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WEMC FS#5-08

Strategies for Competitive Advantage
Cole Ehmke, M.S.
Extension Educator, Department of Agricultural and Applied Economics University of Wyoming

Overview A competitive advantage is an advantage gained over competitors by offering customers greater value, either through lower prices or by providing additional benefits and service that justify similar, or possibly higher, prices. For growers and producers involved in niche marketing, finding and nurturing a competitive advantage can mean increased profit and a venture that is sustainable and successful over the long term. This fact sheet looks at what defines competitive advantage and discusses strategies to consider when building a competitive advantage, as well as ways to assess the competitive advantage of a venture. The Essence of Competitive Advantage To begin, it may be helpful to take a more in-depth look at what it means to have a competitive advantage: an edge over the competition. Essentially a competitive advantage answers the question, “Why should the customer purchase from this operation rather than the competition?” For some ventures, particularly those in markets where the products or services are less differentiated, answering this question can be difficult. A key point to understand is that a venture that has customers has customers for a reason. Successfully growing a business is often dependent upon a strong competitive edge that gradually builds a core of loyal customers, which can be expanded over time. Producers and suppliers familiar with farming and ranching may know that successful ventures in the agriculture industry have typically operated in a commoditized, price-driven market, where all parties produce essentially the same product. Such conditions imply that the ultimate “winners” are the most cost-efficient producers, meaning that agricultural producers have historically relied on strategies that focused on lower costs and higher volumes (i.e. a bushel of hard red winter wheat is assumed to be of similar quality across the entire high plains region, meaning each bushel is assumed to be of the same value; so there is an incentive for producers to keep prices low and volume high). With the advent of product differentiation and niche and direct marketing, that reality has changed, and now there are niche markets in which both individual and wholesale buyers are looking for products with very specific characteristics or special services. These characteristics often use strategies that don’t focus on costs and volumes exclusively; rather the product or service may be of premium quality, be differentiated from other products and services available in the market (such as organic, natural, or humane production), or have a value-added component (i.e. flavored meats, pre-washed salad mixes, etc.). Successful ventures perform a combination of business activities well, including marketing, production, distribution, finance, customer service, and/or other activities important to the enterprise. However, a competitive advantage is often a single key element that gives an edge to a business beyond what the competition has or does.

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1. The experience and skills of the top managers. Over half of business failures are directly related to managerial incompetence. 2. Energy, persistence and resourcefulness (the will to make the business succeed) of the top managers. Many business owners have failed or come close several times before their “instant” success. Don’t give up. 3. A product that is at least a cut above the competition and service that doesn’t get in the way of people buying. There must be a compelling reason to buy; the product is great, the people love to provide service, the buying experience is easy and fun, etc. 4. The ability to create a “buzz” around the product with aggressive and strategic marketing. Make scarce marketing resources count. Do as much homework about your customers and their choices as you can before...
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