The cost leadership and differentiation strategies are not the only strategies used to gain competitive advantage. Innovation strategy is used to develop new or better products, processes or business models that grant competitive edge over competitors.
What is Strategic Management For Competitive Advantage?
Have you ever thought of an appropriate strategy for your business? Do you really know how you are supposed to use your resources and capabilities to achieve your objectives? The competitive advantage is achieved by your ability to create and maintain a sustainable advantage over your competitors. Therefore, it is the ability to create and implement an effective strategy for a sustainable competitive advantage.
What is meant by sustainable competitive advantage?
It means that the advantage can be maintained over time against the competitors’ challenges. Furthermore, it should not be at the cost of an increased risk in the business. Our research indicates that competitive advantage can be gained by using four strategic management tools for competitive advantage, namely: differentiation, cost leadership, niche or focus, and innovation.
Definition of Strategic Management For Competitive Advantage
In 2003, some scholars defined Strategic Management For Competitive Advantage as a research program for developing both theoretical and practical knowledge for the design, implementation and sustainment of organizations. It is the equivalent of the management control for the macro aspect that is used for the management of a competitive advantage.
Strategic management for competitive advantage is an approach to developing a competitive advantage over the short term and/or the long term. It may be a direct or indirect approach to optimizing the performance of organizations. These organizations include those of public, quasi-public, or private sector.
Strategic Management for Competitive Advantage
Strategic management for competitive advantage is a topic of research in a more recent era. Before this, the literature was focused on the competitive advantage for decades. In the early 1980s and before, there seems to be few or less research on how to develop the competitive advantage. This is evident in the research of Prahalad and Hamel (1990). It was argued that the cost leadership was predominant strategy of business operation.
However, in the 1990s, there were few studies on the strategic management for competitive advantage. The empirical results suggested that cost and differentiation strategies are the two main trends of competitive advantage between the 1990 and 2000. Some recent writing such as Fournier, Just and Warner (2005) argued that the cost leadership is still an important factor in business success. Therefore, it is still considered to be one of the factors of competitive advantage. They also argued that the different competitive strategies (including niche strategy and innovation strategy for competitive advantage) are factors that are usually rejected in most cases.
Another example of an argument for the differentiation strategy under the competitive advantage is the writing of Guruswamy, Guruswamy, and Rao (2007). They stated that the differentiation strategy is different from the differentiation of quality. In their writing, they refined the strategic management for competitive advantage as the way to identify a sustainable advantage, creating a competitive advantage and sustaining it over time, even when there is an aggressive price pressure.
They also argued that the differentiation strategy is the most challenging strategy for competitive advantage (Lunenburg and Uryasev 2000). It is argued that there is a complex relationship between the cost leadership strategy and its effect on strategy. This relationship occurs when there are cost cutting strategies or innovations. Furthermore, some scholars argue that strategy is a vital force in small and medium enterprises (SMEs), especially for their development and survival.
Strategic management for competitive advantage in the SMEs is important to increase the awareness of SMEs and encourage them to stay competitive. Really, it is important for an SME to have a competitive advantage because it may otherwise cease to exist. Therefore, strategic management for competitive advantage (especially innovation and differentiation strategies) should be focused on SMEs to achieve their goals.
The potential buyers in the market focus on receiving more and more innovative products and more quality products which should be sustainable. These strategies are used by the multi-national corporations (MNCs). One of the essential characteristics is that they have to be defensive by avoiding irrational change (considering the loyaltyof the customers and the buyers).
The innovation strategy is used to develop new or better products, processes or business models that grant competitive edge over competitors. Therefore, it is a new strategy that differentiates it from the existing and proven models, which grant competitive advantages,
What is Innovation for Competitive Advantage?
As explained above, it is the introduction of new or improved products, services, or business processes. It is also the application of technology in the field of production or management for production that enhances the competitive advantage of the firm in the market. Therefore, innovation strategy attempts to achieve competitive advantage by introducing or improving existing products.
To attain successful innovation as business strategy, there must be continuous research and development and have a profound knowledge of the changing market and the consumer demands. It is driven by the innovation and modernization in the production process or in the design of products. Innovation strategy can be often independent of the differentiation strategy which is based on the features of the product or service.
The innovation strategy is based on the assumption that there is a significant market share that is available for franchising. When a strong underlying concept is identified by the firm, the innovation strategy is usually applied for competitive advantage. As a result, the firm could generate the knowledge for sustainable competitive advantage. In addition, it could reach the dominant position in the market.
