To have a competitive advantage, you must create an edge over your competitors. In

the aggressive business world, especially in today’s economy, every advantage

counts to establish your business in the top of your industry. Gaining a competitive

advantage takes strategic planning and extensive research.

1. Analyze your target market and identify your competition. Your target market is “a specific group of consumers at which a company aims its products and services” (Entrepreneur). A target market is distinguished by socioeconomic, demographic, and common characteristics or needs that make them the best audience to focus on selling to. To uncover your target market, answer the following simple questions: What am I selling? Who will most likely buy or consume my product or service? Before you can crush your competition, you need to know who they are. Find out which businesses are going after your same target market. How do they differentiate themselves from other companies in the industry? Where are they located? To find this information, business directories can be used to search free company profiles. Information included in the company profiles are company overview, contact information, location, key facts, employees, and company payment rating.

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Learn from your competition and your customers. Don’t be afraid of your competition, but rather use them as a learning tool and assess their business model. Learn your competitors’ strengths and weaknesses – imitate their strengths, and use their weaknesses to your advantage. Use companies that specialize in business information, such as Cortera, to construct and analyze a competitive landscape of the target market. The business information you learn from your rivals will help you develop the competitive edge you need to surpass them in your industry. Intimate customer knowledge is equally important as competitor knowledge. Gaining in-depth insights about your customer portfolio will allow you to maximize revenue potential, increase customer retention, and boost prospective customers. You can use a mix of many tools and methods to measure consumer insight and both your position in the market and the positions of your competitors. Along with traditional company information resources, consider social media analysis tools that allow consumer insight mining on a large scale.

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Create an “Economic Moat”. Take advantage of barriers to entry into the market, using them to dissuade competitors from challenging your marketing share. In some cases, an established company’s ability to manipulate hurdles to enter and compete in its market becomes an effective tool against new competition, further entrenching the business and preserving its profit potential for the foreseeable future.

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Stay on the cutting edge. Once you’ve gained a competitive advantage, your work is far from complete. To be successful, you will need to continuously maintain your competitive advantage. After all, your competitors are not going to sit back and allow you to steal their market share. You can maintain your competitive advantage by predicting future trends in your industry, constantly researching and monitoring your competitors, and adapting to your customer’s wants and needs. Sometimes you may need to take chances to keep ahead of the pack and differentiate your business, but with big risk often comes big reward – Just remember to do your research before diving head first into new ideas.

5. 5Use Business Information Resources. The information revolution is here – take advantage of it! It creates a competitive advantage by providing companies with new ways to outperform their rivals. Knowledge is power, and business information companies provide just that. Reliable business information companies include Cortera, Hoovers, Manta, Portfolio.com, and Goliath.

Advantages of Business Strategy: 7

Keys to Competitive Advantage

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What are the advantages of business strategy? How can formulating a business strategy help for-profit organizations gain and maintain a competitive advantage? How can an enterprise succeed when so many seem to fail in the global economy of the 21st century? The key seems to be in a proactive strategy that is forward thinking even when the past was meager at best. Embraer Aeronautics learned the advantages of formulating a clear business strategy and how it could propel it to the top of their industry. Embraer Aeronautics of Brazil is one of the largest airplane manufacturers in the world, but was not always so. For 10 straight years the company struggled to make a profit, then a new CEO took over; quizzed all of its existing customers about what they wanted from Embraer; and designed and implemented a new strategy. From his efforts, he found that the advantage of defining and implementing a solid business strategy was that it gave his organization Embraer a competitive advantage in the airplane manufacturing industry.

Analyze Strengths and Weaknesses

Defining a solid business strategy begins by analyzing the strengths and weaknesses of the organization. In order to properly assess the qualities of a company, the management has to be brutally honest about its ability to compete. Every part of the enterprise must be scrutinized for its capacity to outperform the competition in its industry. 

Assess the Opportunities and the Threats

The second key to competitive advantage is to assess the opportunities and the threats. Opportunities can be defined as the possibilities of available for exploitation by the business. Threats are any obstacles that might hinder an organization from fulfilling its strategy. Michael Porter, an expert in organizational behavior, sites five common factors that influence or apply pressure to an enterprise; they include threats like new entrants into the corporation's chief industry; new laws or governmental regulations; and the strength of consumers and or suppliers. Having a keen understanding of opportunities and threats can help an organization formulate a targeted strategy that will lead to a competitive advantage.

Determine Core Values

A third key to formulate a winning business strategy is to determine your core values. What do you stand for? What is the ultimate message of your company? What are the key assumptions that your organization is built upon? Honesty? Integrity? Stellar customer service? Quality employees and staff members? A product beyond compare? Community service? Determining your core values will help you focus and design a business strategy that will give your organization a competitive advantage.

Define Your End State Goals

The fourth key to developing a successful business strategy is to define your end state goals. These are the main objectives of the organization. After analyzing strengths and weaknesses, assessing opportunities and threats, and determining core values, then management can proceed to put together its core strategy. Defining the main objectives will help the organization focus its energy on what it can do and push aside unrelated activities. What do you really want to accomplish? What are you equipped to do? What can your enterprise do better than anyone else? What need is your company uniquely positioned to satisfy? (Biehl). Defining your end state goals that are consistent with your core values will help you gain a competitive advantage.

