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How do I Develop a Competitive Business Strategy?

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  • Written By: Osmand Vitez
  • Edited By: Kristen Osborne
  • Last Modified Date: 11 November 2016
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A competitive business strategy — more popularly known as a competitive advantage in the business environment — is the ability of a company to produce or sell goods and services better than another. A competitive business strategy may focus on a cost advantage or a differentiation advantage. To develop a competitive strategy, companies should focus on streamlining operations and removing unnecessary costs while setting their products apart from others in the business environment.

Cost advantage strategies start with how much a company must pay to acquire the economic resources it needs to produce goods and services. Economic resources include land, labor, and capital. Overpaying for these resources will quickly lead to high product costs because most companies allocate production costs to each individual good or service from the production process. To recoup these costs and earn a profit, companies will typically add a specific percentage to the product cost, known as cost-plus pricing. A competitive business strategy can help companies find the lowest cost resources to use in their production process.

In addition to obtaining economic resources at the lowest cost available, companies must use production processes that are highly efficient when churning out goods. Business owners and managers should develop production processes with as few steps as possible because each additional step represents more costs to add into the product’s final cost. Producing too few goods at above average costs will often result in the company selling goods and services at a price point few consumers can afford.

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Differentiation is the ability for companies to separate their products from a competitor by offering more consumers more advantages from products. This competitive business strategy also relies on the positional advantage a company can gain when reaching a specific target market or region of consumers. Companies can differentiate their products through specific advertisements, attempting to create a perception of value in the mind of consumers and offering better customer service when responding to issues or feedback.

A competitive business strategy is also possible through the pricing policies for consumer goods and services. Some of the most common pricing policies include: premium pricing to create a sense of inclusion, penetration pricing to set low initial prices for gaining market share, skimming to charge high initial prices and then lowering the price as competitors enter the market, bundle pricing to include additional items at a lower total cost, and promotional pricing add more incentives to purchase the company’s products against a competitors.

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Comparables
Post 4

@alchemy & fiorite- Thanks for the great information. Between what you two have posted and the information given in the article, maybe I can come up a few good business growth strategies and skip hiring a business consultant. I am an entrepreneur and I believe that I have great ideas, but implementing those ideas is where my weakness lies.

Fiorite
Post 3

@Alchemy- I have a resource for those trying to get into the non-profit business arena. It can be very hard to start a successful NPO in this traditionally competitive segment of the business world. The organization Free Management Library offers a free eMBA program for those interested in gaining a sustainable competitive advantage for their NPO.

Enrollment in the program is free and takes about 200 hours to complete. The program does not actually give you an MBA with a concentration in Non-profit organizations, but it will give those interested, the knowledge in managing an MBA. From what I have heard, the program is decent, especially considering there is no cost.

Alchemy
Post 2

I found an amazing resource for entrepreneurs. There are a number of very good online business classes that do not cost a dime. Massachusetts Institute of Technology (MIT) offers something called Open Course Ware through the Sloan School of Business where anyone interested can engage themselves in undergraduate and graduate level business courses from prior years.

All of the course materials from lecture slides and syllabus to readings and assignments are posted free on their website. The books can also be purchased with a portion of the proceeds going to the Open Course Ware program.

The Small Business Administration also offers free courses on financing, starting, and managing a business. In addition, other colleges offer free access to

online coursework. UC Berkeley and Irvine offer course materials from their business courses online.

The London School of Business and Finance offers their entire MBA program online, and even allows you to pay tuition costs retroactively for successfully completing its MBA program in exchange for an MBA. Anyone determined enough could plan a good business or marketing strategy, even if they have no money or prior business experience.

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