I recommend that entrepreneurs, business owners, and managers take time to analyze your company’s competitive status. This will help you understand and emphasize your Unique Selling Proposition.
There is no single formula for conducting a competitive analysis; it’s mostly just good business sense. You want to stay aware of what your competition is doing and measure how your business stacks up against it. Some questions to consider are:
- Do you compete effectively in terms of the quality of your product or service?
- Are your prices competitive? Do customers who compare costs come back to you?
- Are you viewed as the vendor of choice? Why do people seek you out?
- Are you growing, losing ground, or just holding on to your market share?
After this analysis, if you find that your competitive position needs some improvement, I invite you to continue reading.
Your competitive strategy consists of the approaches and initiatives you take to attract clients, withstand competitive pressures, and strengthen your market position. According to authors Arthur Thompson and A.J. Strickland in Strategic Management: Concepts and Cases, there are five competitive strategies to consider:
- A low-cost leader strategy: striving to be the overall low-cost provider of a product or service that appeals to a broad range of customers (examples are Sam’s Club and Southwest Airlines).
- A broad differentiation strategy: seeking to differentiate the company’s product offerings from rivals in ways that appeal to a broad range of buyers [examples are Nordstrom (known for customer service policies and personnel) and Whole Foods (emphasis on health foods and organic groceries)].
- A best-cost provider strategy: giving customers more value for the money by emphasizing both low cost and upscale difference, the goal being to keep costs and prices lower than those of other providers of comparable quality and features (examples are the Honda and Toyota car companies with customer satisfaction ratings that rival those of much more expensive cars).
- A focused, or market-niche, strategy based on lower cost: concentrating on a narrow buyer segment and outcompeting rivals on the basis of lower cost (The Gap clothing store is a good example).
- A focused, or market-niche, strategy based on differentiation: offering niche members a product or service customized to their tastes and requirements [examples are Rolls-Royce (sells limited number of high-end, custom-built cars) and men’s big and tall shops (sell mainstream clothing styles to a limited market with specific requirements)].
Staying competitive implies being aware of trends and reacting to changes faster than your competitors. Understanding the driving forces in your industry – growth rates, shifts in buyer demographics, product and marketing innovations, the entry or exit of other competitors, changes in cost or efficiency – will help to make you a top competitor.
I strongly encourage you to analyze your competitive status and then review the five competitive strategies to determine which will be most beneficial for your company and your business goals.