In business, competition is inevitable. You will always be up against other companies competing for a piece of the same market, regardless of the type of business you operate in. The more money you can win, the more competition there will be and it can be difficult to stay ahead. Companies that are ahead of the competition have something known as a competitive advantage.
A competitive advantage is when a company is doing something different that allows it to produce better results. This could be a more efficient manufacturing process or better customer service. If you run a business, your goal should always be to develop and maintain a competitive advantage.
This is done by establishing a competitive strategy, a set of policies and procedures that will help your business gain an advantage. You can learn more about this in the following guide or for a deeper understanding, get a competitive strategy certificate.
Why is competitive strategy important?
A company may not be able to gain a competitive advantage over its rivals unless it has a competitive strategy. It affects not only the competitive advantage, but also the overall business strategies. It is also essential to find new ways of doing business, innovating and growing the company.
Types of competitive strategy:
There are several types of competitive strategy, not all of which are relevant or possible for your business. Everyone is used to achieve the same goal, creating a competitive advantage, but the way they work is different.
cost leadership
Cost leadership is often the most common type of competitive strategy. It is about being a leader in terms of low prices. By keeping prices lower than the competition, a business has a better chance of encouraging customers to use their product or service. This is more common in industries where there is high price elasticity or where a product is sold at a loss to sell another product or service.
product differentiation
Product differentiation involves emphasizing specific features or advantages of the product or service being offered over the competition. When two products on the shelf are very similar, consumers will typically buy the one they are most familiar with. Differentiation allows a brand to stand out and increase sales in a specific target market.
Customer relationship management
By creating more positive interactions with their customers, a business can greatly increase customer loyalty and improve profits over the competition. A customer who has had a positive purchase with a particular brand is always much more likely to buy from that company again. This can be used to gain a competitive advantage.
How to implement your strategy
Implementing a successful competitive strategy is not easy, but it can be broken down into stages. Implement your strategy:
understand the market
Knowing which strategy to choose is key, and the best way to know is to understand the market and the needs of your target audience. Is there room for differentiation and specialization or would it be better to focus on the customer experience?
Evaluate the competition
If you want to outrun the competition, the first step is to know what they do and how they are different from your business. Look at their strengths and weaknesses and the processes they use to get results.
Implement your plan
Once you've decided on a strategy, it's time to implement it. Make sure all your employees understand the plan and its goals.