CREATING

COMPETITIVE
Advantage
COMPETITIVE
ADVANTAGE
Competitive Adv. - X

Understanding A competitive advantage is a strategic advantage that a company

has over its competitors. It is something that helps it compete
Differentiation more effectively. It could be a superiority that a company gains.
Factors that enable a firm to produce goods or services better or
more cheaply than its competitors or rivals are referred to as
competitive advantage. These variables enable the producing unit
to earn more sales or higher profits than its competitors. A
multitude of variables contribute to competitive advantages,
including cost structure, branding, product quality, distribution
network, intellectual property, and customer service.
 Competitive advantage is what makes
an entity's products or services more
Competitive Adv. desirable to customers than that of
any other rival. In the business world,
Understanding competitive advantage is one of the
most important concepts. Competitive
advantage is the ability of a company Having a competitive advantage
Differentiation
to outperform its competitors by means that a company is able to
providing better products, services,
provide better value to its
or pricing. It is a crucial factor that
sets apart successful companies from customers than its competitors.
the rest. This can be achieved through a
variety of means such as offering
lower prices, providing better
quality products or services,
having superior customer service,
or being more innovative.
UNDERSTANDING
Competitive Advantage
Competitive Adv. - X

Understanding Competitive advantage refers to the unique advantage that a

company has over its competitors, enabling it to generate greater
Differentiation sales, profitability, and market share. It is an essential concept in
business strategy, as it helps a company to differentiate itself
from its rivals and establish a strong position in the market.

Competitive advantages generate greater value for a firm and its

shareholders because of certain strengths or conditions. The more
sustainable the competitive advantage, the more difficult it is for
competitors to neutralize the advantage.
 There are several ways in which a company can achieve a competitive
advantage, such as:
Competitive Adv.

Understanding

Differentiation
Cost Leadership Differentiation Innovation

Brand Reputation Scale

Companies can achieve a competitive advantage through cost leadership,
differentiation, innovation, brand reputation, and scale. By focusing on these areas,
companies can differentiate themselves from their competitors and build a
sustainable competitive advantage that will help them to succeed in the long term.
COMPETITIVE ADVANTAGE
VS.
COMPARATIVE ADVANTAGE
Comparative
Advantage
Competitive
Advantage
 S.
Competitive Adv. V
Competitive advantage refers to the ability of a Comparative advantage refers to the ability of a
Understanding company to outperform its competitors in a specific country or entity to produce a particular good or
market by offering better products, services, or service at a lower opportunity cost than its trading
prices. partners.

Differentiation Competitive advantage is focused on Comparative advantage is focused on

individual firms or companies in a the ability of countries or entities to
market or industry. produce goods or services

Competitive advantage is based on factors Comparative advantage is based on

such as innovation, technology, marketing, factors such as natural resources, labor
and branding. costs, and expertise.

The outcome of competitive advantage is The outcome of comparative advantage is

increased market share, higher profits, and increased international trade and
business growth. specialization.

Competitive advantage is usually short-term

Comparative advantage is usually long-term
and can change quickly as market conditions
and can be sustained over a longer period.
evolve.
COMPETITIVE ADVANTAGE
VS.
DIFFERENTIAL ADVANTAGE
 S.
Competitive Adv.
V
Competitive advantage refers to a company's ability Differential advantage refers to the unique features
Understanding to outperform its rivals in the industry. or benefits that a company's products or services
Competitive advantage is a broader concept that offer compared to those of its competitors.
encompasses all the factors that contribute to a Differential advantage, on the other hand, focuses
company's success, including its cost structure, specifically on the distinctive qualities of a
Differentiation distribution network, and marketing strategy. company's offerings.
Competitive advantage can be more durable than Differential advantage, however, may be more
differential advantage, as it is based on a company's ephemeral(short time), as competitors may be able
ability to sustain its position in the marketplace over to replicate or improve upon a company's unique
time. features.
Competitive advantage is critical for a company's Differential advantage is also important, as it can
long-term success, as it enables the company to help a company attract and retain customers who
defend its position in the marketplace and maintain value the unique benefits offered by its products or
services.
profitability.
Differential advantage, by contrast, is typically
Competitive advantage can be derived from a variety
derived from specific features or benefits of a
of sources, including economies of scale, proprietary
company's products or services, such as superior
technology, brand recognition, and efficient supply
quality, design, or functionality.
chain management.
Differential advantage, however, is more focused on
Competitive advantage is often focused on beating
meeting the specific needs and preferences of
competitors in terms of market share, profitability,
customers, and providing a superior experience or
or other financial metrics.
solution.
 Examples
Competitive Advantage
of

