In today’s globally connected business world and highly competitive international markets, a business cannot thrive if it remains contended with what it has achieved. The truth is that success today does not guarantee success tomorrow and thus a business needs to constantly analyze its strategy in order to respond to the external environment effectively.
Competitive Advantage is the Key to Success
One of the key reasons as to why some businesses thrive even during turmoil such as slow economy, international competition and financial instability, is their ability to maintain competitive advantage. Such businesses are proactive and prepare for the longer run; they don’t just focus on achieving the month’s or quarter’s sales targets but also keep scanning the external environment in order to use their strengths to tap opportunities and minimize the threats they may face in the near future.
If a business is actively pursuing such a strategy, it is highly likely to develop a basis of competitive advantage which gives it edge over its competitors and something which cannot be defeated very easily. There are several bases of competitive advantage. A business may have a certain kind of competitive edge owing to its internal capabilities as well as ability to respond to the external challenges.
Here are some of the ways through which a business can gain the competitive advantage and stay way ahead of competitors in terms of growth and success.
- Product Differentiation: One of the most successful businesses is those that compete with competitors on the basis of differentiation. Product differentiation means that your product or service is so unique and unmatched that no other competitor offers it. Customers take pride in using brands that have product differentiation as their basis of competitive advantage because it has an image which is undefeated and unparalleled.
However, in order to achieve competitive advantage, your business needs to constantly invest in technology, research and experimentation, so that it can develop something novel and unique which competitors cant.
- Cost Leadership: As the name suggests, cost leadership means that your customers prefer your brand as opposed to that of competitors because your business may be offering a price that is irresistible. It has been one of the most used strategies in the past that allow businesses to gain maximum market share.
In order to achieve cost leadership, it is firstly very important to maximize efficiency and reduce costs so that they can be passed on to the customers. Secondly, the price offered cannot be so low that perceptions of your product’s quality are endangered.
- Responsive to External Environment: Although this can be a basis of competitive advantage, however in today’s world, every business needs to actively respond to the external environment in a quick and effective manner so that change in customer needs, laws and environment can be effectively managed.
- CSR: Corporate Social responsibility is one of those factors, which have helped businesses in differentiating themselves and gaining the empathy and preference of stakeholders. Your business needs to have a CSR plan at all times and need to work towards it with genuine concern and effort to create a positive brand image.
Businesses that have some basis of competitive advantage are the ones that are most likely to thrive in the longer run. However, the process does not stop there; a firm should actively maintain its basis of competitive advantage and be vigilant about the emerging opportunities and threats.