Today it is no longer enough to create a brand, a strategy for its promotion and development, and work on positioning, hoping for customer loyalty and love for the company. A discerning buyer wants to trust the company. Know that he can give his money and get what he expects without risks. Therefore, it is important for any company to present its competitive advantages to its potential client, showing that it can satisfy his needs. In this article we will talk about what is competitive advantage, why they are needed, what they are and how to find, highlight and group them.

Competitive advantages and benefits: what are they and what are their differences?

The concept of competitive advantage carries the superiority of a company, product, service or brand over other existing market participants - competing companies working with you in the same niche. For a business, competitive advantage helps solve a number of important problems:

• Strengthens the company's position in the market;
• Creates the prospect of stable growth and uninterrupted operations;
• Creates difficulties for competitors entering the market.

But the most important value of competitive advantages is their ability to generate profit for the company. Any company works for profit, for its development and expansion of its customer base. And competitive advantages, like nothing else, help her in this. They become the main motivator for the consumer, pushing him to take the actions that we need.

Advantages and benefits. Same?

Both in marketing and in Internet marketing, you have probably repeatedly encountered the concept of advantages and benefits. When developing a high-quality Landing page, a block with a list of advantages and/or benefits is an obligatory part of the selling strategy and structure. But many business owners perceive the two concepts as equivalent, which is a big mistake.

In terms of their value and impact on the client, the advantages and benefits are identical. They bring the same result. But they differ in meaning, so it is important to understand what, and also know how and when to use them.

Advantages are formed based on the characteristics of a product, service or company as a whole. With their help, the client understands why and how is your company better? and why it's better for him.

Benefits are a derivative of the advantage provided by the characteristic. They help the client solve their problem, make life easier, save time, money, or whatever is relevant to the buyer at the moment.

Despite the fact that the organization’s competitive advantages and benefits are different in their specificity, they are united by common requirements. They have to:

• Stand out from competitors;
• Satisfy customer needs;
• To be stable and unchanged in a changing market;
• Be unique and make it clear that no other company will provide such advantages and benefits;
• Work for the profit of the enterprise.

Competitive advantages must be based on the desires of the target buyer, which must be studied. Once the benefits are generated, you can highlight the benefits based on them and demonstrate them to your customer. Let's give an example based on a laptop repair service.

Client's wishes (I WANT):

• I want my laptop to work without crashes and glitches;
• I want my laptop to not slow down or get hot;
• I want to be comfortable working on my laptop.

Client criteria (AS I WANT):

• I want it not to be more expensive than the amount I expect;
• I want my laptop to be repaired in 1-2 days;
• I want original spare parts installed;
• I want to be given a guarantee for repairs of at least 6 months;
• I don't want to go to the service center myself.

Based on the analysis of the criteria set by the potential client , we create advantages:

• Laptop repair from 100 UAH;
• Repair time - 1-2 days;
• Installation of original spare parts for Asus, Acer, Samsung. We do not use Chinese analogues or fakes;
• Repair warranty - 12 months;
• Courier delivery of the laptop to the service center and to your hands after its repair.

The benefits have been identified. Let's move on to the benefits:

• Time saving - repairs take only 2 days;
• Saving money - laptop repair will cost 20% less than in other service centers;
• Save effort - the courier will leave the laptop there and back.

Ideally, both advantages and benefits should be stated. Any information affects the conversion of the site, so be sure to work through it and demonstrate it to your buyer.

If you are planning to open a company selling consumer goods that are sold by fifty other companies in your city, and it seems to you that it is impossible to highlight competitive advantages, then you are deeply mistaken. Any company can develop strong benefits that will set it apart from the rest. The main thing is to know how to do it. And we will be happy to tell you this further.

What are the types of competitive advantages?

Competitive advantages can be natural or artificial. Natural benefits state a fact and convey truthful information. Artificial ones belong to the category of manipulation, but can be of great benefit if presented correctly.

What are the natural benefits?

Very often, companies do not demonstrate natural advantages, thinking that they are obvious. And this is a big mistake, since even the most common values ​​among competitors can be presented very powerfully. Below we list what is included in this group.

