13 Nov sources of competitive advantage
if a firm can achieve and sustain overall cost leadership, then it will be … While these can certainly offer competitive advantages, there are other areas where your business can set itself apart from the competition. But for some companies, it’s smarter to produce a lower quality product and offer it at a lower price to appeal to price-conscious customers. Access to your users. Honing and then maximizing your competitive advantages is perhaps the most effective way to increase market share and maximize sales and profits. If you and your managers haven’t spent time discussing ways you can create competitive advantages for your business, it’s long past time to do so. If so, why? As important as the existence of competitors is how well-behaved those competitors are. The lesson: While being first-to-market can provide an early competitive advantage, this advantage will only be short term. | Terms of Use | Privacy Policy | Sitemap, The Role of Finance in Creating a Customer-Centric Culture, How to Stay Competitive in Today’s Fast-Changing World. On the contrary, the existence of a dominant source of competitive advantage frequently gives rise to another ancillary competitive advantage. Brand presence can be a strong source of competitive advantage because people will know your brand when you are present in their vicinity. Therefore, a large distribution network helps with managing your brand presence and obtaining a competitive advantage. If accounting customers in all industries are being served one accounting software powerhouse, starting a new company that focuses specifically on accountants in one industry — such as healthcare — is an advantage. Uniquely low costs to onboard and serve a new customer, such as TurboTax’s low cost to prepare tax returns for a new customer versus a local accountant who needs to spend an intro one-hour consultation to set up a customer. As I wrote there, “true sources of advantage are ones you can invest in and they become stronger over time. For most of my discussions on strategy, I propose building a new market, not joining existing ones. Your sources of advantage are the strengths that you can offer to any potential strategic partner even in the earliest days of your development. Cookies help us deliver our services. Notify me of follow-up comments by email. But even new markets will be ancillary to existing players. What are the unique technologies, skills, or resources you have that allow you to help your customers accomplish something 2x, 3x, 5x, or 10x faster, cheaper, or better than they otherwise could? But again, these businesses likely won’t be among the low-price leaders in the industry. Why are they paying you at all? Distribution or sales network / customer access, including partnerships, such as GE’s sales force that can take a new product idea into just about any company in the world quickly. Part of this is a corporate competency in training and continual learning, which is increasingly valuable as employees move into new roles over time. Even seasoned program managers sometimes confuse the two. How to make your product stand out in a crowded market. Steve Blank (who could be considered to be the godfather of the Lean Startup methodology) wrote about a process for finding strategic partners in his book, The Startup Owner’s Manual. Honing and then maximizing your competitive advantages are perhaps the most effective ways to increase market share and maximize sales and profits. Low price – Depending on the product or service and target customers, price can be a strong competitive advantage – or not. Your competitors may be able to copy your products but they'll never be able to copy your people (although they might poach them). © 2011-2020 CFO Edge, LLC - This article is only for general information and should not be used in lieu of professional advice. ^^ A dedicated focus on a specific user segment / specific industry. Being known and trusted for high quality on attributes that customers care about, such as Toyota’s long record of the low cost of maintenance. IKEA’s sustainable competitive advantage comes from several sources including but not limited to operational efficiency, brand image, strong supplier network, large product line, and cost leadership. Knowledge and experience of the buyers and users you are selling to is especially important. Penetrative pricing, as supplemented by cost advantage, allows an organization to enter a new market by selling si… Size and scale, but only if you can get lower marketing costs or higher purchasing power, such as a local company buying billboard space to drive sales to ten stores versus one store (lower marketing costs) or Amazon offering much larger book inventory than a local bookstore (thus earning higher purchasing power).
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