ACHIEVING A COMPETITIVE ADVANTAGE PART 1
ACHIEVING A COMPETITIVE ADVANTAGE PART 1
By: Milcyn T. Gutierrez
Eight basic ways to gain competitive advantage
Consider competitive advantage in terms of a for-profit company, whose major goal is to maximize profits by lowering costs and increasing revenue. A for-profit company achieves competitive advantage when its profits increase significantly, most commonly through increased market share. The listed eight basic initiatives below can be used to gain competitive advantage, including offering a product or service that competitors cannot provide or providing the same product or service more attractively to customers. It is important to understand that the eight listed are the most common, but not the only, types of business strategy an organization can pursue. It is also important to understand that strategic moves often consist of a combination of two or more of these initiatives and other steps, and that sometimes accomplishing one type of advantage creates another. The essence of strategy is innovation, so competitive advantage is often gained when an organization tries a strategy that no one has tried before. These are the following:
Reduce Costs - Customers like to pay as little as possible while still receiving the quality of service or product they need. One way to increase market share is to lower prices, and the best way to lower prices is to reduce costs. For instance, if carried out successfully, massive automation of any business process gives an organization competitive advantage. The reason is simple: automation makes an organization more productive, and any cost savings can be transferred to customers through lower prices. We saw this happen in the auto industry. In the 1970s, Japanese automakers brought robots to their production and assembly lines and reduced costs and subsequently prices quickly and dramatically. The robots weld, paint, and assemble parts at a far lower cost than manual labor. Until their competitors began to employ robots, the
By: Milcyn T. Gutierrez
Eight basic ways to gain competitive advantage
Consider competitive advantage in terms of a for-profit company, whose major goal is to maximize profits by lowering costs and increasing revenue. A for-profit company achieves competitive advantage when its profits increase significantly, most commonly through increased market share. The listed eight basic initiatives below can be used to gain competitive advantage, including offering a product or service that competitors cannot provide or providing the same product or service more attractively to customers. It is important to understand that the eight listed are the most common, but not the only, types of business strategy an organization can pursue. It is also important to understand that strategic moves often consist of a combination of two or more of these initiatives and other steps, and that sometimes accomplishing one type of advantage creates another. The essence of strategy is innovation, so competitive advantage is often gained when an organization tries a strategy that no one has tried before. These are the following:
Reduce Costs - Customers like to pay as little as possible while still receiving the quality of service or product they need. One way to increase market share is to lower prices, and the best way to lower prices is to reduce costs. For instance, if carried out successfully, massive automation of any business process gives an organization competitive advantage. The reason is simple: automation makes an organization more productive, and any cost savings can be transferred to customers through lower prices. We saw this happen in the auto industry. In the 1970s, Japanese automakers brought robots to their production and assembly lines and reduced costs and subsequently prices quickly and dramatically. The robots weld, paint, and assemble parts at a far lower cost than manual labor. Until their competitors began to employ robots, the