Difference Between Innovation and Differentiation Strategies
There are similarities and differentiations between these two strategies. The similar thing about them is that they both can achieve competitive advantages. Another thing is that they aim to accomplish competitive advantage with different approaches, too. The differentiation strategy focuses on the differences between the product of the business and the competitors.
On the other hand, the innovation strategy focuses on the creation of new or improved products that can create the competitive advantage. These two strategies can manage the different markets. The differentiation strategy can be recommended for the mature and low-growth markets. In contrast, the innovation strategy could be used in new and growing markets.
Theodore Levitt defined the differentiation strategy as one for which the manager concentrates on finding and maximizing the differences in their products or services. He termed this ‘the strategy of the different’. To do this, a firm must use a more cost-based pricing strategy to manage the market.
In addition, the differentiation strategy can be conducted with the aim to deliver a superior product at a price higher than average. Another purpose is to deliver more customer value with quality improvement. A few of the famous firms that use the differentiation strategy is Sony, IBM, and Panasonic.
Although this strategy is for the benefit of the consumer, it can prove to be a difficult market strategy. The reason is the fierce global competition. The differentiation strategy attempts to take a look at the product being offered by the competitors and alter it to be unique. It is commonly used to develop new products that are not present in the market.
Difference between Differentiation Strategy
A few of the differences between these strategies are the common brand, the strong price positioning, and a high cost and low price. The primary objective of the differentiation strategy is to encourage the loyalty of the consumer to the business. The result of this strategy causes the consumer to diverge with most of the others and come back to the business while buying the products in the future.
Another purpose is to have an exclusive marketing technique. A few of the differences between these strategies are that the differentiation strategy is a strategy of a common high price of high quality, high price, and low price.
The innovation strategy is designed to create a competitive edge in the business at a high quality and a low price, in addition to its competitive edge on product innovation and reengineering.
Theoretical Basis of the Differentiation Strategy
The psychological basis of the differentiation strategy is the customer satisfaction. When a customer is loyal to the business, he will continue to buy products from them. The customer satisfaction is the foundation for the relationship between customer and business. As a result, it becomes a duplication of all of the businesses’ efforts that are focused on large businesses. The larger businesses are making ways to capture the larger market at a lower cost because the economies of scale are present in large businesses due to internalizing the additional costs.
On the other hand, small and medium-sized firms can compete with the large firms by focusing on the differentiation strategy. This strategy is normally the cheapest way to check the market data for any firm which is a customer. This is because any data could be obtained from any software.
How to apply the Differentiation Strategy for Competitive Advantage
The differentiation strategy is based on the approach which is very essential to the providers of the business. It also deals with the creation of value for the customer; there are three stages that one must follow to achieve the core value of the business. The stages are the following:
Build a Strong Brand
The differentiation strategy is based on the importance of the strong and indelible brand. Therefore, a strong brand for a small and medium sized business is very important. This strategy is meant for the creation and the development of a strong brand. The strategy is focused on the quality services and the special characteristics of the brand.
One of the main reasons that brand erosion will occur is the high price of the brand which is based on a fact that there is a higher price and quality. The main thing is to grow the brand into a strong brand to the consumer. It should have the elements of sustainability. The main objectives of the brand are to have a higher market share, increase profitability, and provide growth opportunities. To create a strong brand it is needed to have high quality.
The differentiation strategy is different than the common brand strategy. The reason is that it concentrates on quality and the uniqueness of the product or service. It is commonly used to differentiate the firm and the product from the competitors. The differentiation strategy has the components of the uniqueness of the market, the consumer, and the product or service.
The uniqueness of the market is captured by the differences between the customers who are willing to buy the product or service. It contains the point of view of the customers. In addition, it has the elements of customer perceptions, the point of view of the consumers about the product, and the firm’s perception about the product.
The differentiation strategy mainly focuses on the product, feature, and the quality of the product. The main aim is to predict the consumer’s needs and respond to the consumer’s demands. The focus on the consumer is mainly done through the perception of the customer. The process of designing the product in a way that solely satisfies the consumer.
It is used to send a signal to the customers on the characteristics of the product such as the brand, price, and quality. The main objective of product differentiation is to differentiate the product from the competitors in the market. It could result in the competitive advantage and create a profitable business.
With the comprehensive understanding of the competitive strategy, it is expected that the business will be more efficient and profitable. The innovation strategy is designed to discover new ways of doing business and designing products. On the other hand, the differentiation strategy is an approach that is focused on the customer. It is used to differentiate the business from the competitors on the basis of a few of the factors discussed above.
