Are You Better Than Your Competitors?
Gaining an advantage is the key to success and even survival
. But many of the so-called advantages that businesses rely on are not sustainable. They can be easily copied, stolen or negated. Real competitive advantages - things like brand name recognition, patented manufacturing processes or exclusive rights to a scarce resource - cannot be easily copied.Every company has a unique set of strengths, and it's critical that you determine yours, as well as your competitors'. Hold a brainstorming session with your staff and advisors to perform a formal SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis. This analysis helps you to see how your strengths stack up against your competitors' weaknesses and suggests ways to take advantage of marketplace opportunities.
After you have performed the analysis, there are four basic competitive strategies to consider.
Become the low-cost supplier. By under-pricing the competition, you can achieve greater volume, which can drive your costs down even further by realizing economies of scale. Of course, it's important to still maintain a healthy profit margin so the key here is to lower costs, not just prices.
Achieve product or service quality differentiation. Think about the hundreds of companies that have achieved such differentiation for themselves. Take L'Oreal, for example. Why have they used the slogan "I'm worth it" for so many years? And are there really any other crackers on grocery store shelves that have the image of Ritz? What's the real difference between Coke and Pepsi, or between Skippy and Jif peanut butter? Why do you keep returning to the same dealership to have your car serviced?
Why do many of us follow our favorite hair stylist or radio personality if they move to another location or station? The answers lie in the perception of a difference in people's minds. Achieve supply or distribution leverage. When Microsoft wrote the DOS operating system, it instantly gained an advantage in the computer industry that has remained virtually impossible to copy.
Airlines with landing rights at airport gates, or companies like Kellogg's with lots of shelf clout, have sustainable advantages that provide serious barriers to competitors. A patent, copyright or exclusive contract provides legal protection.
Pursue a market niche, especially one that has been neglected by the dominant firm in your industry. As companies grow, decisions often have to be made to discontinue servicing a particular segment.
But that doesn't mean that the segment no longer has needs; it just means that the larger company can no longer provide for them efficiently or profitably. That spells immediate opportunity for a smaller, leaner organization. As you are customizing your strategy to meet your unique situation, keep in mind that your competitors are not just the obvious ones.
McDonald's competes directly with Burger King and Wendy's, but they also compete directly with the grocery stores, especially during the summer barbecue season when people enjoy do-it-yourself burger grilling.
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