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What is sustainable competitive advantage?

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Sustainable competitive advantage is the bedrock of the majority of today’s profitable companies. Organizations who have recognized this and implemented a plan to achieve competitive advantage have become industry leaders in their market for an extended period of time.

The corporate world of today is extremely hard due to such competitive pressure. On the other hand, It’s easier and less expensive to establish a business now, especially with technology enabling companies to operate online and globally in order to acquire new customers in the interrelated markets.

The ability to maintain a sustainable competitive advantage is critical to organisational effectiveness. It is the force that helps a firm to be more focused, to generate more sales, to earn large profit margins, and to retain more customers and employees than competitors.

Sustainable competitive advantage is the significant determinant of long-term business cooperation and is what customers value most when considering to purchase from that company. If you don’t have a lasting competitive edge, you run the danger of becoming just another weak company that struggles along and produces poor results.

Sustainable competitive advantage

What is the sustainable competitive advantage?

The easiest way to illustrate competitive advantage is with a simple example. Consider yourself to be one of the finest students in your class. You are intelligent, well-informed, and endearing in nature. As a result, you earn a high grade and are well-liked by everyone. That, my friend, is your competitive edge.

When a business consistently outperforms other businesses in the same industry, it has a competitive edge. If a company’s earnings exceed those of its competitors, it is said to be outperforming them. When a competitive advantage lasts for a longer length of time, it is believed to be stronger. Companies that can sustain a competitive edge for an extended period of time are considered to have a sustainable competitive advantage.

Importance of customers

If competitive advantage is contingent on maintaining a greater profit margin than competitors in the same sector, how does a business design a plan for achieving and sustaining competitive advantage?

The essential element of profit is the customers that value and will pay for products and services. So a business can keep product development and low production costs associated with goods and services, resulting in a greater profit margin.

What constitutes long-term competitive advantage?

The important factors that provide long-term competitive advantage

Customer loyalty to a brand

Brand loyalty is determined by the brand’s power, and brings competitive success. Consumers are drawn to purchasing a single brand product on a consistent basis. For instance, Apple, Lg, and Walmart.

Innovation and progress

Innovation is critical for business success and growth of a company. It is the way you utilize technological tools to address customer challenges and create value. Google and Microsoft are two examples for the perfect product innovation.

Access advantages

Any type of data that a business maintains that assists in the creation of value. Ebay, for example, has access advantages to customers’ purchase information. In that way, Ebay can offer customized solutions to the targeted customers.

Company size

Being a large-scaled corporation provides you a cost advantage. Company size allows you to sell at a lower cost and achieve more profit. For instance, Walmart cost advantage and price distinction

Proprietorial rights

Ownership of exclusive rights to particular product designs, techniques, or patents. For instance, Porsche’s high-tech production process is protected by intellectual property rights.

Effect of the network

When the product’s worth grows, the number of customers increases. For instance, look at Twitter.

brand loyalty and customer retention

Why is sustainable competitive advantage important?

What you, your organization, or your department do better than anybody else is your competitive edge. The sustainable component relates to your capacity to carry out those actions over an extended period of time. And, certainly, you may have several advantages and build new ones. You are not required to acquire them all at this time.

The simplest method to determine your competitive edge is to respond to these questions.

1. What does my company specialize in most in the market?
2. What is the reason?

What makes you different?

A competitive advantage is anything that distinguishes you from others. The critical point here is that in order to compete, you must have a distinct edge. As you can see from the list provided by the financial services business, this is not a list of unique items. Essentially, anybody in a company today must have that degree of expertise in order to remain competitive.

Consider your competitive advantage to be the DNA of your business. It’s a collection of features or characteristics that define you. When you stay loyal to your DNA, you maintain good health, fitness, and success. When you damage your DNA, you feel anxious, sluggish, and require more work than necessary.

competitive advantage examples

Types of sustainable competitive advantage

Some examples of competitive advantage

Cost advantage /competitive pricing

Scale economies and increased efficiency can assist a business in retaining customers by positioning itself as the low-cost provider. Being the lowest-cost provider might impose a considerable entrance barrier. Additionally, persistent cost advantage and new products may help develop brand loyalty, which is an effective competitive strategy. Example: Wal-mart.

Market share or pricing authority

A corporation with pricing power is one that has the capacity to raise prices without losing customers. Companies with pricing power typically benefit from strong entry barriers or have acquired a dominating position in respective markets. Example: Cisco.

