The Competitive Advantage
– When speaking of business to be precise –
Competitive advantage refers to factors or characteristics that allow a company to produce higher-quality or more affordable products/services than its competitors.
Firstly, the competitive advantage is not strictly limited to physical advantage or non-materialistic advantage. Secondly, it may be derived from the experience of the users themselves, for example, a better product in terms of price, efficiency, or quality, that may appear in a visible form (tangible) or intangible, such as intellectual property, customer service team, etc.
In addition to that, the competitive advantage may also indicate the organization’s ability to attract customers and build an image of itself as an exceptional brand and the products it offers in the minds of the clients. Therefore, the competitive advantage does not focus solely on price increases and declines.
We’ll learn more from this article about the meaning of the competitive advantage and why your business should gain a competitive advantage, and how?
What is Competitive Advantage?
Competitive advantage is what makes a product or service superior to all other options available to consumers in markets.
In other words, it is the reason why a client would choose your product/service despite the temptation of competitors. To know where you stand compared to your competitors, you will need to analyze the competitors’ situation as a whole and conduct a SWOT analysis for their brand and compare it the analysis of your own brand to compare fairly.
By understanding and promoting competitive advantage, your brand or enterprise can gain more market share.
Porter’s strategies can help you determine the competitive advantage of your business
The lowest market price (Cost Leadership) is to produce a reasonable product at the lowest market cost, the brands that use this strategy must reduce the cost of production, meaning the industry is to be in cheap areas like East Asian countries, and they target a broad segment of customers.
In the Differentiation Strategy, a brand aims to offer something innovative and different. Understanding the customers’ wants and needs will ease the process of finding a way to offer your products/services differently and distinctively, for example, fast shipping, high-quality products, advertisements that reach the customers differently.
A brand that uses the Differentiation strategy can price its products at high prices, so the profits will be high.
Cost Focus Strategy means that a company or brand has a better ability to understand and serve the target market compared to anyone else, either by using the lowest market price or using “differentiation” to reach a competitive advantage.
For this strategy to succeed, the selected target market must be narrow, and not served by large corporations.
Differentiation focus
The most important factor for any company adopting this strategy is to make sure that there are indeed different needs and desires among customers, that is, there must be a basis for excellence by ensuring that what your current competitors offer does not meet those needs and demands. In this way, they can create a need and turn it into a competitive advantage for your brand.
How to gain a competitive advantage for your brand?
To gain or create a competitive advantage for your enterprise or brand, you need to be clear about these three determinants:
– Product/Service
What are the real benefits that your product/service delivers to the customers?
It has to be something that your clients truly need and desire! You need to identify your product’s features and how does it benefit and serve your customers. In addition, you need to be kept informed of all the new trends that might affect your product, new technological developments, market and environmental variables.
For example, the corporates’ response and the efficient practical solutions that it offers to its clients under the Corona pandemic.
During the pandemic, have you managed to stabilize your work and keep things steady? Or did you manage to acquire a new segment of customers and expand your business?
– Target Market
Who are your clients? What are their needs? Where do they live (Location)? How old are they (Age)? What are the best payment options available for them in the case of shopping online?
You should know who exactly is buying from you and how you can improve their lives through marketing research. That is how demand is created, which is the engine of full economic growth.
– The competitors themselves
Did you identify your real competitors? It’s not just companies or similar products. It includes anything your competitor can do to meet the needs of your targeted customers.
Barriers to gaining a competitive advantage
For a brand to acquire a competitive advantage is not that simple. While its existence is significantly important, the brand might face several obstacles that could limit its potentials in gaining a competitive position in the market, such as those that are internal and face the organization in its environment, for example:
-Lack of transparency with individuals within the institution
-Lack of supervision to reduce deviations within the organization
-Weak organizational structure
-Absence of successful management
-Institution’s inability to provide information that helps with decision-making information
-The lack of alignment of the organization with recent developments in the field
Some of them are external and relate to obstacles that result outside the enterprise’s environment.
-There are organizations that are difficult to compete with.
-No compliance with the international quality standards
-Lack of interest in research and development
Case study:
The Competitive Advantage of Almarai
The story of Almarai began in 1977 when His Highness Prince Sultan bin Mohammed bin Saud sensed the opportunity to develop a traditional dairy industry in Saudi Arabia to meet the needs of a rapidly expanding domestic market. Several agricultural projects were launched to achieve his vision, starting with fresh milk and milk processing, which quickly expanded to include modern dairy farms and factories.
Almarai has and continues to meet the needs of the growing domestic market. Despite changes in its business, Almarai has been able to remain faithful to its principle of trustworthy quality by offering products that its customers can trust.
That made it distinct from other competing brands.
Apple’s competitive advantage
The main competitive advantage of Apple is its ability to innovate and develop where the rest of the competitors cannot achieve a similar level of performance or innovation.
FedEx’s competitive advantage
FedEx is one of the most prestigious companies on the market until the emergence of many rival companies, which has led them to improve their services and operations to outperform competitors.
It continues to maintain its name and reputation in terms of speed in delivery and continuous pursuit of customer needs and satisfaction.
FedEx now serves more than 220 countries and regions and continues to offer further development.
How do you measure the success of your competitive advantage?
There are a lot of indicators from which you can identify a competitive advantage for your organization, for example:
– The organization’s market share
– Profitability
– Sales
-Consumer satisfaction
-The value of the organization’s shares and the diversity of its products.
However, profitability, sales, and market share are the most common and widely used indicators for their abundance of data. In addition, all of the previous success indicators can be accurately calculated as quantitative indicators that could reflect consumer satisfaction.
The importance of competitive advantage comes in distinguishing a company from its other competitors.
It contributes to higher prices for its products, increased customers, and enhanced brand loyalty.
Building a competitive advantage must be one of the most important objectives of companies to enhance their market presence, ensure business development and increase profits.
In addition to focusing on the competitive advantages, you will need to demonstrate them properly through professional content marketing to attract the attention of your targeted audience in the best possible way.
Do you need to spot the light on your competitive advantage, distinguish your work among competitors to increase your revenue?
In Lhamim, we can help you. Feel free to contact us.
