How to create competitive advantages for a business - solving this issue is very important for owners and managers. Especially in our time, when markets are falling and competition is only intensifying. What should businesses do in these conditions to survive? A hot topic for a large number of companies.

When developing a strategy, we often observe the following: there is a description and digitization of goals, but the owners do not know how their business compares favorably with the business of competitors.

Why are we discussing this topic now? Everyone understands that consumer demand is falling. Accordingly, companies have to fight for shares of a pie that is getting smaller and smaller. Those businesses that were able to “pump up their muscles” in more favorable periods are now aiming to increase their market share. Those companies that have advantages over competitors will win. What are these benefits? Let's immediately make it clear that acting in the spirit of “cheaper, even cheaper” in the current circumstances is simply dangerous. Attempts to stand out from competitors through lower prices are practically a route to nowhere. But if a company can expand its customer base by having unique characteristics, if a company can provide additional value to its customers, that is a completely different matter. This is exactly what we call competitive advantages of business.

So, first let's define the concept. 

Competitive advantage — a certain strong business competency that helps to most effectively attract and retain customers and stand out from competitors. It is good if this competence can be maintained over the long term.

Now let's move on to discuss how to develop competitive advantages.

What does a competitive advantage consist of? Let's make an analogy, for example, with an apple or other fruit. We know that different apples will differ in appearance, color, taste, etc. Why? The first thing that affects the fruit is its variety, that is, its genetic characteristics. The second thing you can notice is that the characteristics of apples, even if they are the same variety, are affected by weather, soil conditions, etc. Finally, it is important who produced these fruits. 

Similarly, companies can build their competitive advantages at three levels:

• the first is “core (CORE)”, 
• the second is “pulp (PULP)”,
• the third is “shell (SHELL)”.

CORE 

This is where the format of the business, its essence, is laid down. This competitive advantage can greatly strengthen the company's position, although it is not easy to transfer when it is necessary to diversify the business. Here we answer the question of what exactly makes this business unique for key clients. At the first level, the following advantages are highlighted: product design, its unique characteristics, price range, technology for creating the product, its production and further maintenance.

PULP

At this level, we use the benefits to support and strengthen CORE. It is already easier to transfer them to new directions during diversification. However, such competitive advantages alone are not enough; they are a risk for business. In this group we will designate the following advantages: efficiency of internal activities, brand strength, availability of financial resources, interaction with clients and suppliers, know-how.

SHELL

The competitive advantages of this level are interconnected with the first and second. Here the emphasis is on human resources. And let us highlight two main directions: personalities and ideology.

Let's look at each of these elements.

If a business has 1-2 competitive advantages at the first level (CORE), this is already a big plus. Let's look at some of them:

If the product has unique properties, it turns out that competitors cannot offer the same products. How to create this advantage? For example, the company was able to develop and implement some innovative idea into production. Or the product was endowed with some property that rivals did not attach importance to. Of course, the important thing here is that for a certain group of customers this advantage matters. Moreover, the group, firstly, must be large enough to provide the business with access to a new level of profitability. And secondly, customers must be willing to pay more for the uniqueness of the product. The task is not easy, but such competitive advantages are difficult to replicate.

Undoubtedly, price is always an advantage for clients. If the quality of goods or services is comparable, then this is a strong argument in favor of your company. But in reality there are very few markets where the only thing that matters to the consumer is price. In addition, the price for the buyer is not just numbers on a price tag. These are also conditions for rent, installment plans, leasing, the opportunity to reduce maintenance costs, get a good guarantee for the product, which will reduce post-sale risks, etc.

Design product can be a win for the company, and this is explained simply: most buyers, as a rule, really do not like to study technical nuances. Therefore, they make a choice based on emotional criteria. These include design (the only problem is that it is easily copied), as well as usability, that is, ease of use. By the way, usability is often used as a competitive advantage in IT. They show interest in him in other areas as well.

Technology for creating goods/services helps businesses use their resources more efficiently. Due to what? There are several components here, including: a thorough study of the needs of your “target”, attracting a strong team of marketers, reducing product development time, quick launch into production, etc. All this forms an integral structure, which is difficult to copy by competitors.

Production technology can become a competitive advantage if you have the know-how, the necessary equipment, as well as a systematic approach to production management. All this will allow the company to exercise control over the quality of products, while simultaneously reducing the costs of producing the product. Moreover, this is how the unique properties of the product are created.

Service technology will become a competitive advantage if the customer is so satisfied with the company’s service that he is either ready to buy more expensive products or contacts the same company to make his next purchase. There are many ways to improve service quality. The most important thing is that the investment pays off, that is, it is important for the company to ensure that satisfied customers bring profit.

Our next level is PULP.

What's happened brand? Here we are talking about certain obligations to the client that the company has undertaken. When can a brand be considered a competitive advantage? If the client chooses this particular company, guided by this factor.

Access to finance allows a company to stand out from competitors if it is able to attract serious finance at a relatively low cost. What will it give? Obviously, more dynamic development, active introduction of new products to the market, etc.

Access to suppliers - approximately the same situation as with finances. Alternatively, such a competitive advantage can be created by acquiring a supplier company or creating your own company that will deal with supplies.

Access to clients becomes a serious competitive advantage for the company if there is a monopoly on the client (for example, a government order). This is the most striking manifestation of this possibility. There are also similar examples among small and medium-sized businesses. Let's say this is a cafe in the airport waiting area or a gas station located at a great distance from other stations. But, as we understand, this advantage over competitors can be quickly lost. And this is a risk if you only bet on it.

Internal efficiency - something that allows the company to easily overtake its competitors. Such a business has a quick response to changes, the company has built efficient logistics, and the level of service is at a fairly high level. There are many ways to increase the level of internal efficiency. Which direction to take will be largely determined by the stage of the life cycle that the company has reached.

Know-how - This is an opportunity to seriously break away from competitors. But it is important to remember about patent protection.

And now we come to the SHELL level - persons and ideology.

In this case, we are not talking about the staff as a whole, but about individual strong individuals. We know many examples where such people on their shoulders pull a business to very high positions. If such a person leaves the company, this is fraught with serious problems for the business. That is why people’s personal qualities need to be transformed into ideology, using it as the basis for creating a strong corporate culture. The task is difficult, but the result is worth it.

So, let's draw the line. How can a business create competitive advantages? We recommend the following step-by-step plan:

1. We choose the advantages that are most suitable for the company (it is necessary to focus on the “core”, or CORE, - these advantages are the strongest).
2. We evaluate the uniqueness of the selected competitive advantages and predict how long they can remain unique.
3. We calculate how much time and other resources it will take to create these advantages.
4. We select the most promising competitive advantages based on the previous analysis.
5. We determine what steps will need to be taken for their further development.