Janice B Gordon Competitive Advantage

Competitive advantage is having a superior performance relative to your competitors. An example of this is Apple’s differentiated expertise in software, hardware, and services. Apple’s vertical integration has given the company its competitive advantage; the company has more control of its value chain, its component costs, owning chip manufacturers, manufacturing and operating in a closed ecosystem of proprietary retail stores.

How do you rate your competitive business advantage against your close competitors, do you rate it at all?  One way of rating competitive advantage is assessing the value add difference in what you offer?

Michael Porter describes evaluating and gaining a competitive advantage; by cost and another by differentiation. Michael Porter is considered the father of strategy, he is one of the most influential business thinkers in the world. Michael Porter’s ideas and concepts like competitive advantage, differentiation, value creation, industry structure, and the value chain form the foundation of all of strategy and competition today.

  1. Cost Advantage

You may have a similar product to your competitors, but you have a cost advantage, you can produce your product at a lower rate than your competitors.

  1. Differentiated Advantage

You may have a superior product that you can charge at a premium rate because your product has an advantage in:

  • Technology
  • Innovation
  • Brand
  • First to market or
  • Quality

Whatever differentiates your product this leading position allows the business to charge a premium for your product.

What is your advantage is it cost or differentiations? 

Look at your products and service to see how you can add value and gain advantages. This is a strategic mechanism for gaining the competitive edge over competitors. Question what is unique about the uniqueness of what you offer. Competitive advantage wins your business more customers and creates a leading position in competitive markets.

Competitive advantage is a superior value viewed from your customer’s perspective; it is what your customer is willing to pay a premium, not what quality cost more to produce. Interview your customers to gain their perspectives:

  • What do they think your product is uniquely different and valuable?
  • What your customer values in your product that is unique to your business?
  • Why they value your product over other available competitor products?

Your customer perspective may not be what you think, ask your customers and see if you have a cost or differentiation advantage.

This is a light touch introduction to competitive strategy. Michael Porter introduces three generic strategies – lowest cost, differentiation, and focus – which bring structure to the task of strategic positioning. In his book Competitive Strategy Michael Porter shows how competitive advantage can be defined regarding relative cost and relative prices that link directly to profitability.

If you can maintain a competitive edge over your competitor for a sustained period and you do not see a competitive change on the horizon, then you must leverage this advantage to gain market share and increase profitability. Define your unique values from a customer’s perspective. Interview your customers to understand where you can create value to give your company a competitive edge and leverage superior performance over your competitors.

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