How to identify a competitive advantage
5-minute read
Identifying your competitive advantages is a crucial step in strategic planning. They are necessary for the growth of the company, so they must be extremely solid.
A competitive advantage must allow a company to distinguish itself from others in its field of business, but it must also be difficult to replicate quickly.
That's what will give the company a head start. A competitor needs to invest a lot of time and money to get things done the same way. Something as simple as offering a quality product is not enough to be considered a competitive advantage.
Three examples of a competitive advantage
1. Technologies
Technologies used by the company to produce a product, to manage customer relations or to improve internal relationships can be considered a competitive advantage.
It's obvious that technology is always evolving rapidly. But a company that is first to do something will be well ahead of others trying to do the same thing.
While world-renowned companies such as Amazon, Airbnb and Uber are banking on technologies, there are also local examples. Lufa Farms, for example, have exceptional technologies for managing their customer relations in terms of order taking and management. They always know where an order is.
2. Brand awareness
As a competitive advantage, you can also rely on brand awareness. Some products are so well-known that we refer to them by using a brand name. For example, an electronic tablet is often referred to as an iPad. That says a lot about the popularity that Apple has managed to create for its product!
It may not be realistic for most companies to achieve this level of popularity, but a good marketing plan combined with prioritizing quality and reliability enables many businesses to stand out from the crowd.
3. Customer service
Distinctive customer service can also be a competitive advantage.
For example, PMCtire, a business in Sherbrooke, Quebec, sells tires on its Web site and has experts on the line who give advice. The order is shipped very quickly.. This company is conquering the Canadian market with its concept that customer service supported by efficient technologies is extremely powerful.
How to create a punchy competitive advantage
While companies will generally rely on a few competitive advantages along the value chain, sometimes only one is enough to stand out. Think of a company that holds the only licence in North America to sell a type of specialized equipment.
An ongoing quest
While a competitive advantage must be difficult for the competition to replicate, this does not mean that it is impossible to achieve. Thus, companies must continually work to strengthen their competitive advantages.
For example, companies must always keep a close eye on the market and adapt in order to continue to meet demand. A competitive advantage may have to be dropped at some point. For example, let's say a company offers exceptional product quality, but customers are no longer willing to pay the price for that quality. It'll have to bet on something else.
Survey customers and industry specialists
To analyze a company's competitive advantages, you must look at various data, and survey clients and industry specialists. This exercise requires that the company’s leader be open-minded. They must be ready to hear the good news and the bad news.
However, many executives underestimate the importance of continually thinking about the company’s competitive advantages and ways to strengthen them.
You always have to ask whether the company will be able to keep or increase its market share because, if it can’t, it will fall into decline.
Executives of established companies often tend not to question their ways because their business is doing well and they don’t see the point of changing. However, the market is changing, and clients are changing as well. You always have to ask whether the company will be able to keep or increase its market share because, if it can’t, it will fall into decline.
A matter of survival
Identifying a company's competitive advantages is therefore a crucial step in the development of a strategic plan. That's what will make it possible to define what you can rely on fairly easily, what you need to improve and what you need to put in place to achieve your goals.
This is ultimately what represents the value of the company. If the executive decides to sell it, its strong competitive advantages will help add value. Competitive advantages allow the company to stand out and last.
Create an action plan to achieve your goals
Find out how to set measurable goals for your company, create an action plan and ensure that you have all you need to succeed with our free digital guide: The Foundations of Strategic Planning.