Strategies for Sustaining Competitive Advantage and Business Growth

Hello Everyone,

I have to make a presentation on Sustaining Competitive Advantage. If anyone has any information on this topic, please help me.

Regards,
Hanu

Hi Hanu,

Pleass find the below:

Newsletter Article-June 2005 - Northern Anne Arundel County

Chamber Of Commerce (NAACCC)

Sustaining Competitive Advantage

Contributed by: Al Bartlinski & Associates, LLC and RanOne

The following are excerpts of the recent 'B2B Classroom' presentation, "Sustaining Competitive Advantage". The B2B Classroom is a monthly seminar on various business growth and development topics sponsored by the Northern Anne Arundel County Chamber of Commerce.

Every business has one thing in common -- there are three main ways to compete in the marketplace:

On price

By serving a niche market better than anybody else

and,

On the individuality of your product or service

Which of these is the better long-term strategy? Undoubtedly a lower price than the competitor is an immediate advantage – but will it deliver a continuing competitive edge?

Many businesses focus on increasing their operational effectiveness as a way of gaining a competitive advantage based on the fact that increasing operational performance can lower production costs and these can be passed on as lower prices. But process reform is effective only up to a point. Over time, more and more businesses restructure their processes and increase efficiency to match what has become, the best practice in the field. This means that if all businesses in an industry are producing a similar product, and producing it efficiently, the only place they have to go for competitive advantage is through reducing prices. Their process reforms will be ‘rewarded’ with downward pressure on prices and profit margins!

You can adopt a focus strategy whereby you target a narrow market segment and service it better than anyone else, building up solid customer loyalty. As a niche operator, you hope that your tightly targeted product features will enable you to charge premium prices. The risk here is that tastes change and niches disappear.

Being able to deliver benefits that exceed those of competing products, that is, a differentiation strategy, will provide a much harder to match advantage for your products. This is the point made by Harvard professor Michael Porter, in his book ‘Competitive Strategy: Techniques For Analyzing Industries And Competitors’ (Free Press 1980) – and it’s still valid. Porter suggests that businesses only really gain a competitive advantage by differentiating themselves from their competitors. You’d aim to come up with a package of benefits that your competitors would have difficulty imitating. And then you’d be under less competitive pressure and in a better position to widen your profit margin.

There are five factors that drive competition in an industry:

Rivalry among firms in the industry

Customer buying power

Supplier selling power

Attempts by outsiders to win customers over to their products

The threat of entry of new rivals

If you can define your sources of competitive pressure you can probably find a way to deal with them. That’s a good thing, because the lower the pressure, the higher your margins can be.

Product differentiation is a real strength in helping you deal with these five pressures. You should be working to build prestige for your brand, providing high levels of customer service and establishing high levels of customer loyalty as differentiators. It would then take a bold or very well heeled challenger to dislodge you from your position of market leadership.

If start-up costs are low, you might find that you are facing many competitors who have little capital and are desperate to sell at any price, just to get some cash flow. In a situation such as this, the ability to differentiate becomes a matter of survival. The drivers of business rivalry and the power relations between suppliers, producers and distributors are changing all the time under the influence of many forces. Strategic analysis begins by looking at the major forces that impact on your business through these five forces.

You also need to be aware of what is happening in the industry. All industries go through life cycles. It is important to be aware of your current position and, if you’re reaching (or past) maturity, you will need to plan for the future. That might mean diversifying or moving into a new business altogether. Competitive analysis can give you early warning of threats to your business, hints at opportunities for business growth, greater business security, and help you safeguard, or build, your profit margins, as you minimize competitive pressure.

You also want to rate your product according to customer perception given that their perception is what really decides a sale. You could do some market research on how customers rated the features of your product against the competition such as through running a customer advisory board or sending out a questionnaire. Every few months, you should do a competitive analysis to identify emerging threats. You need to look ahead and think strategically. The more clearly you have mapped out your competitive environment, the better prepared you will be to react to threats and take advantage of opportunities to build your business.



Regards

Julie

Hi,

There is some information I would like to share with you on Sustaining competitive advantage.

There are many ways to compete, yet most companies tend to focus their strategies on only a few ways to gain a competitive advantage. This limits their ability to create and sustain true competitive advantages. In order to have a lasting competitive advantage, it is important to develop a competitive strategy that includes a wide spectrum of techniques to gain an advantage.

Following are the ways to have a Competitive Advantage:

* Price-Based

The most popular technique is to focus on price. Having the lowest price has always provided a great advantage, but having the lowest price also means low margins, which means you need high volume to make it a profitable strategy. When you think of price-based competition, you might think of Rin, Ariel, HLL, Nokia, and Motorola, or you might even think of anything made in China. But, if you look closer, you will see that companies that are great at price-based competition are using more than one competitive strategy such as Market segmentation, Care and emotions, service orientation.

The best never focus their competitive strategy on price alone. They combine multiple competitive strategies to create a lasting advantage and continue to innovate as they use technology to raise the bar with each method.

So, you can design your presentation on the basis of the above-given material and add points other than Price for being more specific.

If you need more material do let me know.

Cheers

Archna :)

Hi Hanu,

Here you go!!

These are some of the examples of different companies such as coke, Gillette and Japanese companies.

# Coke

Coca-Cola continues to prosper by innovating and adapting to the local needs of its customers and consumers throughout the world. Despite ferocious competition, significant currency devaluations in key markets and major acquisition-related write-downs, the company reported first quarter 2002 sales of US$4.08 billion and has predicted long term growth approaching six percent.

What is Coca-Cola's formula for success? Is it simply a case of having the right product and brand? Or is it more than that? Just what does it take for a multinational like Coca-Cola to sustain its competitive advantage?

Coke employs a 'Think local. Act local.' market strategy founded on the principal that the company exists to benefit and refresh all those who are touched by its brands Given that the product is so relationship based, the company tries to put locals in charge of operations whenever possible - believing they better understand local consumers, as well as their social, economic and political issues.

There distribution system, has an objective is to ensure that ice cold Coca-Cola is always within an arm's reach of local consumers, whenever and wherever they need the physical or emotional refreshment of the unique Coca-Cola taste sensation.

To deliver on that goal, Coca-Cola has constructed an unrivaled worldwide bottling network; consisting of a combination of privately-owned, company-owned and jointly-owned bottling operations.

More than two-thirds of Coca-Cola's unit sales take place outside of the U.S.; while three-quarters of the company's operating income comes from overseas.

Coca-Cola's innovation centers can experiment with new products for local consumers, sharing their most promising new finds with their corporate headquarters.

Products are the only things that make money for a company. Everything else is just a cost. So you have to have an effective global product development process and strategy.

successful global companies typically have cross functional/cross geographical "innovation teams." Those teams must anticipate market shifts, evaluate concepts from diverse perspectives, then shepherd products all the way through from design through launch. They must also obtain country-specific insight and country-head buy-in early in the design process and then execute the rollout.

# Gillette

Gillette is another example, it has implemented process down to a fine art and have strong global distribution networks and a thorough understanding that shelf space is key in consumer marketing.

The real reason Gillette get that shelf space though is because their products sell. That's the bottom line. And they sell because the people in those companies generally do their homework - and do it well."

One third of the world's population lives in Asia

All multinationals must adopt very different strategies in each country, The most notable are of Japan which are follows:

• The people have a strong work ethic,

• They value education,

• Personal savings rates are high, and

• Good government contacts can be critical.

SO I HOPE NOW YOU WILL BE ABLE TO ADD SOME EXAMPLE TO YOUR PRESENTATION.

Cheers

Archna