The team
Ability to produce and sell at a lower cost (known as cost leadership)
Brand and reputation
Innovation
Technology
Location
Variety
Sustainability
 How to Identify your Business’s
Competitive Advantage?
Identifying your competitive advantages really comes down to two critical actions

01 02
 How to Conduct a
Competitor Analysis
Understand what your competitors are best at, why they win business,
and why they lose.

01 02 03
Step 1: Set Up the Comparison Grid

What is
Why do Why do
their big,
they win? they lose?
bold vision?

Competitor 1

Competitor 2

Competitor 3
Step 2: Finish the Grid for Each Competitor
Step 3: Identify Your Competitor’s Advantages
Step 4: Rank Your Competitors
 Identify Your
Competitive Advantages

01 03
05

02 04
Step 1:
Complete the Exercise for
Your Org
Step 2:
Identify Competitive
Advantages Unique to
Your Business
Step 3:
Examine Other Strengths
that Could Be Developed
into Advantages
Step 4:
Examine Weaknesses to
Shore Up
Step 5:
Outline Competitive Moves
to Make to Dethrone a
Competitor’s Advantage
What is
sustainable competitive advantage?
What is
differentiation as Sustainable Competitive Advantage?
Competitive
Advantage
Framework
VRIO
V R I O
Valuable Rare Inimitable Organized
What is
cost leadership as sustainable competitive advantage?
What is
focus advantage as sustainable competitive advantage?
 Y S T O
WA
IL D A
BU IV E
P E TIT
C O M GE
A N T A
A DV
IDENTIFYING YOUR ADVANTAGE

Low pricing

Specialization

fferentiation
Di
 A S F O R
IDE
IL DIN G
BU
Y O U R
E T IT IV E
CO M P
N T A GE
A DV A
Awesome staff
One of your best (or worst) competitive Establishing clear performance
advantages will be your staff. The advantage of standards.
having friendly, knowledgeable, proactive staff
Mystery shopping the standards.
must never be underestimated. The key is to make
sure that your staff are motivated, trained and Starting incentive schemes.
perform well. Do this by: Sending them on training
courses.
Encouraging them to develop
their product/service knowledge.
Holding yearly selling courses.
. Location, location, location
This advantage is most critical for retailers. If you
don’t have a good location can you move or get the
business out to the customers with business-to-
business accounts, free pick-up and delivery, drop-
off points or wholesaling through businesses with
better locations?
Unique or exclusive products
You have an advantage if you can source product
or deliver services that the competition cannot. If
you’re competing against larger or similar
businesses, can you establish a reputation for
unique products people can’t find anywhere else?
 A great website

A website that is more attractive or easier to navigate than

competitors can be a distinct advantage. Can you create a better,
easier, online shopping experience? More competitive shipping
options, online discounts?
Become a star
A signed mission statement in
Your own image can be a competitive view of the public.
advantage. No one else has quite your mix of Signing your name at the end of
skills, and you can build a ‘character owner’ all newsletters and
image by having your name on as much correspondence.
material as possible, including: Offering personal guarantees.
Becoming prominent in your
community.
Becoming an authority in your
field and a spokesperson for the
industry.
Brush up on your technical knowledge

If you can’t compete on price, then offer

superior knowledge to the other
businesses around you. Consequently,
you should make sure staff are well
trained. You could ask your suppliers to
provide training.
 Get to know your suppliers
Being on good terms with your suppliers and their sales representatives is an
often-overlooked competitive advantage over other businesses that haven’t
bothered to develop this closeness. A good relationship will provide:

