No matter what size your business is, or in what industry or sector your business sits, you need to establish a competitive strategy, particularly if your objective is to penetrate competitive markets and succeed.
Creating a strategic plan
One of the most challenging issues for businesses is the desire to try and do everything at once. This is just not possible, so it’s critical to focus on the most important short-term and long-term objectives of your company – and ensure you have a strategic plan in place to meet those objectives.
Michael Porter, the creator of the Competitive Advantage Model, determined a company should adopt a strategy that is intended to achieve some form of competitive advantage for the company’s sustainability.
Porter believed there are three generic strategies for competitive advantage: cost leadership, differentiation and focus.
Regardless of your business size or industry, you need to establish a competitive strategy to achieve the advantage or edge over your competitors and not aim to be everything to everyone.
Defining your competitive advantage
You can apply some valuable lessons from Porter to your business.
For example, if you are a Cost Leadership organisation, your resources will need to be cheaper and your operations more streamlined to cope with high volume production. Your advertising will need to be fairly intense to emphasise ‘unbeatable prices’ or ‘discounts’.
Alternatively, if you have a focused strategy, your organisation will be specialised and superior with a specific niche, often requiring more expensive resources and focused marketing.
Your organisation must continue to develop its products, markets and manufacturing or operational methods, for it to be sustainable.
This calls for you to make strategic decisions around product, market, manufacturing and service development.
Once you understand your company’s competitive advantage and product development strategy, you can start implementing the necessary processes to achieve your objectives. Every contributor to the business must be invested in achieving these goals.
Essentially, objective-setting should relate to key factors for business success, such as profitability, market share, growth, cash flow, customer satisfaction or quality of the firm’s products.
Your business objectives require specific unit objectives, such as increasing your number of customers by 10% or reducing the length of time in producing the product or delivering the service.
Trade-offs between objectives may occur, but once you have decided on the most important or primary objectives, everything else will follow.