Business success: It all starts and ends with competitive advantage
12 Oct 2015 - {{hitsCtrl.values.hits}}
A few activities in the life of a business are as vital—or as overlooked—as that of developing competitive advantage for success. Too often, entrepreneurs brimming with optimism and enthusiasm launch businesses destined for failure because their founders never stop to define a workable strategy that sets them apart from their competition.
As already noted in the previous weeks’ articles, you should avoid the frontal attack at all costs in favour of an indirect approach, which can include any of the non-direct forms of attack — envelopment, bypass or guerrilla.
The entire purpose of the indirect approach is to circumvent the strong points of resistance and concentrate in the markets of opportunity with a competitive advantage built around product, price, promotion and distribution. This approach is especially appropriate for smaller organisations.
One of the classic examples of indirect approach is Amazon.com, which has become a legend in its own time by using the Internet and a vast selection of discounted and used book titles as an indirect approach to outflank most other reputed booksellers. For expansion, Amazon moved into a vast collection of products to envelop many segments of the online market.
Amazon experience teaches us to follow-up by expanding into additional market niches with the appropriate products so you can envelop the entire market category providing your firm has the resources to sustain the effort.
Reasons
There are three central reasons for developing alternative or multiple objectives:
First, business plans generally call for fulfilling several long- and short-term goals. Therefore, a wide range of objectives are required with a variety of timeframes.
Second, alternative objectives permit enough flexibility to exploit opportunities as they arise. By designing a number of objectives, any of which can be used depending on the circumstances, you hold options for achieving one objective when others fail.
Third and most important alternative objectives keep your competitors in a predicament — unable to detect your real intentions. By displaying a number of possible threats, you force a competing manager to spread his resources and divert his attention to match your actions.
To use alternative objectives, follow these guidelines: (1). Consider such areas as customer service, improved delivery time, extended warranties, sales terms, after-sales support, packaging and management training as sources of alternative objectives. (2). Identify alternative niches in the initial stages of market entry to cause your competitors to become distracted from your real intentions. (3). Exploit your competitors’ confusion by concentrating your efforts on the weak spots that represent opportunities.
Concentration
The term - concentration - means focusing your strengths against the weaknesses of your competitor. Concentration has two uses in strategy terms: first, it means directing your full attention toward a market or customer group and fulfilling its specific needs and wants. In modern practice, concentration applies to target marketing, segmentation and niche marketing. Second, as applied to strategy, concentration means focusing your strengths against the weaknesses of your competitor.
How do you determine the competitor’s weaknesses? Devote enough time to conducting a competitive analysis. By detecting the strength-weakness relationship, you can then isolate the areas of competitive weakness and thereby determine where to apply your strength.
To concentrate in a market, use as many of the following techniques as appropriate to your company’s situation:
(1). As with the indirect approach, identify your competitor’s weaknesses and your company’s strengths. (2). Concentrate on a market segment that you have determined represents growth and, in turn, could help launch you into additional market segments. (3). Introduce a differentiated product (or product modification) not already developed by the existing competitors. (4). Seek multilevel distribution, such as private labelling your product for existing suppliers. Concurrent with that action, establish your own brand, which means, if one strategy falters, the alternative strategy often wins.
Unbalancing competition
This strategy’s ultimate purpose: the reduction of resistance. Victory in many competitive situations is not necessarily due to your brilliance, but to the mistakes of the competitor. If brilliance plays a role at all, it is in your deliberate efforts to develop situations that unbalance your competition.
Those efforts, in turn, produce psychological and physical unbalancing effects on the opposing manager by means of speed, indirect approach, concentration and alternative objectives.
You might try an unbalancing action, for example, by announcing a new product that could make the competitor’s product line obsolete. Even a press release about a yet-to-be introduced service can ‘make them sweat’ and create panic and cause mistakes. This unbalancing is practiced continuously in day-to-day activities that range from the threat of legal action to the effects of joining forces with another rival.
Application
To unbalance competition, use these guidelines: (1). Identify those unique areas of your operation where your competitor is unable or unwilling to respond to your actions. (2). Make a conscious effort to create an unbalancing effect through surprise announcements, for example, of a new computerized ordering procedure, just-in-time delivery, or technical on-site assistance. The unbalancing effect will have the greatest impact to the extent that you are able to maintain secrecy until the last possible moment. (3). Utilize new technology to unbalance competitors and make them rush to catch up. Investigate the various technologies, such as interactive video systems and the pervasive uses of social networks on the Internet to enhance communications.
Conclusion
Let us sum up in point form what we reviewed. First, while the tools of business (product development, marketing, distribution, financing) are physical acts, they are directed by a mental process. Meaning - pay close attention to your customers, competitors, industry and environmental trends. You will thereby be in an exceptional position to gain the upper hand against competitors, as you satisfy the needs of customers.
Second, the tougher you make your marketing practices, the more your competitors will consolidate against you. Result: You will harden the resistance you are trying to overcome. Even if you succeed in winning the market, you will have fewer resources with which to profit from the victory. Therefore, establish long-term bonding relationships with customers and suppliers, as you work together for the profitable growth of your markets.
Third, the more intent you are on securing a market entirely on your own terms, the stiffer the obstacles you will raise in your path. And the more cause competitors will have to try to reverse what you have achieved. Therefore, don’t intentionally seek direct competitor confrontations. Doing so will exhaust resources and divert your attention from your customers’ needs and problems. Instead,
use the indirect approach.
Fourth, when you are trying to dislodge your competitor from a strong market position, leave that competitor a quick way to exit the market. Do so by increasing the gap between you and your competitor through product differentiation and value-added services.
Opportunities
The five strategy applications: speed, indirect approach, concentration, alternative objectives and unbalancing the competition, characterize the formation of competitive strategies and serve as the underpinnings for creating opportunities.
In all marketing activities, use speed to create surprise, which in turn will cause confusion among your competitors. Then use alternative objectives to further reinforce the dilemma in your competitor’s mind about your intentions.
(Lionel Wijesiri, a corporate director with over 25 years’ senior managerial experience, can be contacted at [email protected])
