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Army Institute of Business Administration (Aiba) Savar, Dhaka

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To avoid failure and create sustainable competitive advantage, a company must [1] develop a competitive advantage based on either lower costs, superior value, or a niche focus. [2] The key is understanding customer needs and developing a value proposition to meet them better than competitors. [3] A company should then design its business model, marketing, and operations around consistently delivering that value proposition.

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Army Institute of Business Administration (Aiba) Savar, Dhaka

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John Abruzzi
30 views3 pages
To avoid failure and create sustainable competitive advantage, a company must [1] develop a competitive advantage based on either lower costs, superior value, or a niche focus. [2] The key is understanding customer needs and developing a value proposition to meet them better than competitors. [3] A company should then design its business model, marketing, and operations around consistently delivering that value proposition.

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To avoid failure and create sustainable competitive advantage, a company must [1] develop a competitive advantage based on either lower costs, superior value, or a niche focus. [2] The key is understanding customer needs and developing a value proposition to meet them better than competitors. [3] A company should then design its business model, marketing, and operations around consistently delivering that value proposition.

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30 views3 pages

Army Institute of Business Administration (Aiba) Savar, Dhaka

Uploaded by

John Abruzzi
To avoid failure and create sustainable competitive advantage, a company must [1] develop a competitive advantage based on either lower costs, superior value, or a niche focus. [2] The key is understanding customer needs and developing a value proposition to meet them better than competitors. [3] A company should then design its business model, marketing, and operations around consistently delivering that value proposition.

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ARMY INSTITUTE OF BUSINESS ADMINISTRATION (AIBA)

SAVAR, DHAKA

July-December, 2020

Quiz: 02

Course name: Strategic Management


Course code: MGT 4802

Submitted by
Md. Sakib Hasan Khan Srijon
Id- B4170B016
Batch: BBA-4

Submitted to

Murshida Rahman
Lecturer
Army IBA, Savar Cantonment

Date of Submission: 6th November, 2020


Question: How can a company avoid its’ failure and create ways for sustaining competitive
advantage?

Answer: Today’s business environment is very competitive. It’s now a lot easier and cheaper to start
a business, particularly with technology enabling business to be conducted online and internationally
to win customers in foreign markets.

The explosion of online retailing is an example of this, and all this competition and activity makes it
difficult to stand out from the crowd. The challenge is to resist being another ‘me too’ business. The
way to avoid this is by developing a sustainable competitive advantage that differentiates you from
your competitors.

Sustainable competitive advantage is the key to business success. It is the force that enables a
business to have greater focus, more sales, better profit margins, and higher customer and staff
retention than competitors. It is the major driver of long-term business value and is what purchasers
will place the most value on when looking to acquire a business. Without a sustainable competitive
advantage, you risk being another ‘me too’ business that muddles along achieving less than
satisfactory results.

At its most basic level, there are three key types of sustainable competitive advantage.

1. Cost advantage: the business competes on price.


2. Value advantage: the business provides a differentiated offering that is perceived to be of
superior value.
3. Focus advantage: the business focuses on a specific market niche, with a tailored offering
designed specifically for that segment of the market.

Most small businesses don’t have the market share and buying power to effectively compete on price
and are not big enough to be all things to all customers in a market. Therefore, to successfully
compete, small businesses need to develop a sustainable competitive advantage that is based on
providing superior value to a specific niche.

There is another advantage that is often referred to and that is first mover advantage. First mover
advantage is where the first entrant in a new market obtains an advantage over other competitors that
enter the market later. However, while being a first mover may provide an initial advantage, in my
opinion, it is not sustainable unless it’s supported by one of the three types of advantages listed
above. Google and Facebook are good examples of this. Neither of these companies were the first
movers, yet both now dominate their respective markets.
Five steps to developing a sustainable competitive advantage

1. Understand the market and its segments. Look for those niches that aren’t well serviced by
competitors and can be profitably targeted and sold to.
2. Develop an understanding of what customers really want and establish a value proposition
that grabs their attention.
3. Work out the key things that you need to do really well to support and deliver the value
proposition. For example, service levels, quality, branding, pricing, et cetera.
4. Understand what your strengths and core competencies are and how you can use these in
innovative ways to provide value to your chosen market.
5. Design your business model to support and deliver the value proposition.

At the end of this process, you will have a very clearly defined statement of:

 Who you will be selling to (customers and market segments);


 Why they will buy from you and not your competitors (the value proposition); and
 The key things you need to excel at to be able to consistently deliver your value proposition.

Once you’ve found your sustainable competitive advantage, you should use it in many ways, to the
business’ benefit. Using your sustainable competitive advantage in your sales and marketing makes it
easier for your customers to understand why they should part with their dollars and give them to you
rather than your competitors. This, in turn, makes it easier for your staff to sell your products or
services and know their promises will be delivered. They know the whole business is focused on
making sure the sustainable competitive advantage is protected and capitalized upon. Your
sustainable competitive advantage can guide your decision-making and provide you with direction
and a sharp focus.

If a new opportunity for the business doesn’t support your sustainable competitive advantage, then
you should question whether to pursue that opportunity.

Is short-term growth that might erode your sustainable competitive advantage, more important than
building a long-term position of strength and stability? This longer-term view and effective use of a
sustainable competitive advantage can support a higher return on capital invested in the business,
even in the face of stiff competition.

This position builds value in a business and can add a premium to the sale price. That’s an advantage
every business owner wants.

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