Assess Related Risks

Another key to competitive advantage is to assess the risks related to the end state goals or main objectives. Business strategists Cornelius de Kluyver and John Pearce advise business leaders to balance strategic interests according to risk. Risk is the probability of success or failure. Usually, when the potential gain is substantial, then the risk is greater and vice versa. Top management must carefully weigh each action according to whether the desired result will be worth the effort or financial outlay. 

Implement the Strategy

A business strategy is only as good as its implementation. So, the sixth key to defining a winning business strategy is to make it happen. The major key to effective implementation is communication at all times and on all levels. In order to put the strategy into action, top management has to define metrics (small steps) and targets (timetables) that will guide the organization step by step to its end state goals or major objectives. Many organizations go through the struggle to define a new business strategy, but never follow through to the implementation stage. Putting the strategy into play will lead to a competitive advantage.

Evaluate the Business Strategy

The seventh key to a winning business strategy is to evaluate each stage and make adjustments. No strategy is flawless. Putting mechanisms in place to review and alter weaknesses in the plan will help refine the strategy and make the organization more effective. Astute evaluation and related adjustments will lead to competitive advantage.

Competitive Advantage

Author: Jim Riley  Last updated: Wednesday 24 October, 2012

The challenge for a marketing strategy is to find a way of achieving a sustainable competitive advantage over the other competing products and firms in a market.

A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices.Porter suggested four "generic" business strategies that could be adopted in order to gain competitive advantage. The strategies relate to the extent to which the scope of a business' activities are narrow versus broad and the extent to which a business seeks to differentiate its products.

The four strategies are summarised in the figure below:

The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments. 

By contrast, the differentiation focus and cost focus strategies are adopted in a narrow market or industry.

Cost leadership

With this strategy, the objective is to become the lowest-cost producer in the industry. The traditional method to achieve this objective is to produce on a large scale which enables the business to exploit economies of scale.

Why is cost leadership potentially so important? Many (perhaps all) market segments in the industry are supplied with the emphasis placed on minimising costs. If the achieved selling price can at least equal (or near) the average for the market, then the lowest-cost producer will (in theory) enjoy the best profits. This strategy is usually associated with large-scale businesses offering "standard" products with relatively little differentiation that are readily acceptable to the majority of customers. Occasionally, a low-cost leader will also discount its product to maximise sales, particularly if it has a significant cost advantage over the competition and, in doing so, it can further increase its market share.

A strategy of cost leadership requires close cooperation between all the functional areas of a business.  To be the lowest-cost producer, a firm is likely to achieve or use several of the following:

High levels of productivity High capacity utilisation Use of bargaining power to negotiate the lowest prices for production inputs Lean production methods (e.g. JIT) Effective use of technology in the production process Access to the most effective distribution channels

Cost focus

Here a business seeks a lower-cost advantage in just one or a small number of market segments. The product will be basic - perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumers. Such products are often called "me-too's".

Differentiation focus

In the differentiation focus strategy, a business aims to differentiate within just one or a small number of target market segments. The special customer needs of the segment mean that there are opportunities to provide products that are clearly different from competitors who may be targeting a broader group of customers. 

The important issue for any business adopting this strategy is to ensure that customers really do have different needs and wants - in other words that there is a valid basis for differentiation - and that existing competitor products are not meeting those needs and wants. 

Differentiation focus is the classic niche marketing strategy.  Many small businesses are able to establish themselves in a niche market segment using this strategy, achieving higher prices than un-differentiated products through specialist expertise or other ways to add value for customers.

There are many successful examples of differentiation focus.  A good one is Tyrrells Crisps which focused on the smaller hand-fried, premium segment of the crisps industry.

Differentiation leadership

With differentiation leadership, the business targets much larger markets and aims to achieve competitive advantage across the whole of an industry.

This strategy involves selecting one or more criteria used by buyers in a market - and then positioning the business uniquely to meet those criteria. This strategy is usually associated with charging apremium price for the product - often to reflect the higher production costs and extra value-added features provided for the consumer. 

Differentiation is about charging a premium price that more than covers the additional production costs, and about giving customers clear reasons to prefer the product over other, less differentiated products.

There are several ways in which this can be achieved, though it is not easy and it requires substantial and sustained marketing investment.  The methods include:

Superior product quality (features, benefits, durability, reliability) Branding (strong customer recognition & desire; brand loyalty) Industry-wide distribution across all major channels (i.e. the product or brand is an essential item to

be stocked by retailers) Consistent promotional support – often dominated by advertising, sponsorship etc

Great examples of a differentiation leadership include global brands like

Nike and Mercedes. These brands achieve significant economies of scale,

but they do not rely on a cost leadership strategy to compete.  Their

business and brands are built on persuading customers to become brand

loyal and paying a premium for their products.