Dear M & M: How can I gain a competitive advantage in my marketplace? –Joan
From the menu of available choices of opportunities to grow, gaining a competitive advantage is clearly a top choice. Investopedia refers to competitive advantage as a company’s edge over its rivals giving them an ability to generate greater value for the firm. The more sustainable the competitive advantage, the more difficult it is for competitors to neutralize the advantage. There are two main types of competitive advantages: comparative advantages and differential advantages. Comparative advantage, or cost advantage, is a firm’s ability to produce a good or service at a lower cost than its competitors, which gives the firm the ability to sell its goods or services at a lower price than its competition or to generate a larger margin on sales.
A differential advantage is created when a firm’s products or services differ from its competitors and are seen as better than a competitor’s products by customers (Investopedia Definition). In order to implement a winning strategy one must understand market segmentation. Market segmentation is dividing a total market for products and services into smaller groups. Each group has specific needs for products and services they want. Using cell phones as an example, we have many choices available to everyone. There are cell phones for the tech-oriented and the non-tech-oriented customer.
In addition, there is business and home based personal features available to all consumers. Take a good look at the products and service your company is selling. What are the different groups looking for? Can you deliver what they need competing in your market with a cost advantage? Maybe you see an area where you can differentiate or separate your organization from everyone else by doing something your competitors aren’t doing. Let’s say you are selling cell phones. How about really giving good customer service and calling everyone you sold a phone to last week to see how everything is going.
Maybe they don’t know how to take a picture and post it on Facebook or how to set different ringtones to distinguish personal vs. work related calls. Remember one must have a large enough market share available to make this work. Take a look around at what your competition is doing, break your customers into small segments and offer something that allows you to gain a competitive advantage through a comparative or differential advantage you see in your marketplace. Remember a real sustainable competitive advantage is to engage in activities that your competitors can’t or won’t.