Take this challenge:

What will make clients prefer us?

By Dr. Sharon Gotteiner

Can you say in one brief sentence, what makes your offering more attractive to customers than the competition? If it takes you too long, take on the following challenge.

Following are some preliminary questions for understanding our starting point:

• Are you just another company offering the same type of products and services?
• Are you relying on the overall demand for such products and services, and advertising to keep working for you?
• “Actually, there are no companies like ours, and there is no real competition we need to deal with.” – Is this what you’re saying?

If you answered “Yes” for any one of the above questions, or chose not to answer 😉 then your line of business deserves deeper attention. This challenge aims at leading you to consider both your present competitive advantage as well as your future competitive position. For the present, your competitive advantage must be clear. For the future, your competitive position must be protected. Let’s drill down.

There are countless ways of creating competitive advantages for companies. Here are ten examples of possible sources of competitive advantages, ordered by their levels of strength as I personally see it:

1. Access to unique resources or technologies
2. Brand awareness
3. The company’s management team – all levels
4. Distribution and logistics
5. Cost structure and price
6. Quality or uniqueness of products or services
7. Quality of delivery
8. Levels of customer experience, service, or support
9. Range of products
10. Payment terms

The logic behind the order of these sources of competitive advantages depends on the specific industry or business. More important is whether you see the source of your own competitive advantage on this list, or know what it is even if it’s not listed. Further food for thought could is:

Can you strengthen your competitive advantage based on any of these sources?

Give it a decent thought!

The next aspect to consider is ways to sustain your competitive position. It should be protected because it is always exposed to the forces originated by your competition, customers, suppliers, and substitute products (Porter, 2008). Other forces may be originated by the workforce (unions), lenders (credit control), and regulation. Such forces should be analyzed in order to consider the ways of shaping your competitive advantage and protecting it.

The basic assumption while protecting your competitive advantage is that different firms in your industry have different resources and capabilities (aka resource heterogeneity). As such, your options for protecting it lie within your capability of creating “isolating mechanisms” that make your way of doing business more difficult to imitate (Peterhaf, 1993). Here are several paths for you for you to consider, to create such isolating mechanisms:

• Making it more difficult for others to access the resources you have (aka imperfect mobility). Examples are patents, trademarks, expensive equipment that smaller businesses can’t afford, and a really great management team (compensation mechanisms are used to reduce the mobility of this resource).
• Making it more difficult for others to imitate your way of doing business (aka ex-post limits). That can be achieved by maintaining the confidentiality of both commercial and operational know-how. Examples are your ways of maintaining a lower cost structure, your pricing policies, plans for the future, asymmetric information, and your unique organizational culture.
• Taking advantage of the limited room for competition (aka ex-ante limits). Examples are exclusivity contracts and prime locations.
• Making it more difficult for others to introduce substitute solutions. One way of doing this is acquiring technologies that may enable just that. In extreme cases, this may bring a company closer to a monopolistic position. Please make sure to give such move careful consideration.

Can you think of any course of action that will fit into any one of these paths?

Do you know any manager who would like to take on this challenge with you? 

Good luck!

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