Better service and support. You might get

promotional material, displays and signs,
plus training for your staff.
Better supply and faster delivery.
Better return policy and customer support.
Early notification of specials or discounts.
Display your other services

To gain an advantage, offer things that the

competitors don’t, especially if they cost very little.
Sometimes this may simply involve displaying a list of
what you already do for customers, but the majority
may have been unaware of. Don’t simply expect
customers automatically to be aware of your
competitive advantages. You must advertise and
promote them.
Strategic alliances and joint ventures

One of the best ways to compete against larger

businesses is to form alliances and joint ventures with
other businesses. For example, by banding together
with other businesses in your industry, you can often
gain better group discounts from suppliers than you
would if you ordered on your own.
People want quick service, so the faster you can deliver
your product or service the better. Hold regular staff
meetings on how to streamline your business
processes and fulfil or exceed customer requirements
without sacrificing quality of delivery.

Speed
Approaches to Marketing Strategy
01 Entrepreneurial 02 Formulated
Marketing
Task Name Marketing

Task Name
03TaskIntrapreneurial
Name
Marketing
Basic Competitive Strategies by Michael Porter

Overall Cost
Differentiation Focus
Leadership

achieve the lowest concentrate on serve a few market

production & differentiated segments well rather
product line & than the whole
distribution costs.
marketing program. market.

Try to be good on all competitive strategies.

 Value Disciplines for delivering
superior customer value.
Michael Treacy & Fred Wiersema

Operational Excellence Product Leadership

offer a continuous
lead its industry in
stream of leading-edge
price & convenience.
Customer Intimacy products/services.
precisely segment market &
tailor products/ services to
exactly match the needs of
targeted customers.
COMPETITIVE
POSITIONS
Market Leader

Market Challengers

Market Followers

Market Nichers
 MARKET LEADER
Firm in an industry with the largest market share.

1. Expand total market.

New users
New users
More usage
2. Protect market share.
Fix Weakness
Innovate
3. Expand market share.
MARKET LEADERS IN THE PHILIPPINES
MARKET CHALLENGERS
runner-up firm that fights hard to increase its market share in an industry.

EXAMPLES: 1. Full frontal attack.

Attack Competitor’s
Strength
2. Indirect Attack
Attack Competitor’s
Weakness
 MARKET FOLLOWER MARKET NICHER
Runner-up firm that wants to hold its share
·firm that serves small segments that the
in an industry w/o rocking the boat.
other firms in an industry overlook/ignore.

Follow closely.
Specialization.
Follow at a distance.
Multiple niching.
Balancing Customer and
Competitor Orientations
 Competitive Positions
Competitive position refers to the place of the
company, its products or services on the widely
understood market. It describes its market share
relative to all other companies acting on the market
and defines the opportunities and threats that arise
from it.
4 Types of Competitive Positions
MARKET firm in an industry with the largest market share
LEADER
runner-up firm that fights hard to increase its MARKET
market share in an industry
CHALLENGES
MARKET runner-up firm that wants to hold its share in an
FOLLOWERS industry without rocking the boat

firm that serves small segments that the MARKET

other firms in an industry overlook/ignore
NICHERS
 INNOVATION
Firms create competitive advantage by Innovation & Creating Competitive Advantage:
perceiving or discovering new and better Innovations shift competitive advantage when
ways to compete in an industry and rivals either fail to perceive the new way of
bringing them to market, which is competing or are unwilling or unable to
ultimately an act of innovation. It can be
respond. This can be the result of many
manifested in product changes, process
causes, among them complacency, inertia,
changes, new approaches to marketing,
new forms of distribution, and new
inflexible or specialized assets, or mixed
conceptions of scope. motives.
 CAUSES OF INNOVATION THAT
SHIFT COMPETITIVE ADVANTAGE:
New technologies
New or shifting buyer needs
The emergence of a new industry
segment
Shifting input costs or availability
Changes in government regulations

New Technologies
Technological change can create new possibilities for the design of a product, the way
it is marketed, produced, or delivered, and the ancillary services provided. It is the
most common precursor of strategic innovation. Industries are born when
technological change makes a new product feasible.
 New
New or
or Shifting Buyer Needs
Shifting Buyer Needs
Competitive
Competitiveadvantage
advantageis often created
is often or shifts
created whenwhen
or shifts
buyers
buyersdevelop
developnew needs
new needsor their priorities
or their change
priorities change
significantly.
significantly.