The decision in choosing a suitable strategy to use should be based on the type of strategy of the business. If the business works in a way that is quite common and there are not many competitors the differentiation strategy is applicable for the business. If the business is relatively new and there are few competitors, the strategy of the differentiation is used in a situation where there is a need to create the uniqueness of the business and the products. The strategy of the differentiation is mainly used in the business where there are many competitors. This is because it leads to the competitive advantage.
Different decisions require different types of strategies. If there are new businesses that have unique products and services to offer to the customers, the unique strategy is very appropriate. If the business is currently working on a new way to venture the market with new innovative products, the innovation strategy is applicable for the business.
The other strategy that is commonly applied is the differentiation strategy. If there is a need to differentiate from your competitors, you should use this strategy. This strategy is also used if a business needs to differentiate their position from the competitors in the industry. It is also used in the business where the business needs to emphasize the uniqueness from other businesses.
By reviewing the pros and cons of these strategies, it is clear that the differentiation and the innovation strategy require extra effort and investment for the business. However, they do offer innovative products and services to the customers. On the other hand, the differentiation strategy is applied to a market that is filled with competitors and the innovation strategy is used to create innovative products and services for the consumers.
Critically discuss the theme above. Rank the strategies and provide a succinct summary of each of the four strategies Above. Critically discuss the innovations and advantages of differentiated approaches to business
Differentiation between the two strategies is the competitive advantage. On the other hand, differentiation strategy is linked to a unique position. If a business uses this strategy, there will be a competitive edge from other firms in the market. The differentiation strategy helps to reach the customers that are not willing to buy the products from the business. In addition to that, the business can also capture a portion of the consumers from the competitors. On the other hand, the diversity strategy also helps the business to create a competitive advantage from other businesses. It is used for the differentiation of the market. For example, if a business uses this strategy, it creates a differentiation of the entire market. If there are more competitive businesses in the market, a business can create a competitive advantage by separating from the competitors and making the market different compared to the competitors.
The innovation strategy enables the business to offer innovative products that are not commonly used by the competitors in the market. If a business uses this strategy, it can attract more customers to buy the products offered in this business. The unique strategy helps to achieve the competitive advantage because the customers are willing to buy the goods and services when they know the products are exclusive.
The innovation strategy is attached with several benefits over the other strategies. If the business uses this strategy, it enhances the sales, gives an advantage in the market, and recaptures the market from the competitors. On the other hand, the strategy of differentiation creates the management layer that has the obligation of choosing the unique products for the consumers. It also divides the market into various segments, and hence, it creates a challenging environment to the competitors. The last strategy is the strategy of unique marketing which enables the business to introduce uniqueness in every aspect of the business.
The differentiation strategy is suitable to the companies that are new in the market because it helps the companies to differentiate from their competitors. The strategy of finding unique products and qualities is also suitable for the new businesses. In contrast, the differentiation strategy is not suitable to the businesses that are effectively categorized and are well known in the market. The uniqueness strategy is suitable to the competitor dominant market. This strategy is designed for the dominant company to help them to create a competitive advantage and remain in the business, if a few competitors enter the market. The strategy of unique marketing is the best strategy when a company has well-known products, because it helps the company to create an exceptional uniqueness for the product. This strategy is also useful if there are so many competitors in the market because it helps the business to create uniqueness through quality and design.
Analyze the success factors that determine the success of the brand by referring to the brand Zara. Critically assess the strengths and limitations of the two different strategies to create a brand (innovation and differentiation) and the brand-building strategy of Zara.
The outer style and the inner quality are the success factors that determine the success of the brand. The focus of the success factors is on the outer style. The brand-building strategy of Zara is attractive, innovative, and unique. The main objective of the brand is to create an exclusive brand, where the customers can find only the customer-specific products in this business. In addition, the business is designed to achieve the competitive advantage. In order to win the market, the business needs to create an original look for the consumers. For the business of Zara, the success factor is the creation of the casual wear for young people. The design of the pants, shirts, and tops in Zara is different from their competitors because they offer something that no one can offer in the competitors’. In addition, the products are also designed with a unique sense of color and design. This makes Zara different and successful compared to the other clothing items that offer the same products.
