June 2015 Newsletter – How to Identify and Develop Your Strategic Competitive Advantage

How to Identify and Develop Your Strategic Competitive Advantage

Recently I was at a New Business Launch Event and a presenter was asked “Who is your competition and how do you stack up against them?” They meekly responded, “We have not had a chance to fully do that research yet”.

Why would you want to know your competition and how you compare to them? There are three reasons:

  • To use your marketing resources most advantageously
  • Be able to differentiate your company from its challengers
  • Beat your opposition

The key in knowing about your rivals is to discern your company’s relative Strengths and Weaknesses and use that information to outflank your adversaries.

So how do you objectively and effectively ascertain your business’ Advantages and Disadvantages in the marketplace?

The 5 Elements of Your Strategic Competitive Advantage

In working with over 1,200 companies during the past 17 year my company and I have found that using the five following elements to analyze an organization is an effective way to determine its strengths and weaknesses.

As you proceed through this analysis, it is vitally important that you ask yourself, “Which of these five elements is the key to how you provide or “produce” your product/service?” In other words, what is the one thing that, from a production standpoint, that separates you from your competitors? I call this your Strategic Competitive Advantage.

Keep in mind, when I say production this is not specific to a manufacturing business. For a restaurant its “products” are food and beverages. For a bank, they are banking services.

Product Cost Advantage

Do you have an advantage or a disadvantage with regard to the cost of producing your products as Small Business Planning in Atlanta, Georgiacompared to its competitors? If your production costs are lower, then you have a cost advantage. However, if your production costs are higher then you have a cost disadvantage.

Why is this important? Having a cost advantage means you can sell your product at a lower price than your competitors. For your business to have a sustainable price advantage, you must first have a product cost advantage. This is because unless you do, all you are going to get by selling your product at a price lower than your competitors are lower profits and perhaps put your business at risk.

Product Quality

Do you have a strength or weakness with regard to the quality of your product as compared to your competition? This is the most straightforward element and it lends itself to independent verification of your quality. The most common mistake made in this area is to you assume your perception of quality is the same as your customers’.

There are three ways to assess the quality of your product. First is a subjective analysis based on your sales volume and the input from your sales personnel. The second method is to use independent surveys to objectively analyze your current customers’ perception of the quality of your product. The third method is to have an independent consumer research and testing lab such Consumer Reports® or JD Power and Associates® analyze your product compared to competing products.

Delivery Time or Convenience

Small Business PlanningDo you deliver or provide your product/service sooner or more quickly than your competition? Or is dealing with you more convenient to your customer than dealing with your competition? You want to establish whether you have an advantage or a disadvantage with regards to the period of time it takes from the point an order is placed to it delivered to your customer. Additionally, you need to evaluate whether you have an advantage or a disadvantage when it comes to how convenient it is for your customer to transact business with you compared to your competition.

Customer Service

Next, analyze your Customer Service area and verify whether you have a strength or weakness with regards to what a customer or potential customer experiences as compared to your competitor. Sometimes it is difficult to define what is and what is not included as part of a business’s Customer Service. This is particularly true when your business is a distribution, wholesale, or retail business. The concept of Customer Service can become somewhat fuzzy. Essentially, Customer Service is the overall experience a customer has in dealing with you, which includes the entire shopping experience they have with your business.

Customer Service includes all the interactions that a customer or potential customer has with your business to obtain your product. Customer Service does not include your actual product or the price of that product, but it does include placing an order, inquiring about resolving an order or product issue before the delivery of your product, post product-delivery issues, and problem resolution once your product has been received. Let me underscore – resolution of problems or concerns with your product/service falls squarely within your Customer Service function.

The Uniqueness of Your Product

Lastly, determine whether you have any desirable unique characteristics or features. The uniqueness of Small Business Planning in Atlanta, Georgiayour product is not something that simply happens; you must create or develop this uniqueness

Because your product possesses some desirable unique trait and your competition cannot duplicate or obtain this desirable unique trait due to a patent, copyright, trade secret, or extreme cost to develop, you are able to sell your product at a higher price than your competition. This means you do not have to focus on your Product Quality, Delivery Time or Convenience or Customer Service areas as much because you are the only game in town.

Applying Your Strategic Competitive Advantage

Once you have examined each of the five elements and assessed their strengths and weaknesses, you should ask yourself which of these five areas is the “key” to delivering your product to your customers. In certain situations, your key element can be a combination of two of the elements. For example, “We will produce a high-quality product that is unique,” or “We will produce a low-cost, high-quality product” – which translates to a value approach. However, the key to your production area should rarely include more than two of the elements of your production area.

Using the above you want to determine which factor or combination of factors separates you from your competitors. This becomes your Strategic Competitive Advantage which when properly applied will increase the profitability of your company by separating your company from its challengers.

If you need assistance with using this concept to separate your business from its competition so you can take your business where you want it to go, please feel free to contact us for assistance.

www.FountainheadConsultingGroup.com

Office phone: (770) 642-4220

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