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Competitive advantage: how to grow your business
If you want to succeed in the marketplace, a key aspect to consider is competitive advantage. But what does that mean? In a nutshell, that your company should have something unique and distinctive compared to your competitors, enabling you to offer your customers recognizable, high-quality products and services, but not necessarily by lowering their prices.
Nothing new so far, you'll say, but specifically what can you do today to have a competitive advantage? In this article we will look at everything you need to know about competitive advantage, from the different types, to mistakes to avoid, to understanding how to develop and maintain it over time.
What is meant by competitive advantage?
Competitive advantage is an element that enables a company to position itself better in the marketplace than its competitors. It can be determined by a number of factors, such as:
- Theefficiency of the production process;
- innovation;
- The quality of the product or service;
- customer relations;
- managerial skills;
- the strength of the brand.
This advantage can be crucial to a company's success, as it enables it to stand out from the competition and create a positive image in the minds of consumers.
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What are the different types of competitive advantage you can put into practice to try to scale the market
- Cost advantage: a firm that has a cost advantage is able to produce and sell its products or services at a lower price than its competitors. This can be achieved through a more efficient production process, purchasing materials at lower prices, or reducing marketing and advertising costs.
- Differentiation advantage: a company that has a differentiation advantage offers its customers unique and distinctive products or services compared to those of competitors. This can be achieved through innovation, product quality, customer experience or after-sales service.
- Responsiveness advantage: a company with a responsiveness advantage is able to respond quickly to changes in the market or customer demands. This can be achieved through a flexible organizational structure, an efficient supply chain, or a corporate culture that values agility and rapid response.
- Resource access advantage: here the company has access to resources that are unique or difficult to replicate by competitors. These resources may be patented technologies, privileged relationships with suppliers, or an extensive distribution network.
- Alignment with target audience values: respecting the values and ethics of the target audience makes customers feel closer to the company and its mission, improving corporate reputation and thus customer loyalty.
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The mistake everyone makes when they see sales numbers drop
It happens to almost all companies to go through difficult times when sales start to drop. In such cases, very often, the first solution that comes to mind to try to give sales a boost is to lower the prices of one's products and services, or to play the promotions card.
As we shall see, however, taking advantage of the competitive cost advantage does not always turn out to be a good choice.
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3 examples of companies that experienced declines in turnover after reducing their prices
Lowering the prices of your products or services might seem the most logical and immediate choice to increase sales, but the results are not always as expected. Let's look at some examples.
- JC Penney: in the first quarter of 2012, after eliminating periodic sales and lowering product prices, it suffered a 20 percent year-on-year decrease in sales.
- Tesco: In 2014, Tesco decided to reduce food prices to compete with other supermarkets. However, this strategy led to a decrease in sales due to lower revenue per product and lower profit margins.
- Ryanair: reduced airfare prices by 4 percent in 2013, but suffered a 2 percent decrease in revenue due to lower revenue per passenger.
What should be done then?
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6 tips for gaining and maintaining competitive advantage
Developing and especially maintaining a competitive advantage can be a really difficult task: it requires strategic planning, careful analysis of the market, and constant attention to customer needs. Here are 6 tips for developing and maintaining a competitive advantage.
- Identify key success factors: it is important to identify the factors that are critical to the success of the business. These factors may be different for each business, but may include product quality, production process efficiency, customer experience, or brand strength. Once these factors are identified, the company can focus on improving them and developing a competitive advantage over them.
- Investing in innovation: companies that invest in research and development, new technologies, or new business models, such as with a more sustainable focus, can create unique products or services that are distinctive from those of competitors.
- Maintain constant attention to customers: maintaining constant attention to their needs and wants can help the company develop products or services that meet their expectations, thus improving corporate reputation.
- Investing in human resources: attracting and retaining top talent, developing staff skills and creating a corporate culture that values innovation and agility can help a company stay ahead of market changes and develop a lasting competitive advantage.
- Constantly monitor the market: constantly monitoring the market and competitors allows the company to be aware of trends, new technologies, regulatory changes, and competitors' strategies. Maintaining constant attention to the market can help the company develop new strategies and adapt quickly to new circumstances.
- Leveraging technology: the use of digital tools such as artificial intelligence, robotics or blockchain can help a company improve efficiency, reduce costs and develop innovative products or services. This is through the ability to automate repetitive processes, improve information management and communication.
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The new differentiator that enables you to scale the market today
The generational shift that is taking place has also led to a shift in the interests and values of consumers, who now place increasing emphasis on one thing: environmental sustainability.
- According to a 2018 Nielsen survey, 73 percent of consumers say they would be willing to pay more for sustainable products.
- IBM's 2020 research found that 57 percent of consumers say sustainability influences their purchase decision.
- A 2019 Accenture global survey found that 83 percent of consumers believe companies have a responsibility to the environment and society.
- According to 2020 research by Deloitte, 56 percent of consumers say they have changed their purchasing habits to reduce their environmental impact.
Oggi, quindi, investire in un percorso di sostenibilità ambientale rappresenta un vero e proprio vantaggio competitivo per le aziende, perché permette loro di andare incontro alle esigenze dei clienti, alle tendenze di mercato e ai nuovi cambiamenti normativi, ma non solo.
Iniziare un percorso di sostenibilità ambientale per la tua azienda vuol dire anche aumentare l’efficienza dei processi produttivi (con conseguente riduzione dei costi) e ti permette di attirare talenti, sempre più interessati alle tematiche riguardanti la sostenibilità.
Ma come si inizia un percorso di sostenibilità ambientale?
Up2You ti accompagna in ogni fase del percorso, aiutandoti a calcolare la tua carbon footprint, a ideare una strategia di riduzione su misura e a compensare le emissioni non riducibili. Inoltre ti aiutiamo a comunicare i tuoi progressi e i tuoi risultati con clienti, personale e stakeholder, permettendoti di differenziarti e ottenere un vantaggio competitivo.
Contact us and find out how we can help you!
