In an increasingly competitive world, businesses that fail to create an effective strategy will be left behind. If you’re a business owner, you’ll already know how difficult it is to run a successful business. In most instances, there are always competing companies targeting the same niche and target market. To stay ahead of these competitors takes a lot of work, and you need to always be improving and delivering better results to keep your share of the market.
Delivering better results than other businesses within the same market is referred to as a competitive advantage. By sustaining this competitive advantage, it’s possible to increase profitability, providing a better product or service while reducing costs. However, this competitive advantage is often only temporary. Competing businesses may adapt and develop new strategies to get ahead.
Building and sustaining a competitive strategy for your business isn’t simple. However, you can learn how to do so with a competitive strategy course. Through this course, you’ll develop the skills you need to leverage your company’s resources and strategically drive innovation to boost performance. Generally, there are two main ways you can build a competitive strategy for your business.
With a differentiation strategy, your business offers a distinctive product or service. This differentiation can include physical characteristics like shape, size, and colour, as well as immaterial characteristics like high quality, dependability, and first-rate customer service. Additionally, your business backs it up with effective marketing to shape brand recognition.
Customers are eager to pay more for unique products. Customers genuinely want the product, and some will even wait in line and pay more than competitors. In many cases, high prices can actually increase desirability, provided there is enough differentiation between competing products. Studies have shown that consumers that see a high price will automatically assume that this product is of better quality than a similar product with a lower price.
Additionally, the differentiation approach does not just concentrate on developing better product qualities. Other factors also play a role. For instance, your business can raise the value of its products by providing customers with after-sales support. Such services increase the value of the product, enabling your business to charge more.
Branding and promotion are also significant factors. Both are crucial to shaping how customers view what your business has to offer. Often, it’s difficult to determine what makes a product or service unique, but branding can make a big difference. If a product is standard but is marketed as unique, it can still achieve differentiation.
Cost leadership strategy
A cost leadership strategy looks to create a cost structure that is less expensive than the industry standard. For instance, if your business currently provides common products and charges typical pricing for them but produces them at a cheaper cost, a competitive advantage can be gained. By saving costs compared to competitors, you can increase profits and have more success while achieving the same number of sales.
Additionally, it’s possible to create a competitive strategy through pricing. If you then offer the same product or service, but at a lower price than is standard, it can increase sales and lead to more profits. If the margin per unit is lower than that of competitors, you might stand to lose out on potential profits. However, customers will be drawn in by the lower prices and make a purchase that they otherwise wouldn’t have, therefore increasing profits overall.
Cost leadership, in contrast to distinctiveness initiatives, usually aims at budget-conscious consumers. As a result, your business provides clients with the same level of satisfaction as rivals. You provide a product that is quite standard and comparable to that of your rivals. However, because your business runs more profitably than the average rival, you outperform them.