply

स्रोत : corporatefinanceinstitute.com

Strategic Management for Competitive Advantage

For the better part of a decade, strategy has been a business buzzword. Top executives ponder strategic objectives and missions. Managers down the line rough out product/market strategies. Functional chiefs lay out “strategies” for everything from R&D to raw-materials sourcing and distributor relations. Mere planning has lost its glamor; the planners have all turned into […]

Strategic Planning

Strategic Management for Competitive Advantage

by Frederick W. Gluck, Stephen P. Kaufman, and A. Steven Walleck by Frederick W. Gluck, Stephen P. Kaufman, and A. Steven Walleck

From the Magazine (July 1980)

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For the better part of a decade, strategy has been a business buzzword. Top executives ponder strategic objectives and missions. Managers down the line rough out product/market strategies. Functional chiefs lay out “strategies” for everything from R&D to raw-materials sourcing and distributor relations. Mere planning has lost its glamor; the planners have all turned into strategists.

All this may have blurred the concept of strategy, but it has also helped to shift the attention of managers from the technicalities of the planning process to substantive issues affecting the long-term well-being of their enterprises. Signs that a real change has been taking place in business’s planning focus have been visible for some time in the performance of some large, complex multinational corporations—General Electric, Northern Telecom, Mitsubishi Heavy Industries, and Siemens A.G., to name four.

Instead of behaving like large unwieldy bureaucracies, they have been nimbly leap-frogging smaller competitors with technical or market innovations, in true entrepreneurial style. They have been executing what appear to be well thought-out business strategies coherently, consistently, and often with surprising speed. Repeatedly, they have been winning market shares away from more traditionally managed competitors.

What is the source of these giant companies’ remarkable entrepreneurial vigor? Is it the result of their substantial investments in strategic planning, which appear to have produced something like a quantum jump in the sophistication of their strategic planning processes? If so, what lessons can be drawn from the steps they have taken and the experience they have gained?

To explore these questions, we embarked on a systematic examination of the relation between formal planning and strategic performance across a broad spectrum of companies (see the sidebar). We looked for common patterns in the development of planning systems over time. In particular, we examined their evolution in those giant companies where formal planning and strategic decision making appeared to be most closely and effectively interwoven.

A Quest for Common Patterns

For two years, we and our colleagues studied the development of formal planning systems in 120 companies, mainly industrial goods manufacturers (client and nonclient) in seven countries. To ...

Our findings indicate that formal strategic planning does indeed evolve along similar lines in different companies, albeit at varying rates of progress. This progression can be segmented into four sequential phases, each marked by clear advances over its predecessor in terms of explicit formulation of issues and alternatives, quality of preparatory staff work, readiness of top management to participate in and guide the strategic decision process, and effectiveness of implementation (see the Exhibit).

Exhibit Four Phases in the Evolution of Formal Strategic Planning

The four-phase model evolution we shall be describing has already proved useful in evaluating corporate planning systems and processes and for indicating ways of improving their effectiveness.

In this article, we describe each of the four phases, with special emphasis on Phase IV, the stage we have chosen to call strategic management. In order to highlight the differences between the four stages, each will be sketched in somewhat bold strokes. Obviously, not all the companies in our sample fit the pattern precisely, but the generalizations are broadly applicable to all.

Phase I: Basic Financial Planning

Most companies trace the origins of a formal planning system to the annual budgeting process where everything is reduced to a financial problem. Procedures develop to forecast revenue, costs, and capital needs and to identify limits for expense budgets on an annual basis. Information systems report on functional performance as compared with budgetary targets.

Companies in Phase I often display powerful business strategies, but they are rarely formalized. Instead, they exist. The only concrete indication that a business strategy exists may be a projected earnings growth rate, occasionally qualified by certain debt/equity targets or other explicit financial objectives.

The quality of Phase I strategy depends largely on the CEO and the top team. Do they really know their company’s products and markets and have a good sense of what major competitors will do next? Based on their knowledge of their own cost structure, can they estimate what the impact of a product or marketing change will be on their plants, their distribution system, or their sales force? If so, and if they do not plan for the business to grow beyond traditional limits, they may not need to set up an expensive planning apparatus.

Phase II: Forecast-based Planning

The complexities of most large enterprises, however, demand more explicit documentation of the implicitly understood strategies of Phase I. The number of products and markets served, the degree of technological sophistication required, and the complex economic systems involved far exceed the intellectual grasp of any one manager.

स्रोत : hbr.org

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