KCard : Competitive advantage
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Competitive advantage
Having competitive advantage is the fact of having a
clearly noticeable advantage over competitors for a long enough period of
time. It must be measurable by the clients and resist long enough to
reproduction by competitors. Michael PORTER identifies two major kinds of
competitive advantages, costs leadership and differentiation. This translates
into the common saying which goes: either you do the same as your competitors
at a lower price in which case you should open your shop just opposite theirs
and profit from their proximity either you do different things at different
prices in which case you'll need to promote yourself and don't need to compare
to others. Cost leadership
This is the first of the two competitive advantages.
Cost leadership means that you provide a product which is perceived identical
to that of your competitors but at a noticeably lower cost. This generally requires having an organisation focused
on process improvement, performance controls and measures, specialised employees,
incentives based on productivity, sustained investment in production
facilities, design for simple production, strongly structured and optimised
organisation, ... The means to achieving cost reduction (in order to
provide lower prices to customers) are very diverse, ranging for example from
business process improvement to pressuring providers. In some cases, the
research of cost reduction can lead to strategies such as externalisation and
offshore production facilities because local production (in occidental
countries) can be more expensive. Differentiation
Differentiation is the strategy to provide a product
with sufficient distinctions compared to your competitors so that clients
will either not compare or either accept a higher price (if this is the case). Usually, this strategy requires having polyvalent employees,
creativity and intuition friendly environments, motivational incentives, important
commercial capacities, leveraging technologies, reputation for quality and
technological leadership, strong R&D, ... This strategy is difficult to achieve because it requires
not only finding differentiating characteristics but also they must resist to
copying, as otherwise competitors will soon reproduce them thus annihilating
invested R&D efforts. |
Ideas to develop
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