Strategic Marketing Management

Business Strategy and Competitive Advantage : Overview

A business can gain a competitive advantage by providing superior value or lowering the relative costs.

The components for obtaining competitive advantage are bases of competitive advantage, the advantageous position, and the results. The bases of competitive advantage are enhanced resources, improved skills, and better controls. The advantageous position can be attained by providing superior value to the customers or by lowering costs. The results of competitive advantage are generally measured in terms of profitability or market share. The competitive position of a company can be measured using competitor-centered methods or customer-centered methods. Rather than depend too much on either of these methods, a business should make use of both, depending on the situation. After achieving a competitive advantage, a business must make efforts to sustain it. The company should develop advantages that cannot be easily imitated. Competitive advantage can be sustained in three major areas namely, size in the target market, accessibility, and the market entry barriers.

The strategy should define the mission statement, core competence, and the corporate objectives. The mission statement should define the purpose of the business and what business one is in. It should be different from the mission statement of the competitors and should also provide a competitive advantage. The core competence is the one thing that a company can do better than others. The competitive advantage of a company is built around one of its core competencies. Core competence is the root of competitive advantage. The process of obtaining core competence involves defining the needs of the customer, preparing a plan for the product, developing a prototype, manufacturing, distributing/selling and providing after-sales service. The corporate objectives act as a yardstick to measure the performance of a business. These objectives can be in terms of gaining market share, making profits, etc. A company can plan to expand its business either by introducing new products in existing markets or existing products in new markets or by diversifying. It is easier for a company to formulate a business strategy if the composition of a business is well defined. A company can be divided into business units based on the industry in which it operates. However, the business units work together to achieve the strategic vision of the company.

The strategic choices play a vital role in the performance of a business. The generic strategies formulated by Herbert and Deresky will help a business in making strategic choices. These generic strategies include the develop strategy, the stabilize strategy, the turnaround strategy, and the harvest strategy. The capabilities approach and the comparative advantage theory also help a business in making strategic choices.

Chapter 3 : Overview