Introduction
There is a popular saying that life is a game, the same applies to businesses. Just like various teams have to compete in a game to win a prize, so will your business compete constantly to gain and maintain a share of the market. To do this effectively your business needs an edge over other business. this is edge is called your competitive advantage.
Competitive Advantage Meaning
Competitive advantage is that feature or aspect of your business that differentiates it from other businesses in your niche. It’s what makes customers think about you instead of our competition, it is your competitive edge.
Competitive Advantage is necessary for the survival and growth of your business. It guarantees your business market share and helps you serve your customers better.
How to recognize your competitive advantage
There are a few elements that must be understood if you want your business to stand out from the crowd. They are
- Competition: Understand your competition, and familiarize yourself with their value, processes, and systems. Like a game, you need to know the competitor’s strengths and weaknesses.
- Value proposition: How does your business provide value? What aspect of your products or services is most attractive and efficient?
- Target market: which audience is most receptive to your business offers?
Your business should serve a target market that is perfect for your value proposition. The value proposition should be such that your competitors can’t imitate it.
Types of competitive advantages
Michael Porter, a Harvard business school professor, identified three major types of competitive advantage in his book Porter’s Generic Strategies. These strategies can help your business whether product-based or service-based. They are.
Cost leadership: This strategy employs that your business has lower costs compared to the competition. This gives you the ability to offer your products and services at a lower price. Customers typically opt for the product and services with a lesser price
Differentiation strategy; This strategy implies that you develop unique products and services. Your business offering should have notable differences from other competition.
Focus strategy: This strategy entails that you meet a specific need of a particular audience. This strategy is good for small businesses that have limited marketing resources.
To create a sustainable, unique, and difficult-to-replicate value proposition. to achieve this, you can use the VRIO framework to form your competitive advantage.
Using the VRIO framework to craft your value proposition
VRIO is an acronym for Value, Rare, Imitability, Organization. The VIRO framework will help you identify the unique value proposition for your business
Value – Does your products or services provide actual value to customers?
Rarity – does your offer stand out from the crowd or is it differentiable from your competition
Imitability – how easy is it for your competition to replicate your business offering?
Organization – Does your business have the systems, structures, and processes to deliver and sustain the offering?
Benefits of a Competitive Advantage
- A Grip on your Market Share: having a competitive advantage gives your business an aura of exclusivity. What this means is that they can expect certain things from only your business.
- Helps to serve your customers better
- Improves your marketing efforts
- It makes it easier to scale your business
Real life Examples of competitive Advantages
| Business Name | Type of competitive advantage | Strategy |
| Hypo | Cost differentiation | Hypo did a hostile takeover in the Nigerian bleach market by introducing a cheaper substitute. In no time they were able to dethrone their dominant competitor and steal the market share for themselves. |
| Hero | Focus strategy | The lager beer company is one of the fastest growing in the country. The beer brand chose to niche down to the Igbo people, this has made it a home brand amongst the Igbo people. |
| Apple | Differentiation strategy | Apple has stood above its competition by driving innovation and delivering superior quality. |
Conclusion
Every business that seeks to thrive must have a competitive advantage. At wildfire we’ve been able to stand above the crowd by consistently delivering disruptive solutions. Like Jack Welch said “if you don’t have a competitive advantage don’t compete”
