The functionality of competitive advantage allows organizations to develop features and applications for building unique position in the market. The application of competitive advantage act as a leverage for competitors of a business. The competitive advantage in an organization can be built with the association of increased value offerings for the target customers. Structuring the promotion strategy for communicating the features of the product offerings like improved quality and/or lower price, can effectively target the desired group of consumers. The reasons behind the phenomenon of brand loyalty and brand recognition is the application of strategic competitive advantages. The understanding of the conception of value proposition is important for the structuring of competitive advantage. Competitive advantages of organizations can be created through the structuring of value proposition, which comprises of the additional values based on the demand and preference of target group. The values perceived by the consumers can determine the effectiveness of competitive advantages for an organization. The preferences of consumer for specific product or service offerings can be improved by offering relevant value propositions. According to the study of Michael Porter, there are two ways by which organizations can develop competitive advantages, through the application of differentiation advantage and by incorporating cost advantages for the target customers.
The advantages of differentiation can be constructed by the incorporation of better service or product value with unique characteristics in comparison to the competitors. The cost advantage in an organization can be constructed by adopting the lower pricing strategy in comparison to the competitors’ offerings. The conditions included in competitive advantage enables the enhancement of productivity of organizations with decent margin in comparison to the rivals in market. The attributes of competitive advantages includes the elements such as customer service, intellectual property, quality offerings and improved distribution network. The benefits of competitive advantage stimulates higher values for organizations for depicting strength in the competitive market. Sustainable competitive advantages of organizations presents numerous challenges to the existent competitors in neutralizing advantages.
There are two forms of competitive advantages, differential advantage and comparative advantage. The process of incorporating advantages in the product and service offerings of an organization, which is considered superior in comparison to the competitors, reflects the conception of differential advantages. The key drivers of differential advantages are, superior group of personnel, patented processes and products, recognizable brand identity and advanced technological implication. The benefits of constructing competitive advantages for organizations are higher market shares and wide sales margins. The comparative advantage depicts the capabilities of organization in incorporating values in the product and service offerings, which effectively and efficiently responds to the competition in the market. The strategy of incorporating values can lead to the outcome of higher profit margins, thereby forms competitive advantages. In case of rational purchase, the consumers will prefer to have an affordable or value added product or service.
Two major factors that helps in creating competitive advantages for organizations are geographical locations and internal system. The conception of competitive advantage is not limited to offering lower cost and higher value of the product and/or service offerings. Offering same values in lower price can also be a strategy for creating competitive advantage. In case of international trade values, the opportunity costs of products reflects the comparative advantages. One of the examples of comparative advantage is Amazon, the online retailer is focused on constructing comparative advantage by creating unique values and offering products at discounted prices in comparison to the traditional retailer. The effectiveness of the organization’s strategy can be understood by the challenges created for traditional retailer like, convenience, lower price and availability of numerous options.
There are three ways of implementing competitive advantages, cost leadership, differential strategy and focus strategy. Cost leadership depicts the formulation of lower costs for the products and services in relation to the competitors. Selling similar products in less price in comparison with the existing competitors can lead to the construction of competitive advantage of organizations. The strategy of cost leadership creates price values for customers. Creating product offerings different from the competitors leads to the strategy of differential strategy. In accordance with the study of Michael Porter, the product offerings should be constructed in a manner that can respond the increasing competition in market. In the case of implementing differential strategy, organization launches innovative products that can be challenging for the competitors to neutralize. The incorporating of the strategy of differentiation can be costly and time consuming, as it requires investment and efforts in product development, critical thinking for design formation and marketing research for understanding the preferences and demand of target customers. Unique and innovative product and service values can lead to the willingness of paying more for the acquired offering. The strategic way of targeting a specific group of customers by not directing the focus towards everyone, depicts the conception of focus strategy. The focus strategy is usually adopted by smaller businesses and organizations offering niche products. Smaller businesses do not have the capability of sourcing required amount of resources for targeting mass population. Organizations selling niche products targets a specific group of customers for creating premiumness. In this way of implementing competitive advantage, businesses need to direct their focus on the understanding of consumers’ need and preferences. Acquiring valuable feedback and reviews on the offerings can play a significant role in organization. This strategy includes the incorporation of segmentation approach. The organizations undergo strategic segmentation strategy for dividing the population.
The facilitation of competitive advantage can only be executed by creating a balance between price and quality. The decision of selecting any one of the two areas of decision can limit the scope of success of organizations. The main factor influencing the construction of competitive advantage is the inclusion of innovation in the production process of the offerings, as it can enhance brand loyalty, stimulates brand identity and creates brand recognition in the organizations. One of the main driving force for constructing competitive advantage in organizations is value creation by improving the quality, pricing structure and innovativeness.
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