Making your product or service unique is an important part of success. To achieve this, it is worth creating a competitive advantage with the help of Porter’s strategies. In this case, the idea is not just to find a differentiator.
Porter’s strategy also involves choosing the type of standout feature that will be adopted. This way, it is possible to more clearly define the positioning of the product or service and take advantage of this standout point.
Want to know how to find and determine your business’s competitive advantage? Discover Porter’s 3 strategies!
What is competitive advantage?
Competitive advantage represents any attribute or difference of a product or service in relation to its competitors. This advantage is an element that makes the company stand out from others available in the market.
Competitive advantage also indicates what only your business is capable of doing to meet the public’s interests. Therefore, you need to go through a process of defining this point. Then, you will be able to communicate it to the public, adopting it as part of your advertising strategy.
Why develop a competitive strategy?
In addition to understanding the concept of competitive advantage, you should also know its advantages. Firstly, it can optimize the results of small and medium-sized businesses. After all, seeking differentiation increases the prominence of your business, product or service.
This is a way to draw the consumer’s attention in relation to competitors. As a result, there is a greater chance of capturing the public’s interest and, thus, converting it into sales to increase revenue .
Furthermore, products and services with competitive advantages tend to generate more profits. Their sale may be easier due to market recognition or prominence and may be more profitable due to added value.
Therefore, competitiveness-oriented strategies help companies grow and consolidate. By using them, you can position your business in a unique way, overcome challenges and improve performance.
What are Porter’s 3 strategies?
Knowing the need to have a competitive advantage, it is possible to use the so-called Porter Forces to seek this differential. This is a theory created by Michael Porter, a professor with a degree in mechanical engineering.
Around the 1980s, he developed a model that points out the 5 main forces that can threaten a business’s performance. They are:
- rivalry between competitors;
- negotiating power of suppliers;
- customers’ bargaining power;
- threat of competitors entering the market niche;
- threat of substitute products.
To overcome these threats, it is important to understand the theory of competitive advantage. Through it, you can define the means necessary to make your business stand out in the market.
Therefore, see in 3 points how Porter theory can help you establish differentiation strategies:
1. Total cost
One way to achieve a competitive advantage is to differentiate yourself through low prices. In this case, the company’s goal is to stand out by offering a more attractive price than its competitors — but it must not compromise on quality.
For this to be viable, it is necessary to achieve maximum operational efficiency . Furthermore, this is usually a strategy best suited to products that can be standardized and created at scale. After all, this is a configuration that helps reduce overall costs.
2. Differentiation
Another of Porter’s possible competitive strategies is diversification. Through this approach, the focus is on making available on the market products or services that are innovative, exclusive or unique.
One example involves high-end and ultra-high-end brands. In this sense, consider a luxury fashion company. It creates differentiation by offering exclusive pieces to its buyers. This allows it to stand out from the competition.
Furthermore, the differentiation strategy includes attention to customer experience and brand building. The company stands out because it presents a unique process that is capable of delighting customers.
3. Focus
Furthermore, there is Porter’s competitive advantage through focus. In this case, the intention is not to offer the cheapest or most exclusive product, but rather the most segmented one for each audience.
By using this strength, the company focuses its attention on a specific market niche. In many situations, it can reach an audience that is not fully reached by its competitors, for example.
This type of differentiation by focus can also be divided into cost or differentiation. Therefore, it is possible that the objective is to offer a niche service or product that is unique or that has the best price among competitors.
How to identify your business’s competitive advantage?
As you have seen with Porter’s forces, there are several ways to achieve competitive advantage in the market. Before adopting any of the strategies for companies, however, it is important to do a broad analysis to find out what really sets your business apart.
In this case, it may be interesting to start with a mapping and process analysis. The objective is to understand the production steps until the final product is presented to the customer.
At this point, it is important to identify the company’s strengths. Therefore, try to understand what the business really stands out at and how this can be worked on and developed into a truly unique characteristic.
Furthermore, it is essential to conduct a competitor analysis. By comparing and identifying the key points of competitors’ offerings, it is possible to understand how the company positions itself. In general, this is an exercise that helps to find the standout elements.
To learn how to stand out in the market, remember to also base yourself on Porter’s forces on competitive advantage. If the idea is to differentiate yourself through price, for example, it is necessary to ensure operational efficiency.
Furthermore, it is necessary to reinforce the chosen differentiator with the public. Therefore, it is worth developing a strategic plan — both to consolidate and to publicize the unique characteristics of your company’s product or service.
As you have seen, these 3 Porter strategies help you find and determine what your business’s competitive advantage is. Based on this definition, you can increase your chances of sales and, therefore, improve your business’s results.