The Emergence of A New Industry Segment

A good example is the lift truck industry, where Japanese
firms perceived an underserved segment in small lift
trucks for general-purpose applications.

Shifting Input Costs or Availability

Competitive advantage frequently changes when a significant change
occurs in the absolute or relative costs of inputs such as labor, raw
materials, energy, transportation, communications, media, or
machinery.
New or Shifting
Changes Buyer
in Government Needs
Regulations
Adjustments in the
Competitive nature ofis
advantage government regulation,
often created in when
or shifts areas such as
product standards,
buyers develop environmental
new needs orcontrols, restrictions
their priorities on entry, and
change
trade barriers, are another common stimulus to innovations which
significantly.
result in competitive advantage.

Moving Early to Exploit Structural Change

Early movers gain the greatest competitive advantage in those
industries where economies of scale are significant and where
customers are most conservative about switching suppliers.

First Mover
A company that is the first to establish itself in a given market or
industry, the proverbial 'early bird,' is known as the first mover.
First Mover: Advantages
First movers have the potential to make a lasting impression on
customers, which can lead to brand recognition and brand
loyalty.
First movers have more time to refine their processes and to
perfect their products or services.
First movers may have an advantage in controlling resources,
such as a strategic location or an exclusive contract with key
suppliers or talented employees.
First movers may have a sustainable advantage when there is a
high cost involved for customers to switch brands at a later date.
First Mover: Disadvantages

First movers bear the economic burden Followers can utilize newer technologies that
of developing a new market that become available, while first movers may be
followers into the market can exploit. heavily invested in older technologies.
First movers sometimes rigidly adhere to
Followers into the market can learn
their original path, even when it isn't
from the mistakes of the first movers, working, which opens the door for followers
allowing them to reduce their risk and to move in with a revised version of the
avoid making costly mistakes. product that better serves the market's
Followers may be able to examine the needs.
processes of the first movers and First movers may be driven by a fear of
modify them for greater efficiency and missed opportunities, leading them to launch
a new product or service before the market is
cost reduction.
ready.
 MOVING EARLY TO EXPLOIT
STRUCTURAL CHANGE

In many branded consumer packaged goods, for

example, brand loyalties are long lived and technical
change has been incremental. Brands like Ivory Soap,
M&M/Mars, Lindt, Nestlé, and Persil have preserved
leadership for generations.
 SHIFTING BUYER NEEDS
5 types of buyer need:

Functional Needs Situational Needs Social Needs

Relates to some function or Usually result from conditions Usually result from conditions
task that must be performed or circumstances experienced or circumstances experienced
by the buyer. by the buyer.

Knowledge Needs Psychological Needs

Come from a desire for Stems from a desire to
personal development or minimize risk or feel reassured
growth.
Understanding Your Buyers’ Needs

A good way to start figuring out buyer needs is researching and

developing your buyer personas – detailed representations of
different segments of your audience. These personas can include
demographic information about customers, as well as their goals,
needs and pain points. You can use this detailed information to
create targeted content that addresses the unique needs of goals
of every potential customer.
 Emergence of a New Industry Segment
5 new industry segments:

Emotional Understanding
Problem solvers expressionists seekers
this segment actively they let their emotions out as they try to understand
plans, tries new things, evidenced by the copiousness the situation that we are
and finds solutions to of angry and complaining in and seek to learn about
existing woes posts in social media it
Example: Example: Example:
virtual coaching, self-help webinars, online courses, webinars, virtual
digital banking, coaching, documentaries on
virtual dance parties, and self-care
videoconferencing tool, or products like essential oils and pandemics, and fitness and
online marketplace fitness products health care products
 Emergence of a New Industry Segment
5 new industry segments:

