Competitive Advantage in Small Business

1
What "competitive advantage" means?.
A competitive advantage is simply a factor that distinguishes your business from others and
makes customers more likely to choose your product over the competition. Without a
competitive advantage, your business has no unique method of drawing in customers.[1]
• A competitive advantage is a way in which you can create value for your customers that
your competitors cannot. This may be lower cost, faster service, better customer service, more
convenient location, higher quality, or other factors.
• For example, a restaurant offering the best food in town (best-tasting, highest-rated,
most well-known chef, or some other measure of quality) would have an advantage other its
competitors by offering a higher-quality product.
• Alternately, a business could focus on reducing overhead and production costs to offer
a market-quality product at a below-market price. Being able to offer this product at the price
that they do would then be their competitive advantage.
• Creating a competitive advantage involves analyzing your business's strengths and
those of your competitors, and then learning how to take advantage of these factors.
How to create a Competitive Advantage?
Review your core strengths.
Once you have identified your core strength areas, you can add to those using several market
strategies to build a competitive advantage, or to create new areas of advantage.
For example, you may have a major strength in terms of product quality. You can further add
to this strength by focusing even more heavily on fantastic quality, but also trying to deliver
your product faster, and at a lower cost.
Reduce costs.
Cost reduction is one strategy that businesses can pursue to gain a competitive advantage, or
to add to their advantage. Most markets have price-sensitive consumers, and being able to
offer your product or service at a lower price is a certain way to create value for your
customers. Walmart, for example, has a competitive advantage due to its ability to provide low
prices.
 Examine your entire production process. This includes everything from purchasing
supplies, to how your workers produce your products, to how your product is sold.
 Consider investing in technology that can reduce costs. If you own a restaurant, for
example, purchasing energy-efficient equipment can reduce your operating costs. If
2
your business has an excellent credit rating compared to your peers, you can finance
these purchases at a lower cost.
 Examine how your workers are producing as well to make sure they are not wasting
resources and that they are producing as much as possible.
Focus on service.
In your particular market, service may be a key factor that differentiates competitors. If your
business already has a strength in service, consider doing more to focus in this area.
 Hiring better staff, improving training standards, managing staff closer, offering
rewards and incentives for strong service, and offering more convenient hours of
operation can all help generate an advantage. It is important to create a culture of
excellent service. If your service advantage is based on a few simple factors (like longer
hours), your competition can easily replicate it.
Focus on product or service quality.
If you cannot compete with your peers on location or on price, for example, you can always
compete on quality. This is even more true if high quality is one of your strengths. Customers
will often pay more or go to greater lengths for an exceptional product.
 You'll need to first determine exactly what quality means in a particular market. For
example, do customers want maintenance-free products, better design, or longer life?
What does quality mean to your customers?
 Look at best-selling products in your market. What aspects of these products make
them desirable?
 Focus on taking your unique talents and background and using these. For example, if
you are in the restaurant business, and you spent three years overseas studying cuisine,
you can use your experiences and contacts there to establish truly unique recipes.
 Focusing on hiring the right people, and using higher quality supplies can dramatically
enhance the overall quality of your product or service.
Differentiate your products and services.
Look for one or more marketable attributes that you have that can set you apart from your
competitors. Then find the segment of the market that finds those attributes important and
market to them. For example, do you have the longest battery life? Frequent travelers need
this. The lowest price? That's important to lower income customers. Free shipping? If you are
the only one offering this it could attract new customers.
 This process can also work in the other direction by conducting research to determine
which things consumers find most important and then developing a niche market for
those products or characteristics. For example, people with arthritis have trouble
3
opening cans and jars. You could design a gadget that makes it easier for them and then
advertise in medical publications.
 Make sure your product has both attractive features and benefits. A feature is
something that the product has or is, such as a drill that has interchangeable drill bits.
A benefit is a positive outcome that the user experiences as a result of using the
product, like how using an umbrella keeps you dry in the rain. When a product has both
of these, it's much more possible to gain a competitive edge.
Form an alliance with another company.

Forming a partnership or alliance with another company can be an excellent way to gain a
competitive edge. For example, assume you are a local equipment supply company. You could
approach a local transportation company and offer to provide them with a discount on
products in exchange for quicker or more preferential local transportation. In doing so, you can
offer your customers their products in a shorter time frame than your peers, providing you with
a competitive advantage.

Competitive Advantage in Small Business

Uploaded by

Copyright:

Available Formats

Competitive Advantage in Small Business

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Competitive Advantage in Small Business

Uploaded by

Copyright:

Available Formats

1

What "competitive advantage" means?.

Form an alliance with another company.

You might also like