Competitive advantage refers to why clients choose you over your competitors, allowing your business to achieve huge margins while generating value. For something to be considered a competitive advantage, it should be difficult or impossible to copy or duplicate. Before establishing a competitive advantage, ensure that your products or services offer value and generate interest, find your target market and how you’ll cater to them, and know your competitors and what they’re doing.
A clear competitive advantage helps businesses increase certainty and channel their resources for maximum return on investment. It makes your revenue streams more constant and predictable to help achieve momentum. Additionally, gaining a competitive advantage reduces expenditures such as recruiting, marketing, and fundraising and allows you to measure your progress accurately.
To develop your source of competitive advantage, you need to know your key competencies and understand your competitors and their competencies. Find out who your paying customers are and what they value. Here are ways to gain a competitive advantage.
1. Differentiation focus
With differentiation focus, you aim to differentiate within one or a few target market segments whose needs indicate that there are chances for you to provide different products or services compared to your competitors who may be focusing on a large group of consumers. To adopt the differentiation focus strategy, ascertain that your target audience has different needs and wants that the existing competitor goods or services aren’t meeting, ensuring a valid reason for differentiation.
Through this strategy, you can establish a niche market segment for your business to achieve higher prices than undifferentiated products. Use a market intelligence platform to acquire granular insights into the competitors’ activities, such as new product launches, to track their every move and predict what they’ll do next. This will help you create a foolproof plan to execute your differentiation focus strategy to gain a competitive advantage.
2. Cost leadership
When you leverage the cost leadership strategy, you aim to be the lowest-cost producer in your niche market. With this strategy, you offer similar products with the same quality as your competitors but at lower prices. To succeed with this strategy, find ways to produce your goods at a lower cost, such as high productivity levels and capacity utilization, take advantage of your bargaining power to negotiate for low-cost production materials, and use technology in your production processes. Accessing the most powerful distribution channels will ensure that your products reach a wider audience.
3. Differentiation leadership
Differentiation leadership allows you to target a larger market to gain a competitive advantage across the entire industry. With this strategy, you have to choose one or more criteria that buyers use to position your business to meet those criteria uniquely. Since differentiation requires you to charge extra to cover the additional production costs meant to offer value-added features to your clients, you have to find ways to convince them to choose your products over the undifferentiated ones. It requires a huge marketing investment. To achieve differentiation leadership, ensure exceptional product quality and branding that focuses on customer recognition. Focus on wide market distribution and constant advertising.
4. Consider innovation
Although product innovation can give your business a competitive edge, process innovation can bring you a greater advantage. This is because it completely changes the way a company operates. Process innovations are beneficial because they reduce product costs, helping you attract more customers before your competitors find ways to discover and imitate your process.
5. Leverage strategic partnerships
Partnering with businesses within your industry or closely related sectors is a good way to gain a competitive advantage. Strategic partnerships involve joint ventures where companies bring their resources together to gain exposure at the expense of those not in the alliance.
6. Strategic management
Strategic management involves planning and implementing strategies to establish, maintain, and grow a company’s competitive advantage. To develop a strategic plan, you should understand stakeholders’ expectations, global trends, and the competitive landscape to help with strategic decision-making for a strong long-term competitive position. To achieve and maintain a competitive advantage, you should constantly track and review your strategic approach for an improved financial situation and fast response to continually changing market forces.
Since markets are generally competitive, sustaining a competitive advantage can be challenging. This is because competitors imitate advantaged industry competitors or the disadvantaged competitors create their unique competitive advantage to outdo those already enjoying the competitive advantage.
To maintain and increase competitive advantage, consider constantly assessing your company, its value proposition, the customers, competitors, and the market. This will help you ensure that you always have a competitive edge over your competitors.
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