Effective Brands

Building a brand requires significant time, investment of money and a solid marketing strategy. It is quite easy to destroy. A strong brand is priceless because it motivates people to choose your brand over rivals. Being the market leader and having an excellent corporate reputation may contribute to the development of a strong brand and a competitive edge. Example: Xerox, Nikon.

Strong capital assets

Trademarks, copyrights, intellectual property protection, web addresses, and long term deals are all examples of capital resources that give long-term sustainable competitive advantage. Businesses that thrive at r&d to develop may have significant strategic assets. Example: IBM

Competitive advantage challenge

The most prevalent challenge to entry is the cost advantage of an existing organisation over a new one. High investment expenses and federal regulations are frequent roadblocks for businesses seeking to enter new markets. High entry barriers can result in monopolies in the market. Example: Industrial utility brands.

Product Line Adaptation

Effective product development and product innovation is perfect for competition. A product line that is capable of evolution enables the development of superior or similar follow-up goods that keep people coming back for the “new” and upgraded version. Example: IPhone

Product Differentiation

A distinguished product or service fosters brand loyalty and is less likely to be lost to a rival than a cost advantage. Overall quality, concept selection, purchasing flexibility, and customer support are all factors that might positively differentiate the product strategy.

Solid Balance Sheet / Cash Flow

Businesses with minimal debt and/or large cash reserves are able to make prudent investments and never have difficulties with cash flow, sustainability, or financial health. The balance sheet is the backbone of the corporation.

Outstanding leadership / personnel

There will always be the qualitative of exceptional leadership. Although this is difficult to quantify, there are losers and winners. The winners appear to make the correct judgments at the appropriate moment. Winners encourage and elicit the best performance from their staff, particularly when confronted with obstacles. A track record of achievement in management is a sustainable competitive advantage.

Small business competitive advantage

The majority of small businesses lack the market share and purchasing power necessary to compete successfully on price. Additionally, they are not large enough to offer everything to all customers in their markets. As a result, small businesses must create a lasting competitive advantage based on offering greater value to a specialized niche in order to compete effectively.

First mover advantage

Another frequently mentioned benefit is the first mover advantage. The first mover advantage occurs when the initial entry in a new market gains an edge over later entrants.

While being the first to market may give an initial advantage, it is not sustainable in my opinion unless it is accompanied by one of the three sorts of benefits described above.Google and Facebook are excellent examples. Neither of these firms were the pioneers in their respective fields, yet both have since dominated their respective marketplaces.

edge over competitors

Developing the competitive advantage

A company leverages its strengths and resources to provide consumers with the products and services they desire. When a business utilizes them properly in order to manufacture a product at the lowest possible cost and with the most features, it gains a price or differentiation advantage.

Five steps of building a competitive advantage

  1. Acquaint yourself with the market and its sectors. Look for underserved niches that may be economically targeted and marketed to.
  2. Recognize what clients truly desire and create a value offer that captures their attention.
  3. Determine the critical tasks that you must perform exceptionally effectively in order to support and fulfill the value offer. For instance, service levels, quality, branding, and price.
  4. Recognize your skills and key capabilities and how you can use them in novel ways to add value to your target market.
  5. Create a business model and marketing strategy that enables and supports the value offer.

 

At the conclusion of this procedure, you will get a very precise declaration of:

  • Who you will be promoting to (target clients and market segments)?
  • Why would they buy from you rather than your rivals (the value proposition)?.
  • The critical areas in which you must excel in order to offer your value proposition consistently.

 

Once you’ve identified your competitive advantage, you can use it in a variety of ways to improve your organization. By incorporating your sustainable competitive advantage into your sales and marketing strategy, you can help consumers understand why they should part with their money and give it to you rather than your rivals.

Competitive marketing strategy makes it easy for your personnel to offer your products (goods, solutions or services) and to feel certain that their commitments will be fulfilled. They understand that the whole business is centered on preserving and capitalizing on the sustainable competitive edge.

If a new business opportunity does not complement your sustainable competitive advantage, you should reconsider pursuing it. Is short-term growth more essential than developing a long-term position of stability and confidence? Of course, long-term stability is always the best way to go. In fact, it is the best marketing strategy.

The longer-term perspective and successful application of a sustainable competitive advantage can result in a better rate of return on capital invested in the company, even in the face of fierce competition. This position adds value to a firm and may result in a higher sale price. That is a benefit that every sales, marketing and business development executive desires.