Sources of Competitive Advantage for Sustainable Companies

(Last Updated On: August 8, 2019)

Sources of competitive advantage make the companies sustainable. It is very much true for the emerging and great companies. In fact, competitive advantage are one of the crucial factors that distinguishes a successful company from an unsuccessful. Lets see what are those sources of USP, or unique selling proposition, or competitive advantage, and how they play vital factors to mobilize all other factors of an organization.

How have companies like Apple, Google, Microsoft, Walmart, General Electric, Berkshire Hathaway and Kumar become market leaders? Well, you can find the below.

“If you have no competitive advantage, don’t compete.” – Jack Welch

Most entrepreneurs and business owners know what living in business can achieve a competitive advantage. Every business should have a competitive advantage; If not a business, its days are numbered. The time test stands out that companies are companies with a strong competitive advantage, or unique selling proposition.

Related: Five Basic Generic Competitive Business Level Strategies

What is your USP

A business’ competitive advantage is sometimes referred to as a unique sales proposal, or USP. It’s the kind of thing or thing that sets your business apart – and better than your competitors, as well as the customers buying from you instead. Identifying your USP is important, so you can build on your strengths and emphasize your sales and marketing efforts.

When they believe in the competitive advantages of their business, most owners will talk about their great product or outstanding customer service. While this can certainly offer competitive advantages, there are other areas where your business can set itself apart from the competition.

“If you make a good Mousetrap, the world will lose its way to your door.” While the rise of the term is controversial – it is generally attributed to Ralph Waldo Emerson in the late 19th century, but the quote from it is difficult to find accurately – it means crystal clear: companies capitalize on their competitive advantage sources – in this case, a good product or “Mousetrap” – can win in a free and open market.

If you and your managers did not spend time identifying the sources of your competitive advantage, but this is a long time to do so. Honorable and then your competitive advantage is the most effective way to maximize market share and increase sales and profitability.

sources of competitive advantage

sources of competitive advantage (image source)

Here are some common sources of competitive advantage:

High Product Quality – Most business owners will tell you that they produce high quality products. But for some companies, it offers lower prices for producing lower quality products and appealing to smart price conscious customers.

Low price – Depending on the product or service and the target customers, the price can be a strong competitive advantage – or not. Businesses that place themselves and their products at the highest quality will usually not focus on lower prices as USP.

High level service – High quality quality, some businesses charge exceptional customers service as their USP. But again, this business probably doesn’t have to be among the industry’s low-cost leaders. In fact, low prices can probably impress customers that their service may leave something deliberately.

Industry Knowledge and Skills – Some businesses have in-depth industry knowledge that helps customers get the most out of their products and services. They can often charge a premium for products and services because customers value these skills and hands-on assistance.

Improved technology and innovation – this is the best “good mice-trap” that Emerson (or anyone) mentions. Businesses can use the latest new technologies and innovations to make things easier for customers that have key strategic advantages over their competitors.

“The ability to learn and translate the skills of any organization learning to learn fast is the ultimate competitive advantage.” – Jack Welch

Exclusive resale or distribution rights

Holding exclusive distribution rights is another source of sustainable competitive advantage. When a company has exclusive rights to the product within a particular region; That product can only be sourced from the distributor or such rights holder.

Capital equipment ownership

Competitive advantages are exploited by operating companies in the industry requiring heavy machinery where these sources are mainly needed. Examples of industries that include a competitive advantage include ownership of capital equipment including publishing, production, oil exploration, construction and mining.

Strong research and development capabilities

With strong research and development capabilities, a business can gain a strong competitive advantage in its industry. Strong research and development is reflected in the company’s product development process. Companies with strong research capabilities often lead the market with innovation.

Access to Intellectual Property

The next source of sustainable competitive advantage a business can employ, it holds an intellectual right; Which may exist in the form of trademarks, trade names, copyright and patents.

Excellent management team and operation

Show me a business that is the leader of its industry market and I will show you a personal business by the firm’s management team. Exploiting other sources of competitive advantage without a strong business team will only be a vain attempt. A business management team is essential to strengthening the opportunities to create the necessary competitive advantage.

Barriers to entry or monopoly

Some businesses have gained competitive advantage because their industry entry has been limited to the surrounding circumstances. A good example of an industry where barriers to entry create competitive advantage is the oil exploration and mining sectors (licenses are required to enter industries because there are government restrictions on entry). The exclusive can be achieved through a sustainable competitive advantage and having a close relationship with the government.

Economic reasons

Seventh source of sustainable competitive advantage is an estimate of the economic factor in a region within the time frame. A manufacturing company operating from China or India will have the competitive advantage of producing a US company because China’s economic system is more favorable to start overhead and labor costs.

Superior database management and data processing capabilities

This source of competitive advantage is quite clear and understandable. A company that shows the ability to process the process faster, will have a competitive advantage over other organizations with less processing capacity. This source of competitive advantage is usually outsourced to the banking industry, the telecommunications industry and the service industry in general.

Superior product or customer support

Customers who have the ability to respond quickly to the customers and have the ability to provide support, have a competitive advantage over the competitors.

