Creating And Sustaining Competitive Advantage
There are many ways to compete, yet most companies tend to focus their strategies on only a few of the many ways to gain a competitive advantage. This limits their ability to create and sustain true competitive advantages.
In order to have a lasting competitive advantage, it is important to develop a competitive strategy that includes a wide spectrum of techniques to gain advantage. You can compete on price, but you can also compete on time, reputation, values, technology, image, experience, service, design, innovation, quality, information, knowledge, consultative value, loyalty, and process.
The most popular technique is to focus on price. Having the lowest price has always provided a great advantage, but having the lowest price also means low margins, which means you need high volume to make it a profitable strategy. I find it interesting, and somewhat amusing, to see the large number of competitors selling the same thing, all claiming to have the lowest price, yet none of them charge the same price. Obviously, someone is lying. The Internet makes price-based competition even more difficult because it is so easy to compare prices and find the true lowest price.
When you think of price-based competition, you might think of JetBlue Airlines, Wal-Mart, Dell Computers, Amazon.com, or you might even think of anything made in China. Yet, if you look closer, you will see that companies that are great at price-based competition are using more than one competitive strategy.
For example, JetBlue has made a nice profit while all the other major airlines have had huge losses. In the second quarter ending June 30, JetBlue posted 19% operating margins, and the stock has surged 156%, to $46, since the company went public in April of 2002. Compare that with United, Delta or America, who also offer low fares, and you will quickly see that something else must be going on.
Is JetBlue’s success because they have the lowest price? No. They had a low price, but the also have lowered their operating costs by standardizing on one type of jet, dramatically lowering training and maintenance costs. They use technology that enables over 700 reservation agents to work from their homes in Salt Lake City, saving both time and money, and 72% of ticket sales are booked through JetBlue’s own Web site, saving agent commissions and other travel agent fees.
In addition to low fares, they provide comfortable seats and movies that add value and differentiate them from Southwest Airlines and other discounter airlines. They continue to innovate: they were the first airline to allow pilots to carry laptops that automatically update flight manuals.
Wal-Mart competes on price, but they also compete on time and convenience because they offer so many products customers don’t have to drive to multiple stores to get what they need. They also compete on location and reputation.
Dell’s buy-direct sales method, coupled with its built-to-order system, has allowed it to compete not only on price, but also on loyalty, time, reputation, customer experience, service, quality and process.
Amazon.com’s core competitive strategy has been to focus on the customer experience; however, they also compete on time, sending orders quickly; price; convenience; ability to shop from anywhere, anytime; loyalty, they keep customers coming back for more; reputation, and innovation.
As a nation, it’s hard to compete with China on price and win. China is best known for its low-cost manufacturing, thanks to low wages; however, its manufacturers are starting to focus on quality as a means of increasing their competitive advantage.
The best never focus their competitive strategy on price alone. They combine multiple competitive strategies to create a lasting advantage and continue to innovate as they use technology to raise the bar with each method.
Daniel Burrus, one of the world's leading technology forecasters, business strategists, and author of six books
Copyright 2003 Author retains copyright. All Rights Reserved.