The uniqueness strategies are applicable in both the business world and the business market. The business of Zara is suitable for the unique strategies because it helps the business to achieve the competitive advantage, and attract many customers from the competitors. First, the strategy of uniqueness creates the brand for the business. It offers something that is different from the other competing businesses. Before the products are launched into the market, the management is able to examine and analyze the products in the office using the factory or the shop. The products are designed based on the analysis conducted in the office. Then, it is clear that the product is unique to all the other competitors in the market. This ensures that the business will earn a competitive advantage in terms of turning the design into production. In addition, the uniqueness strategy helps the management to differentiate from the other competitors. It is simpler for the consumers to choose the products of the Zara, and it also enhances sales.
The uniqueness strategy is more beneficial to the business than the other strategies. The strategy of differentiation allows the business to capture the entire market. On the other hand, the new products provided by the business are the benefits of the uniqueness strategy. To reach success, it is essential to create something new in the business. First, the business turns the uniqueness strategy into a competitive advantage for itself. This strategy creates an edge from the competitors. Eventually, the business can easily earn more profit, have enough capital to run the business, and differentiate from the other competitors in the market.
Explain the impact of brand-building strategy on the competitive advantage. Critically analyse the extent to which the strategies of differentiation and uniqueness affect the competitive advantage.
The four strategies of brand-building can affect the competitive advantage in different ways. The competitive advantage helps the business to compete in the market. In addition, it also helps the business to increase sales and profit. To remain in the business and compete in the market, the management of the company must identify the competitive advantage for the business. The competitive advantage helps the business to compete in the market, strengthen its position in the industry, and maintain the existing customers.
The strategy of addition of value is designed for the business to differentiate the brand from the other products (i.e. competitors) in the market. This strategy can affect the competitive advantage in different ways. First, the business can easily create an edge in the market and avoid offering the same products to its customers as the other competitors. In addition, the business focuses on creating a brand that is different from the other competitors. It is beneficial to the company because it helps the business to develop customer loyalty. This strategy is designed for the business to offer customers something that they cannot find in the competitors. Customers will continue to visit the business because they need something that they cannot find in the competitors’ shops. Therefore, the company can earn competitive advantage to compete in the market.
The strategy of product differentiation is used to differentiate the products of the business from the other competitors. This strategy can affect the competitive advantage of the business in different ways. The business of Zara is suitable for the differentiation strategy because it focuses on the creation of the casual wear for young people. The main objective of this business is to achieve the competitive advantage. It focuses on producing original designs of the pants, shirts, shorts, and tops. The business of Zara has achieved competitive advantage due to the creation of casual wear for young people. In addition, these clothes are designed with a unique look, which is not found in the competitors’ shops or stores. This helps Zara to increase customer visits to its business.
The strategy of uniqueness can help the business to achieve competitive advantage in different ways. The strategy is designed for the business to maintain a competitive advantage from the other competitors. To achieve the competitive advantage, the business looks for a unique brand name, design, and quality for all the products and services that it offers the customers. The success is easy for this business because it is preferred by customers. Consequently, this strategy helps the business to make money out of customers’ preference for the brand in the competition. Finally, the business can earn a competitive advantage from the other competitors.
The uniqueness strategy is useful for the business to achieve the competitive advantage in different ways. First, it focuses on creating a product different from the competitors’ products. The strategy is designed for the business to offer something that customers cannot find in the other competitors’ shops. Initially, the business will not be able to compete with the other competitors in the market if it offers the same product as the competitors do. The business makes profit by having something different from the competitors. Customers can easily distinguish between the products of Zara and the other competitors because they offer something unique. That’s why customers prefer to visit Zara instead of the other competitors.
A fresh approach to strategy means quickly and creatively recognizing opportunities and co-ordinating for their exploitation. However, this will typically demand a new business concept that exploits them. A fresh approach by the management also means changing the organization’s focus, goals and behaviors, as well as its systems and cultures. Managers are not born with the insights and resources to do this. All managers must learn the skills of business creativity. One of the most important of these is a willingness to recognize that there is not a single best solution to any problem, but instead many different ones.
What is the relationship between creative strategy and competitive advantage?
Creative strategy and competitive advantage are not related. Creative strategy enhances the competitive advantage for the business. When the business strategizes in a creative way, it simplifies the strategy-making process for the management. The main objective of the management is to make effective decisions in relation to the business. The first step of strategy-making is to understand the environment of the business. It is essential for the managers of the company to understand the environment of the business in which they are operating. The next task for the management is to understand the industry in which they are operating. The main objective of this task is to identify the resources, processes, and environment that they need to know to develop a business strategy. The managers can make effective decisions in relation to products, markets, products or services, and investments. When the managers apply the strategy in different ways, it is essential for them to identify their objectives to achieve effective decisions. In the last part of this process, the managers ensure that their decisions will be valuable for them and for the business.
