The role of strategic planning in achieving competitive advantage
There's a reason starting a business isn't for everyone: Entrepreneurship can be rewarding in more ways than one, but it's also challenging. Oftentimes, you will face a lot of competition from other companies that offer similar products or services. Consumers are also getting smarter than ever before, and they can easily search online to see what your competitors offer, their prices, and a host of other factors that will influence their buying decisions. All of this means that it is increasingly important for companies to develop a competitive advantage that sets them apart from others in their industry.
The role of strategic planning in achieving competitive advantage:
The role of strategic planning in achieving competitive advantage: 6 ways your business can gain a competitive advantage.
What is the competitive advantage?
Competitive advantage, simply put, is an attribute that gives your business an edge over its competitors. There are many different aspects of a business that can constitute a competitive advantage, and we'll look at some examples in this article.
Competitive advantage does not necessarily make your business more competitive in the eyes of all consumers, only in the eyes of the specific target market segments your business is competing for. This means that in each industry, several companies can have competitive advantages over each other, it just depends on the advantages that the consumer gives priority when making a purchase decision.
Examples of competitive advantage:
Some of the commonly cited types of competitive advantages for a product-based business are lower cost of materials through economies of scale, lower freight costs, access to unique raw materials, favorable geographic location, unique technology, and high barriers to entry for new competitors.
These are all things that can give a product-based business a comparative advantage over other businesses, enabling it to offer a higher quality product, cost advantage, or better service.
The competitive advantage of a service-based business can include specialized knowledge and experience, unparalleled customer service, or valuable industry experience.
Six ways to develop your competitive advantage:
You might think that as a new entrepreneur, your small business cannot develop a competitive advantage over more established companies that have more resources than you. However, there are always ways to develop a differentiation strategy for your business. Sometimes being smaller and smarter can give you an edge over competitors.
1. Become an Internet influencer:
Becoming an influencer for your target audience is a great way to differentiate your business in the market. While someone can always come along to offer your product or service at a cheaper rate, if your target market sees you as a reliable source of information and enjoys your content, they are more likely to buy from you, anyway.
For example, if you are a professional organizer, you may have to charge a little more as a sole proprietor than a larger company that pays their organizers by the hour. However, if you can build an audience on social media and share your best organizational tips and post inspiring before and after photos, your potential customers will see you as an authority and are more likely to want to work with you and support you despite the price premium.
2. Speak at events in your field:
Similar to becoming an influencer online, speaking at industry events can help establish yourself as a thought leader in your field, giving you a competitive advantage. If your target audience is very local, then appearing more often at local events can be an excellent way to get your name out there and create new business.
3. Qualitative stature:
As an entrepreneur, you can't make everyone happy 100 percent of the time. One effective business strategy that you can implement to serve your clients and grow your client base is to position yourself as closely as possible and become known as the best in your narrow field.
For example, if you have a food truck business, there will always be other food trucks to compete with. However, by having a unique item in your signature list, you will likely become the niche for that item.
4. Getting the most benefit:
Less expensive producers in a particular category may have a selling price as their differentiation feature, but sometimes a higher cost can indicate that product quality, sustainability or service is a business advantage.
Finding the lowest price ever is not the only thing that is important to consumers. For example, many people prefer to support their local independent coffee shop even if they can get their morning coffee at a lower price at a nearby chain. The chain may have access to cheap labor and low-cost coffee beans. However, a local store can provide fair trade, artisanal, sustainably grown beans and pride themselves on a living wage for their employees.
Higher costs in an independent coffee shop indicate higher quality and more ethical practices, which represent competitive advantages in the eyes of a particular target market.
5. Investing in Deeper Relationships with Clients:
Another competitive advantage that a smaller company is more likely to have than larger competitors is the ability to form deep and meaningful relationships with customers.
If you want strong customer relationships to be your competitive advantage, make sure you take every opportunity to interact with your customers, be transparent with them, show your appreciation for their business, and personalize their experience.
We all like to feel appreciated, and when a company shows its gratitude to its customers and invests in providing exceptional customer service, customers are more likely to remain loyal, even if a cheaper alternative appears.
6. Creating an Amazing Company Culture:
Building an amazing company culture can pay off in many ways. First, it is among the main factors that employees look for when searching for a new job. If you want to hire the best talent in your field but your company culture is tense, unpleasant, or doesn't promote a collaborative and respectful work environment, the best talent won't want to be there.
Second, since consumers today expect more transparency from the companies they support, being known for a great company culture can help attract more customers to your brand. In a competitive landscape, this type of differentiation can give your business the edge it needs.
As an entrepreneur, you have to wear many hats and keep an eye on the many moving parts of the business, from sales and marketing to accounting and budgeting.
Developing an area where you have a strong, well-defined competitive advantage can make your job as an entrepreneur a little easier by attracting more loyal customers, providing you with a clear objective to consider, maintaining your competitive advantage, and making your business decisions.
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