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Competitive Strategy: Business Definition and Competitive Advantage

Dec 23rd 2015 at 1:54 AM

Your business will only succeed if you can offer the customers in your market something more, better, and/or different from what the competition is doing. Your competitive advantage (core competency) is essential and, once you establish it, your business decisions will start to fall into place.

Every advertisement, every promotion, even the price of your product and the location of your business should be designed to get customers excited about your competitive advantage. Your competitive strategy combines your business definition with your competitive advantage. A competitive advantage must be sustainable, meaning that you can keep it going. If you decide to beat the competition by selling your product at a lower price, your advantage will not last long if you cannot afford to continue at that price. Small business owners should realize that price alone is not likely to work as an advantage in the long run. A larger business can almost always beat you on price, because it can buy larger quantities than you can, and therefore probably receive a greater discount from suppliers.

Being able to temporarily undercut the competition’s prices is not a competitive advantage. Being able to permanently sell at a lower price because you have discovered a cheaper supplier is a competitive advantage. Being able to develop and maintain proprietary product or service features and benefits is another approach to finding a sustainable advantage.

Strategy versus Tactics

Your strategy is the plan for outperforming the competition. Your tactics are the ways in which you will carry out your strategy. If you plan to open a bookstore, how will you compete with the chain outlet in the neighborhood? This competitor buys many more books than you do and will receive higher discounts from wholesalers, so you will not be able to compete on price. How else could you attract customers?

Perhaps you could make your bookstore a kind of community center, so people will want to gather there. What tactics could you use to carry out this strategy?

  1. Hold poetry readings and one-performer concerts to promote local poets and musicians.

  2. Create special-interest book-discussion groups.

  3. Offer free tea and coffee.

  4. Provide comfortable seating areas for conversation and reading, to encourage customers to spend time in your store.

  5. Set up a binder of personal ads as a dating service.

If your tactics attract enough customers to make a profit, you will have found a strategy for achieving a competitive advantage. Remember, you will also have to create a strategy that considers online bookstores and e-books.

To find a competitive advantage, think about everything your business will offer. Examine your location, product/service, design, and price.

 

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