Strategy Competitive Advantage | Business Strategies for a Competitive Advantage

Strategy Competitive Advantage  Today’s organizations have to deal with dynamic and uncertain environments. In order to be successful, organizations must be strategically aware. They must understand how changes in their competitive environment are unfolding. They should actively look for opportunities to exploit their strategic abilities, adapt and seek improvements in every area of the business, building on awareness and understanding of current strategies and successes.

COMPETITIVE ADVANTAGE

Competitive advantage provides a firm an edge over itsStrategy Competitive Advantage | Business Strategies for a Competitive Advantage competitors, allowing it to generate greater sales or margins and/or retain more customers than its competition. There can be many types of competitive advantages including the firm’s cost structure, product offerings, distribution network and customer support. The more sustainable the competitive advantage, the more difficult it is for competitors to neutralize the advantage.
There are two main types of competitive advantages: comparative advantage and differential advantage. Comparative advantage, or cost advantage, is a firm’s ability to produce a good or service at a lower cost than its competitors, which gives the firm the ability sell its goods or services at a lower price than its competition or to generate a larger margin on sales. A differential advantage is created when a firm’s products or services differ from its competitors and are seen as better than a competitor’s products by customers

BUSINESS STRATEGIES

Michael Porter (1985) had suggested 3 generic approaches to achieve competitive advantage.

Cost Minimization
Differentiation
Focus

Cost Minimization Strategy

A business can try to compete by offering similar products and services as competitors, but at lower prices. Succeeding in a low-price strategy typically requires the business unit to have a lower cost structure than that of competitor. This strategy, also known as Cost Leadership Strategy, involves the business to win the market share by targeting to cost-conscious or price-sensitive customers.
It can be through:

  • Achieving a high asset turnover
  • Achieving low direct and indirect operating costs
  • Control over value chain encompassing all functional groups

Example of firm which uses this strategy is Carrefour.

Differentiation Strategy

A business can compete through differentiation, which means offering customers something different than the competitors’ products. If it is successful in achieving the desired differentiation, the business can typically charge higher prices than its competitors do. This strategy is appropriate when the target customer segment is not price-sensitive, the market is competitive or saturated, customers have very specific needs, and the firm has unique resources and capabilities which enable it to satisfy these needs in ways that are difficult to copy.
It can be through:

  • Patents
  • Unique technology
  • Innovation

Example of firm which uses this strategy is Apple.
Focus Strategy
A business can compete through focus, which means targeting a selective segment of customers (also called as segmentation strategy of niche strategy).
A focused strategy should target market segments that are:

  • Less vulnerable to substitutes
  • Where a competition is weakest
  • Distinct groups with specific needs

Example of firm which uses this strategy is Southwest Airlines, which provides short-haul point-to-point flights in contrast to the mainstream carriers.

COMMUNICATION STRATEGIES

Marketing Communication is the integration by the company of its communication channel to deliver a clear understanding of its brand and about the organization. It involves identifying the target audience and developing a promotional program to obtain a desired audience response.
Broadcast Communication
Broadcast is to communicate a message or content, to a wide group of recipients simultaneously over a communication network(Shimp, 1997). It is a strategy based on the extent of reach, hoping that a portion of message reach the target customer.

  • Popular media used is Newspaper, Television & Radio.
  • The objective is to become the known and preferred producer in an industry.
  • Works at its best when your product is standardized and the numbers of buyers is large.
  • Associated with an undifferentiated/cost minimization business strategy where a standard product is offered to a larger audience.

Strategy Competitive Advantage

Example: Toyota, Hyundai

Narrowcast Communication

Narrowcast is to communicate a message or a content to a narrow group of recipients simultaneously over a communication network(Shimp, 1997). The narrowcast approach enables marketers to influence their customer choicesand getting their message in front of only the valuable prospects.

  • Popular media used for this type is communication is selected Television/Radio channels, print, online
  • The objective is to become the understood and preferred producer in an industry
  • Works at its best when your product is differentiated and buyers seek more information
  • Associated with a differentiated business strategy where the product is targeted to a selective audience
    Example: BMW, Mercedes
Nichecast Communication

Nichecast is to communicate or transmit a signal, a message, or content, such as audio or video programming to a small group of recipients simultaneously over a communication network

  • Popular media used for this type is communication is highly selective Television/Radio channels, print & online
  • The objective is to become the most personalized and preferred producer in an industry
  • Works at its best when your product is unique and buyers seek customized communication
  • Associated with a focus based business strategy where a unique product is targeted to very limited audience

Example: Lamborghini, Ferrari. Order Now