Top 4 Strategies to Gain a Competitive Advantage
Introduction: In today's dynamic business landscape, achieving sustainable growth and market presence is essential. To succeed, aspiring entrepreneurs must…
The present state of our businesses is heading toward prosperity in order to succeed in establishing a presence in today's market. For this reason, any entrepreneur wishing to launch a company must be familiar with all the elements that enhance the value of their market entry, starting with a feasibility study.
There are fundamental factors that facilitate a business owner's strong entry into the competitive market, which we will explore in this article.
One of the most powerful effective factors in the success of any project is working on strengthening the competitive advantage correctly and effectively. By doing so, you will secure business immunity and a share in the market you operate in, which increases your company's profits and sales.
Table of Contents:
What is competitive advantage and its importance.
What are the characteristics of competitive advantage and why do we use it.
8 types of competitive advantages.
The difference between competitiveness and competitive advantage.
Four ways to achieve a competitive advantage.
1. What is competitive advantage and its importance:
It is a trait that allows a company to outperform its competitors. It can be a new innovation, the discovery of new manufacturing, marketing, or development methods, or anything else that leads to creating better added value than competitors (a high-quality product, modern technology, a low price, fast service, etc.).
The importance of competitive advantage:
Reaching the appropriate competitive advantage is one of the most effective business strategies, just like product marketing, conducting market research, and future sales forecasting. Accordingly, the purpose of using competitive advantage can be summarized as follows:
Increasing sales and consequently increasing profits.
Giving dynamic mobility to the company's internal operations such as production and marketing.
Staying a step ahead of competitors, especially if the company can maintain the continuity of its competitive advantage and protect it from imitation.
Raising the value of the company and its shares among investors, gaining their trust, and increasing the company's profile in the media and among specialists.
Increasing customer loyalty to the brand. You may be interested in checking out building digital marketing strategies.
2. What are the characteristics of competitive advantage and why do we use it?
There is a set of determinants for competitive advantage that will indicate whether it is truly an advantage or just an idea, an imitation, etc. These are as follows:
First: Feasibility (Realizability):
If a competitive advantage cannot be applied in reality and fully realized on the ground, it is useless and better left as mere words and future designs at best. A company reaching a new innovation might have significance in the future but not today, for example, due to a lack of infrastructure or the lack of readiness of the market and customers for it. Examples of feasible competitive advantages include:
Providing raw materials in very large quantities.
Hiring highly qualified employees and workers.
Accessing new technologies through innovation or importation.
Expanding into a very suitable geographical area.
Second: Effective and Decisive:
If a feature is not superior to the competitors in the market segment it covers, its description will be incomplete, and it will contribute little to the company. The term "competitive" clearly implies creating a form of competition and keeping pace with other companies active in the same industry.
Third: Exclusive and Fortified:
Naturally, it is unethical to steal others' ideas or imitate them literally, leaving the company no room to showcase its own personality and unique touch. We are not referring here to inspiration—taking advantage of competitors' weaknesses and developing them after studying them—but rather to imitation and intellectual/scientific theft. Achieving exclusivity is only possible if a company invests part of its profits in funding scientific research and innovation, especially in the field of information technology. A competitive advantage must not be easy for competitors to copy or simulate; otherwise, it loses its immunity and its secret status.
Fourth: Providing Real Added Value:
This part concerns the target customers, who are the focus of competition and the backbone of business. Without creating real added value that makes a difference for customers, a competitive advantage is meaningless, even if it meets all the previous conditions and characteristics! It is inconceivable for a company to gain a competitive advantage, surpass its rivals, and dominate the market without at least satisfying the needs and desires of its customers.
This added value may be entirely new or an existing one that has been developed, such as:
Reducing prices while maintaining quality without incurring losses, but rather achieving greater profit, whether financial or marketing-related.
Providing new additional services not available from competitors, such as free delivery services.
Fifth: Lifecycle and Sustainability:
Every competitive advantage has a lifecycle with a beginning, a peak, a decline, and an end. It is rare to find a competitive advantage that lasts for a long time these days, due to the widespread availability of advanced technologies, the speed of developments in all fields, and the rapid, periodic emergence of scientific studies and academic papers. This can make any competitive advantage today vulnerable to disappearing tomorrow—based solely on recommendations from a recent scientific study or because companies imitate one another, as happens with Chinese companies that no longer hesitate to copy and steal the competitive advantages of American and European companies in broad daylight!
Why do we use competitive advantage?
Startups use the competitive advantage tool to help them obtain higher value for their products at a lower cost without losing quality, in order to offer better features and services.
3. 8 Types of Competitive Advantages:
There are many different types of competitive advantages – consider what sets your competitors apart before choosing which one will give your business the best results.
1. Choose a good location:
Securing a great location is essential if you are a retailer. Your competitive advantage could be the amount of foot traffic passing by your store if you rent or own a building on a main shopping street.
Hiring helpful, friendly, and proactive staff can be a major competitive advantage for your business. Make sure to train your employees well and motivate them by:
Using training programs to teach quality standards periodically.
Having incentive plans.
Encouraging them to enhance their product or service knowledge.
3. Products or services:
By sourcing products or services that your competitors cannot access, you will establish uniqueness in your business.