Low cost or high volume production

Your business has a high volume production capabilities; Then it can achieve sustainable competitive advantage by reducing profitability and recovering it through high volume sales and turnover.

Strong marketing strategy

In the market, the company with the best marketing strategy wins. There is no doubt about it. The reason for competition to gain a strong competitive advantage in the marketplace is that giant companies spend millions of dollars on annual marketing research and advertising.

Access to working capital

Access to Working Capital One of the strongest durable competitive advantages that a business can have on a contest. Access to working capital is the difference between a billion dollar company and one million dollar company or a small business and a big business.

In the first market: a lasting competitive advantage?

Another competitive advantage touted by some companies is being the first business to capture the market. For example, a company could invent a new product, come up with a new process, or use technology in new ways to gain market share.

Amazon and eBay are good examples of the latter. When these companies were born, in the late 90’s, Amazon was primarily focused or selling books by conducting auctions. But to sell books (and eventually thousands of other content), they take advantage of the revolutionary new technology of the Internet and conduct auctions that have never been done before. Now Amazon and eBay are the most successful examples of two new economy businesses.

But for the first time in the market, not all Internet businesses enjoy long-term success. For example, do you remember Pets.com and Webvan.com? These companies were the first in the market for online pet supplies and grocery shopping, which gave them a great initial competitive advantage and could achieve long-term success. But poor management and strategic planning led to their downfall – and they are now remembered as one of the biggest names in the hundreds of Internet businesses that the dot-com bubble exploded.

Lesson for this: While being in the first market can provide competitive advantage initially, this benefit will only be short term. It takes hard work, solid management and sound strategic planning to translate the market edge from the outset into a sustainable, long-term competitive advantage.

The thought is over

Companies that capitalize on their competitive advantage sources – or those that create better music rap – are more likely to win in a free and open market. If you and your managers have not spent time discussing ways you can create competitive advantages for your business, this is a long time to do so. Honorable and then maximizing your competitive advantage is probably the most effective way to increase market share and increase sales and profits. Involved as a part-time CFO or project CFO, a CFO service partner can help you identify and maximize your competitive advantage.

Michael Porter’s seminal work on sources of competitive advantage

Competitive advantage comes from many places beyond just products and services. They are supported by substantial information, research and experience; The information sources are included in the library below for your reference. The sources of competitive advantage lie along the value chain based on Michael Porter’s seminal work, competitive advantage, and famously pictured below.

With so many options, how do you know the right competitive advantage for your business? It has to be unique and “increase performance by reducing or increasing customer costs through the impact of its value chain on the customer value chain.” Notice the price impact of dollars and cents on your customers here. This is the only real competitive advantage when done.

Feel free to contact us to implement and possibly assist with implementing the most effective differences for your firm.

Leadership: The advantage of competitive advantage

Here, I replaced Michael Porter’s infrastructure with a top management role, which certainly involved the department or the external environment. We begin with examples of the company’s strategy and impact on the external environment.

Localization in the Global Market

The simultaneous implementation of localization and globalization strategies in the global market, Panasonic is back on a profitable growth path. The company suffered its first loss in 2000, with China’s competitors effectively exporting to the United States, Europe and South Asia. In response, Panasonic relocated a global scene from a US based location. It sets a focus on the needs of the local Chinese market and on both Panasonic products that are available and available globally. The center continually unveils the need for refrigerators, which results in a tenfold increase in refrigerator sales a year. It found a need to sterilize laundry. Panasonic was the first major player to bring this capability to the market. As a result, the market share of load shed washers ahead of China has increased from 3% to 15%.

Strategic Alliance or Acquisition

Strategic alliances may not be one of the most important sources of energy. Some companies have all the capabilities needed to compete effectively in our world of rapid change. “Although a coalition is formed within about 90 seconds, failure occurs in about 60 percent of alliances. (4) In most cases, failure is not a bad strategic alternative; instead, failure is responsible for managerial flaws.” As a result, successful strategic alliances are significant. Can bring competitive advantage.

Another option is to purchase power. At Sonako Retail Packaging, we can see that our ability to pack retail products will be complemented by the ability to design, manufacture and pack popular point-of-purchase displays. As a result, we have acquired a private POP display company, which provides customers with an important capability they need and generates additional sales and profits.

Competitive tasks

After extensive research on competitive steps and reactions to the aircraft industry, Ming-Jane Chen concluded that more responses to the company’s competitive work are further strengthened, which would reduce the company’s profitability. Extremely visible attacks to the core of competitors will generate many repercussions, as the airline data confirms. Competitive attacks that are difficult to respond to draw low response, demonstrated by significant aircraft data in the study. Difficulties in responding that demand expensive feedback, significant organizational change or sophisticated coordination between different departments. This competitive action company wants to create.

Still, effective competitive action can vary by environment. In the fledgling market, plenty of ambiguity exists and investors prefer companies with more predictable and easier competitive moves. This encourages improved investor valuation and therefore offers competitive advantage.

Customer Cluster

Research has shown that companies located closer to clusters of customers are innovating faster. it is mainly due to more customer participation and real-time data flow. Flung away makes customer satisfaction more difficult to evaluate and maintain.