Help and support Problem avoiders

seekers this segment looks for
this segment seeks help activities to forget the current
and support from others problems and they act as if
to enable them to cope nothing is happening

Example: Example:
virtual coaching and spiritual gardening and fitness, liquor,
advisory, financial advisory and comfort food, popular coffee
insurance, and errands services brands, and entertainment
and apps content
 Switching Costs
Understanding Switching
What are Switching Costs?
Costs
Switching costs commonly refer to the
Switching costs are costs that a
financial costs incurred by a consumer
consumer incurs from switching when they switch brands, products,
brands, products, services, or services, or suppliers. However, it is
suppliers. Switching cost is also important to note such costs also include
non-financial costs. Other costs include
known as switching barrier.
psychological, time, and effort-based
costs.
 High and Low
Switching Costs
Switching costs can be “high” or “low.” The
higher the cost of switching, the less likely an A notable example of a product with high
individual will be willing to switch brands, switching costs is the QWERTY keyboard
products, services, or suppliers. To consumers, layout. According to studies, the QWERTY
the higher the cost, the less value the consumer keyboard layout may not be the most
is deriving from switching to another brand, efficient keyboard (in terms of typing speed)
product, service, or supplier. compared to a DVORAK keyboard layout.

The DVORAK keyboard layout is not popular

with consumers, due to the high switching
Practical Example:
costs associated (in terms of the time and
The QWERTY
effort required to learn a new keyboard
Keyboard layout) with transitioning from a QWERTY
keyboard to a DVORAK keyboard.
 Common Switching Costs
There are a variety of specific switching costs that companies can use to deter their
customers from jumping ship and going to a competitor. Common ones include the following:

Convenience Exit Fees

Many companies
A company may have charge exit fees for
many locations of its leaving. These fees are
stores or products,
making it easy for Emotional
usually not necessary
but a company tacks Time-Based
customers to buy its them on at the end just
goods Many companies continue so a customer won't If it takes a long
doing business with their leave. time to switch from
current suppliers, for one brand to
example, just because the
emotional cost of finding a another, customers
new supplier, building a new often forego doing
relationship, and getting to
know new individuals might
so.
be high.
 Business Model
A business model is a broad strategy for how a company will generate and
increase earnings.
Business models determine whether a company will provide a good or service,
operate online or in a physical location, sell to businesses instead of consumers
directly, or use a combination of many conventional business models.
A business model is not a detailed plan; rather, it is a high-level overview of
the company that serves as the foundation for more detailed strategies.

A finance strategy and a marketing plan are the two focuses of a

business model.
 MARKETING PLAN
A corporation must define its Value Proposition, Brand, and Target Market inside a
marketing plan.

A value proposition explains why customers

should choose to buy a good or service from you
rather than a rival. For instance, Uber's value
offer includes a fleet of local drivers available
around-the-clock to get you from point A to
point B.
A brand is what customers associate with your
firm when they hear its name as well as how you
communicate your value proposition to them.
A target market is who you are trying to sell to. A
target market can be based on age, gender,
marital status, location, life stage, job or a
variety of other factors.
 FINANCIAL PLAN
A financial plan estimates variable and fixed expenditures while
projecting income. Variable costs are expenses related to each
production unit that are factored into the calculation of gross
profit, the revenue generated by each sold unit. Fixed costs are
the out-of-pocket expenses required to create goods, like a
facility. The number of units that must be sold to pay fixed costs
and turn a profit will be determined by a financial plan.
 The aim of every firm is to generate
and maximize profits. Many
business owners, however, do not
Invest In consider the numerous additional
Development aspects that may be detrimental to

and Security
their companies. Potential risks can
be reduced or avoided, and
profitability can be increased, with
the assistance of a financial advisor
who can evaluate the viability of
your business model.
THANK YOU
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