4. Intellectual Property:
If your business has developed some intellectual property, it is important to register it before the competition has a chance to simulate your achievements. Protect it, and take full advantage of communicating its benefits to your potential customers.
5. Building Alliances:
The ability to form a strategic alliance or joint venture is an increasingly vital advantage in building a successful business. It can set your business apart from the rest.
For example, a gas station could share some floor space with a food franchise, a cartridge refilling center, etc. This would lower overhead costs while also providing the customer with additional purchasing options.
Securing a service contract can be a significant competitive advantage. For example, a real estate company that has won a contract to build a large project will be able to rely on this cash flow for the duration of the contract. Its competitors may not have the same luxury.
7. Online Presence:
Ease of use online is a major draw for online shoppers. Time is an essential factor when shopping on the web, so if your business is easier to navigate than others, you may have a distinct advantage, you might be interested in checking out electronic marketing campaigns.
8. Communicating Your Advantages:
A competitive advantage only truly exists if your customers perceive the same. Craft a strategy in your marketing plan so that the customer understands your advantages.
Remember to review your competitive advantage regularly. The market changes, companies come and go, and your advantage may no longer work. Ask your regular customers about your performance—the best place to know if you are still relevant or not!
4. The Difference Between Competitiveness and Competitive Advantage:
Although they are verbally similar, the meaning is slightly different. As we saw above, anything you excel at more than your competitors and succeed in is considered a competitive advantage, and this advantage may last for months or years depending on the surrounding circumstances, competitors' reactions, market stability, and other factors. Competitiveness, on the other hand, is a broader concept than competitive advantage in terms of time frame and technicality; competitiveness is often not limited in time or temporary, but rather open-ended and akin to an inherent trait of the company or institution.
The same applies from a technical perspective, as the institution's ability to plan, innovate, reduce prices while increasing profits, and other vital internal functions are all indicators of its ability to compete. In short, a competitive advantage is the product of a business entity's high competitiveness.
Remember! Competitiveness will allow a company to create competitive advantages consistently, and its absence—that is, the ability to compete—will lead to the absence of any competitive advantage.
5. Four Ways to Gain a Competitive Advantage:
Using any of the following methods demonstrates how much you desire to have an outstanding business.
First Method: Cost Leadership
Cost leadership is one of the concepts developed by Porter, which essentially means the lowest cost of operations in a specific industry. What drives it is the efficiency of startups, their scale, size, scope of work, and accumulated experience. Cost leadership seeks to take advantage of production volume and its well-defined scope to offer high-quality products, utilize advanced technology, and other economies.
Cost leadership is not used in every industry, so you must study your industry and the target market. Sometimes it is better for small companies not to compete at all on price points if the market includes large competitors with strong brand names, you might be interested in checking out the 9 most important differences between marketing and sales.
Second Method: Differentiation
The differentiation strategy is a commonly used strategy in business for startups to stand out from their competitors. In this strategy, there is a commonly used element, which is cost reduction, and this is what might differentiate your company from its competitors, but not for long. Therefore, when you want to differentiate, you must look for different means, determine their importance, and market them (this process can succeed through research to determine what the consumer finds important, thereby exploiting this point to be the basis of your distinction and creating a unique market for it).
A differentiation strategy is subject to success or failure; if you have a strong and confident brand identity, you can easily use it to offer high supplier costs to your customers because there are no substitute products—assuming your customers are loyal to you. This approach can also fail if your competitors imitate your method at a higher value; therefore, this can put you at risk because consumer behavior may change, and if there is not enough demand for your products to cover the high costs, you may suffer a significant loss.
The Third Method: The Defensive Strategy
This method is used when your competitors release a new product; your company uses it to define and defend its market share. If you are an industry leader, you must adopt certain techniques and measures, such as protecting your share, benefits, product positioning, and consumer awareness against new competitors.
The defensive strategy applies to all industries, but you must focus on your company's competencies and assets to defend your market share. You should also think about your brand identity and your customers' knowledge of your company, then engage in positioning your product, improving features and prices, and adding some marketing techniques as well. You might be interested in learning about pricing policy and its types?
The Fourth Method: Alliance Strategy
Alliance strategies are considered a key strategy for developing any company. They are a formal or informal partnership between two or more organizations to achieve their common goals, obligations, etc. These strategies are characterized by enough flexibility that makes most companies, markets, and the public willing to use them.
There are 3 types of strategic alliances: commercial, functional, and dynamic. Commercial alliances are clear, where both the seller and the buyer form a type of agreement or arrangement based on contractual terms, while functional alliances integrate some core functions between both parties to achieve specific goals and establish ongoing management relationships. Thus, this alliance translates into improving research, developing projects, providing access to geographical markets, and overall enhancement.
As for dynamic alliances, they involve intangible advantages for both parties, such as the skills, knowledge, and capabilities necessary to achieve results. The only drawback of this strategy is that we do not know what benefits are required because the structure of the alliance evolves almost during the negotiations and initial operations.
The alliance strategy is ideal for startups that do not have enough resources because it reduces risks and investments and provides the efficiency your startup might lack. However, it is not permanent; it has a short life cycle, can reduce competencies, mask weaknesses, and can also be difficult to manage, especially when any change occurs.
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Mohammad Ghanem Al-Sawas
Marketing Department Manager
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