A competitive advantage consists of a special capability, identified by an enterprise as giving it a winning position over its competitors. It is a capability which cannot be easily copied or emulated by competitors. It may be a cost/price advantage, special technical or processing capability, design leadership, response time, service support, special production runs or a combination of these capabilities.
A Sustainable Competitive Advantage is identified by comparison of an enterprise with its strengths, weaknesses and the competitive position of each of its major competitors. If an identified advantage can be copied, or can be easily emulated by a competitor, then it is not sustainable.
Firms may survive without identifying and achieving competitive advantages in suitable market niches.
However, research has shown that consistent performance tends to correlate with firms that have at least one defined competitive advantage and have identified market niches based on these strengths.
SCA's and strategic fit
The key to strategic management is to capitalise on enterprise strengths, and overcome relevant weaknesses, in order to take advantage of marketplace opportunities and mitigate the impact of potential threats.
A SWOT analysis and SWOT Matrix provide the raw information for the development of appropriate strategies based on this approach
The objective is to find the best strategic fit for the enterprise in relation to the present external (market place) environment and the anticipated or evolving environment.
Identifiable sustainable competitive advantages are therefore the basis of strategic fit.
SME's and niche markets
SME's do not usually have the resources to compete effectively against larger enterprises or against well-entrenched competitors or across large geographic markets.
However, they may be able to identify an unfullfilled need and focus their efforts and resources on fullfilling that need more effectively than any other entity. This is the essence of 'niching', that is, establishing a dominant position, or pseudo-monopoly, in a definable, sustainable and profitable segment of the market.
Small businesses must have one or more specific advantages over a larger competitor in an identifiable market niche. These advantages may include:
- ability to fulfil customer orders on short notice
- supply of relatively small volumes of special products
- a competitive price; and
- provision of excellent service to customers
Having identified competitive advantages, market research may be necessary to segment and identify market niches.
How to identify your SCA
Determining the Sustainable Competitive Advantage (SCA) for any organisation requires an understanding of the customer's needs and preferences.
A competitive advantage arises out of activities which provide high value to the customer and a strong ability to beat competitors. The SCA process will help you identify a range of issues which can be contenders for your SCA.
Step 1:
Brainstorm in your team some of the factors that could be your SCA. Your list should include issues such as lowest price, best quality, response time, etc.
Step 2:
Rate each of your critcal success items our of 10 ( 0 being the lowest and 10 the highest ) using the following criteria:
1. Value to the customer
2. Our current ability to beat our nearest competitor for the segment
Step 3:
The next step involves plotting these factors on the matrix below. You will find it easier to write the scores out of 10 for each axis for all items before you plot.
Step 4:
Once you have finished plotting all the items, look for those that scored highest in the Value to Customer axis. Even if they scored poorly on Ability to Beat Competition, we can move them through strategy to the top right hand corner of the matrix.
Step 5:
We need to now find which factors will have the most impact on the business. We call this extra dimension pervasiveness. By putting each of the factors into the following statement you can usually tell which is going to be the most pervasive.
"We will win by having the best .............................."
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