The company should try is to create a sustainable competitive advantage (SCA) in the market in which it competes. An SCA is a perceived difference that leads customers to prefer one offering to another. Why do people prefer Coca-Cola to Pepsi?
The difference may be based on a superior product such as Nokia or better service support such as Toyota or lower price such as Game.
When you can create an SCA, it creates a higher market share and develops a barrier for entry for new competitors and the ability to defend attacks from existing ones.
For a sustainable competitive advantage there are four criteria's:
1) Customer benefits - the offering must be seen as something important to them
2) Unique - cannot be obtainable from any other firm
3) Sustainable - Difficult to copy - patents, - economies of scale - the more you produce the cheaper it becomes
4) Profitable - to offer a product or service with a price, cost and volume structure that makes it profitable - customers must be willing to pay for your profit.
Searching for differential advantage begins with understanding what the customer values. The customer value is the perceived total satisfaction from the offering minus the price paid, minus the operating costs incurred over the life of the product/service. It is a mixture of economic, rational and subjective image factors.
The factors that increase value and therefore a sustainable competitive advantage are product, service, personal, image and cost.
Product Drivers
The physical product can be differentiated by design to make it appear better or cheaper
The questions that you need to ask yourself
How is my?.....
* Performance - speed, accuracy
* Features - software, hardware
* Benefits - safety, why do you need it?
* Reliability - the likelihood of a breakdown
* Conformance - the level of expectation
* Durability - the life span of the product
* Operating costs - energy consumption, raw materials (importing - exchange rate)
* Serviceability - the ease of servicing the product
* Aesthetics - products look and feel
Service Drivers
Services that augment the product have become increasingly important.
How is my?
* Credit and finance - credit terms, loans to buy the product
* Ordering facility - the ease of ordering
* Delivery - spiv align="left"> Guarantees - eliminate perceived purchase risk
* Operational support - Training and consulting - additional help and support
* After-sales service - backup support
* Guarantees - eliminate perceived purchase risk
* Operational support - reduce customer costs
Personal Drivers
The companies personnel have become recognized as a source of SCA or differential advantage.
Key attributes that add value
* Professional
* Courteous
* Trustworthy
* Reliable
* Positive
* Responsive
* Initiative takers
* Communicative
Image Drivers
A strong image gives a customer a feeling of confidence and permits the firm to charge a higher price
* Socio-psychological confidence - makes a social statement - Nike
* Economical confidence - the image of reliability, performance and value
* Advertising and related media - articulate, clarify and reinforce brand image
Cost Drivers
Lowering costs without reducing Customer Satisfaction is a crucial task
The following cost drivers are the most important
* Economies of scale - large volumes reduce unit costs
* Experience - learning cuts cost over time
* Capacity utilization - operating at maximum capacity
* Inter-relationships - sharing cost in R&D
* Integration - vertical integration (acquisitions)
* Timing - being first
* Location - relative costs on labour and transport
* Institutional factors - taxation, trade unions practices
* Marketing strategy - adding features and services adds value