The Japanese automobile companies are succeeding by using a creative approach to competitive advantage. A creative strategy is used by the business to determine its competitive advantage in the market. This strategy is designed for the managers of the business to identify the best opportunities in the market. They can use this information to develop awareness of the business and its role in the market. The managers can also use this information to develop a value proposition and set of competitive differentiators that they can use to achieve competitive advantage in their business. A creative strategy may also be designed to support a clear business model that works for the company.
The segmentation of the market can be used by the business for the creative strategy to achieve the competitive advantage. The business can focus the whole product to a specific group in the market or a specific product to a specific group of customers. The managers can focus their product on customers who value the fewest features and services. In addition, the business can be a global leader in a market by selling its products with an emphasis on aesthetics. The company can then export or import products for sale in foreign markets.
The business can use the creative strategy for the best possible customer experiences. The business can develop and identify multiple core values in the market. These values will help the company to provide the best service to customer needs. The business can use creativity to achieve a competitive advantage from the other competitors. The business can focus on customers in the market and look for a market with a price premium. The company can then offer the best customer experience and a product that is different from the competitors’ products. The competitors can then use the creative strategy for the business to achieve competitive advantage.
Market leaders have a creative strategy for the business to achieve a competitive advantage. The leaders innovate and provide products and services that customers want. The leaders also use creativity for the development and production of their products. They use creativity for the creativity of the management. The leaders also use creativity for the effective maintenance of their products.
The German automobile manufacturers are pursuing a creative strategy for the business to achieve competitive advantage. They can create innovative vehicle concepts to achieve competitive advantage. They use creativity for the marketing of their vehicles. The German manufacturers are pursuing a creative strategy for the business to achieve competitive advantage. They have used creativity for the manufacture of their cars. Most of them have used up to 3 million parts per vehicle. For this reason, the German car companies have had difficulty to achieve competitive advantage from the other competitors.
In the future, creative strategy can be used by the companies of Germany to achieve competitive advantage from the other competitors. The German manufacturers can use creativity for the manufacture of an advanced drive train system that is advanced, light, and aluminum to achieve competitive advantage. In addition, they can use creativity for the manufacture of vehicles with lightweight and advanced ergodynamic design. In the future, we can expect that the leading German automobile manufacturers will use creativity for the development of their engines. The main objective of this strategy is to produce an engine that is more likely to lead to competitive advantage.
A clear understanding of the creative strategy is available for the marketing departments of the automobile manufacturers. They can use creativity for the development of the brand and the design of the car. Then they can use creativity for the development of the marketing strategy. To achieve competitive advantage, it is necessary to market the product at the right price. They can also use creativity for the realignment of the price of the product by market demand. In addition, they can use creativity for the segmentation of the market and provide a product that is unique for every segment.
A creative strategy can be used by the marketing department to achieve competitive advantage. They can use creativity for the development of advertising for the product. To achieve competitive advantage, it is essential that the customers pay attention to the advertising. This can be done by using creativity for the advertising of the device in the market. The strategy can focus on the use of creativity for advertising, without the use of a lot of money. This strategy can be used for the long time for the business.
Creative strategies are not always successful. There is a creative strategy for the business to achieve competitive advantage. The business can stop using the product to achieve a competitive advantage. For example, this can happen when the business is high in the market, it can reduce the demand for the product. This can lead to lower prices and the business needs to cut costs for the product. For this reason, the company decides to reduce the quality of the product. The costs of the product for the business can also be reduced. For this reason, the company reduces the price for the product. The final aim of the company is to achieve competitive advantage.
The creative strategy for the business to achieve competitive advantage can also fail when the company does not invest in research and development. Another factor that may reduce the creative strategy for the business to achieve competitive advantage is the quality of the product. At the same time, the other companies of the product in the market are used to market the product. The main purpose is to produce a product with a high quality. The competition of the company includes the use of creativity for the creation of the product. Then they use creativity for the manufacture of the product. They also use creativity for the marketing of the product or service. This is the business strategy for the company to achieve a competitive advantage. The company can reduce the price of the product to raise its sales. This is sometimes the trade-off between price and quality. The objective is to achieve competitive advantage.
The objectives of the creative strategy are to achieve competitive advantage. The use of creativity for the manufacturing of the product can help to achieve competitive advantage. In addition, the ownership of the product can help to achieve competitive advantage from the competitors. For this reason, it is important that the business uses a creative strategy for the business to achieve a competitive advantage. Then the company can achieve a competitive advantage from the market.