Company-wide market orientation

Many companies simply offer lip service to focus on markets and customers. An actual market orientation delivers more customer value because of the understanding of the outstanding customer value cartoons that are in competition with customers and customers. Based on 9-year information, Kumar et all found that ‘adaptation of market has a positive effect on short-term business performance.’ It may take some time for the market to have a positive impact, so management needs assistance. At the beginning of the 9 year period, a market-based company was an advantage. Next, the nature of the competition changes and market adaptation is needed to successfully compete. Still, research shows that under extremely competitive pressures, a company can benefit with a market orientation.

In many million packaging companies, I led to the transfer to market focus on a product. Initially, the company could produce equipment produced in large quantities. As a result, the company was intermediate in most markets, and in some cases was badly run, which suffered significant losses in the previous year. I coached the management team to explore market options using extensive knowledge with the help of sales, production and market analysts. Given the company’s sophisticated skills, market trends and high margins, we select high-end market segments as the focus area, reducing high volume, low margin product lines. The company pulled together to pursue high-quality packaging accounts and move to a new, high-end product line. The new business added significant profits to our bottom line, returning the company to profitability.

Strategic fit between marketing and production

“Organizing appropriate marketing activities according to the strategic type of business can constitute a significant source of competitive advantage.” Ensure that the company’s marketing strategy is met by the customer’s requirements production strategy. Misalignments need to be identified and strategic sizes changed.

The strategic merits of marketing and manufacturing marketing and manufacturing can drive such a strong relationship of trust and reputation that “the potential exists for a company to build a close relationship with customers that they can be relatively rare and difficult to replicate with a competitor”. The “best” product does not necessarily win. The best networks are usually “. This phrase highlights the necessary partnerships of production and marketing.

For production-oriented companies, it is important to note that “three organizational challenges at the strategic heart of entrepreneurship fall completely within the bailiwick of marketing: (1) scanning and projecting current, emerging and potential environmental changes; (2) outlines of potential opportunities are secret but rarely explicitly transformed. And (3) generate value for certain sets of customers Mind (available) opportunities for (potential) solutions. Translate “Effective marketing is essential for effective marketing.

Implement the strategy

It is possible to successfully compete with the higher implementation of the strategy instead of the superior strategy. When markets become more mature, the environment becomes less dynamic and there is less chance of developing improved products or new strategies. As a result, higher implementation days can win.

“Implementation leadership has an internal focus, which has great organizational and motivating capabilities,” though the strategy of discrimination demands a leader with an external focus who is “great strategist – brilliant, capable of seeing what others are doing.”

Human Capital

Humanitarian capital can be competitive in the form of highly trained workshops, especially if employees do not take their skills to the competitors. Strong-fixed capital is not valuable when relocating to a new firm and it is a good source of specially competitive advantages. However, if an organization is able to retain employees, competitor interest will be a source of competitive advantage.

Many studies suggest that employee engagement can be a source of competitive advantage. A study conducted in the labor-intensive hotel industry found that ‘highly satisfied, motivated, committed and fully engaged’ workers had higher market share than their competitors.

Technology changes

There are many opportunities to gain competitive advantage through technical innovation at this time of great technological advances. However, a new version of a company has to be created to create a culture open to effectively implement. A study on the adoption of electronic information exchange (EDI) in the automotive industry noted that the company benefited: “Cost savings, time savings, increased efficiency, better communication, fewer errors and delays. As a result, customer satisfaction and performance levels have increased dramatically.” However, the price is achieved only with the selection of the right technology and effective implementation.

Business Analysis

In a survey conducted by the MIT Sloan Management Review, conducted recently by the MIT Sloan Management Review, in partnership with ITBI Institute, with over 58% answer business values ​​of more than 5800 respondents, it said that their companies are achieving competitive pricing from analyzes – for the current 37% years ” Information-based cultures implement analytics more effectively. However, creating these cultures can be difficult. 44% of respondents find it difficult to solve organizational challenges, 21% of whom are easy to manage. This problem is the most difficult to find.

Production system

Implementation of an effective production system can bring companies competitive advantage. One study shows that Jordanian industrial companies have implemented Just-In-Time (JIT), which receives positive and statistically significant benefits on cost, quality and financial results. I ran to an RR Donnelley facility, we implemented a small run, JIT in the fast turn press room. It has sold significant customer satisfaction and maintenance sales in a highly competitive market.

Business Process

Managing consistent business processes is another source of seamlessly competitive advantage. For example, Toyota has added commodity prices due to sigma and product design processes. Improving business processes can be a cost effective strategy as it can happen without technical changes. However, it is important that the processes are closely related to strategic strategies and objectives.

National export promotion

Countries that receive specific export promotion programs can provide competitive advantage to the company’s products, services and costs. This has a strong positive effect on small companies and those who have less export experience.

sources of competitive advantage

sources of competitive advantage (image source)

Take away

Durable competitive advantages can absorb a business. No company can compete without a competitive advantage, and when you can’t compete; You are as dead as well

There are many potential sources of competitive advantage. As a reference, the selected facility of keys will provide value to your market. Feel free to contact us to implement and possibly assist with implementing the most effective differences for your firm.

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