Competitive Advantage
You need an X factor to run a flourishing business. This is the one key advantage that sets you apart from your competition. Look at examples such as Starbucks, Apple or Nike and you immediately understand the value of a competitive advantage through a strong X factor.
The goal for you is that after reading Topic 4 you can immediately get started with creating or sharpening your X-factor: competitive advantage. By communicating this advantage – your Unique Selling Point – you move from constantly trying to convince potential customers to attracting customers to come to you. Of course, good visibility is vital to this. This allows you to focus on further optimizing your business.
Not another claycenter
All over the world, arts and community centres are teaching ceramics. Throwing, slabbuilding, mouldmaking, you can learn it everywhere. But there is only one place in the world where people from all continents, even world famous artists, travel to to play with the clay. That’s in Oisterwijk, a tiny little village in the Netherlands, at the European Ceramic Workcentre. Why? Because they have the X-factor. No one knows exactly what it is, but for 50 years it is, as the New York Times stipulated: The Best Residency for ceramics in the World. What Martin Margiela is for fashion, David Byrne for popmusic and Zumthor for architecture, is the EKWC for ceramics.
Competitive Advantage:
Michael Porter is one of the most important marketing gurus in the world. In 1980 Michael Porter published his first book: Competitive Strategy putting forward his idea about competitive strategies.
According to Porter’s competitive strategy, there are various strategies that businesses can use to create added value and distinctive capacity compared to their competitors. Porter’s competitive strategy is useful when formulating a company’s competitive strategy.
Seth Godin has a comparable approach, but his concept of the purple cow came from his observation of cows. After looking at them for a while they all look the same, common, and ordinary. But a purple cow would stand out and draw attention. As a business owner, do not be afraid of standing out, of being disliked, or of criticism. How you market your business is not enough – you must be unique and offer something different to your audience.
Do I or my clients need competitive strategy?
The competitive strategy is very valuable in the selection of strategic objectives. Which variables do we need for the competition strategy?
According to Porter’s competitive strategy, there are various competitive strategies that organizations can use to create added value and distinctive capacity to their competitors. Porter distinguishes the following strategies:
- Cost leadership
- Differentiation
- Focus Strategy
- Cost focus
- Differentiation focus
- Stuck-in-the-middle
How can we apply the analysis?
Cost leadership Competitive strategy
This competitive strategy focuses on optimizing business processes. This limits the costs compared to the competition. Because the costs remain limited, there is more margin left for the organization.
. The company therefore creates competitive advantage through cost leadership. The low cost price can be achieved by various variables:
- economies of scale;
- lower wage costs;
- technological development;
- standardization and simplification (products and processes);
- vertical integration;
- outsourcing processes;
- management of fixed costs;
- automation processes;
- removing unnecessary extras from products;
- simplify design and composition.
If other companies in the same market use the same competition strategy, this is in most cases at the expense of quality.
In this case there is fierce competition in the market, causing many companies to “fail.”
Differentiation & | Competitive strategy
The goal is to create a unique image. The product/service become important if one or more properties of the products are unique. It is therefore based on the characteristics of the offering as well as the brand image. The buyers want to pay a higher price for this unique product. The organisation provides better service and quality in exchange.
This model determines which activities create value for now and in the future. Differentiation on product, service or image is difficult to copy.
Differentiation can be based on:
- production or service quality;
- product or service innovations;
- service/customer care;
- image, the power of branding;
- design and product characteristics;
- choice of distribution channels.
Focus strategy Competitive strategy
The focus strategy is focused on competing in a niche market rather than the total market. As a result, the producer/service provider has knowledge of the target segments so that it is possible to better respond to consumer needs. There are therefore two different focus strategies:
- Cost focus
- Differentiation focus
These are based on the above cost leadership and differentiation only focused on a niche.
- Cost focus
Combination between the focus strategy and cost leadership.
- Differentiation focus
Combination between the focus strategy and differentiation
- Stuck-in-the-middle | Competitive strategy
This competitive strategy of Porter is used by a business if no clear choice has been made in strategy. The business will not stand out in the crowd and no added value will be delivered to the consumer. Some characteristics of a similar business: the business is too general to be distinctive; the company is too broad to gain a strong position with any specific groups; low profitability
Action make a long list of direct, indirect and new competitors. You can do this best by doing online research. Find which companies offer your product or service. Consider how you search for customers and indeed how your customers find you. So do not only search for “business coach”, but also for “business advice and mentoring”.
Make a shortlist of the 5 to 10 most important competitors. Describe why you see them as a competitor. Save the long list as well. A competitor who is not threatening now can become one in the future.
Collect information from your main competitors about their customer segment, region, products and services, additional services, prices, channels, and marketing strategy.
Action – Make a table and give your most important competitors scores with pluses and minuses. You can also make a full Strengths Weaknesses Opportunities Threats analysis for each party. You can read more about this in this article.
Action – Draw conclusions. Where are the opportunities to improve your business and to distinguish it even more from your competitors? You can also use the SWOT analysis for this.
Time to Reflect:
Consider your business from the outside, how is it approached by the customers, the consumers, the public? Q: Why do you need a marketing plan? Q: How does a marketing plan fit into your business? Q: Who is responsible for marketing in your organisation? |
This module has explored the Competitive Advantage. Competitive Advantage is known as the X-factor, although there are more ways to analyse your business. These topics are interconnected and with the right balance you will devise a successful marketing plan. You must think about your strength and your unique selling points. Please be aware of the context that you operate in. Does your product have the right price, is it accessible in the right way, is it needed? How do the several topics of the Marketing Plan relate to each other? You need to know the voice of your customer and more important, the customer needs to know you.
Now that you have completed the module you should be able to:
- Explain the use of Marketing in your organization
- Describe a series of ways in which your business needs marketing on a daily basis.
- Be curious to want to learn more about marketing.