1. Price/income

Perhaps the most powerful advantage. Especially if competitors don’t have it. But here it is important to format the information correctly. Do not write template phrases: “Low price”, “Discounts for regular customers”, “Wholesale prices”, “Prices from the manufacturer”, etc. Write specifics: “25% discount on refrigerators,” “prices are 30% lower than market prices.” Always speak in numbers. This is very important, especially for B2B companies. Information about earnings also grabs a potential buyer’s attention very well. This is very often used by information businessmen, presenting as an advantage of the service the opportunity for the user to earn money.

2. Timing/energy savings

Your client always wants to save his time. Give him this opportunity by specifying specific deadlines. If your logistics department is well developed and you guarantee fast delivery, write down how many days it will take to deliver the goods from one point to another. Here it is also important to exclude bureaucracy and cliche phrases, such as “Fast delivery.” Write “Delivery in 1 day from Kyiv to Dnepr” or “Delivery in 1 hour to anywhere in the city.” A valuable advantage can be information about benefits that will help the consumer save their effort, energy, time or increase their own productivity (for example, when using the services of a cleaner, the client pays for cleaning and saves his energy by getting cleanliness in his home). Such customer care inspires trust and motivates the consumer to action.

3. Your experience

It is very important here not to cross the fine line by approaching the hackneyed phrase “We are experts in the field...”. Such expressions no longer work and are of no interest to anyone. If you decide to declare your experience, then speak in fact - what you have done in 10 years of your activity: built 150 houses, opened 15 branches throughout the country, introduced a new production line of goods, etc. Your client is looking for facts about your successes, not information about your years of work.

4. Terms of cooperation

Any specific features of cooperation can be an advantage here. Don't be afraid to reveal those that are also listed by your competitors. The fact that you accept cash and non-cash payments can significantly increase the chances of a sale by providing convenience to the buyer. Indicate all the factors of cooperation: the presence of a showroom, the possibility of producing a product model to order, the geographical location of the office near a municipal transport or metro stop. Even the possibility of self-pickup and your own warehouse or any information that gives the client the benefit of saving his time or effort, as a competitive advantage, can play into your hands by providing the buyer with maximum comfort.

5. Achievements

Diplomas, diplomas, certificates, a list of partner companies and large client companies with their logos work as social proof that instills trust in the company, which is the main goal of competitive advantages. With the help of documents that you demonstrate to your potential clients, you will emphasize your experience, status, and authority. And this is very important for buyers, as it says that you are working for the future and development, which means that your company will not close tomorrow.

6. Specialization

If your company operates in a narrow specialization, then you definitely need to tell your client about this. Imagine that you are using an Ariston brand washing machine. And one day it broke for you. Which company will you contact - one that only repairs Ariston washing machines or one that repairs washing machines of all brands? Surely, firstly, because you will subconsciously conclude that its employees are more experienced in matters of your washing machine.

7. Business Features

Any fact specific to your business can become a competitive advantage. Using a certain technology or equipment, an assortment of products that exceeds competitors, purchasing raw materials in Europe - all this will help you become the king. Don't miss this information when creating your benefits.

What advantages can be called artificial?

Such advantages can help out a company that operates in a very popular niche. It is usually very difficult for such firms to find competitive differences, since all organizations most often work according to the same principle. Or the formation of artificial advantages will help a young company that has just entered the market and cannot “compete” with established participants to stand out. Let's list what can serve as such advantages:

1. Added value

Let's say you sell women's dresses. In this niche, it is very difficult to compete with similar companies that may even purchase goods from the same supplier as you. There is a way out - to create added value: to offer your client something that competitors do not offer. For example, when purchasing a dress, an accessory is given as a gift. In other words, even the most ordinary promotion will help you create an advantage over your competitors and attract the attention of buyers.

2. Responsibility for the product/service

It works very well, provided that you are willing to be truly responsible for what you are selling. For example, you claim that the doors you are selling will last 30 years, because you know that they are made of oak without the use of cheap substitutes. Clients will be drawn to you if your statements are compelling.

3. Warranty

Any guarantee will become a competitive advantage if its conditions are met. A guarantee can be given for both the service and the product. For example, you can guarantee the possibility of returning and exchanging goods within 30 days, despite the fact that by law this can only be done within 14 days. Or guarantee a refund if the service does not bring results. Don't worry about customers returning items or asking for refunds frequently. Generally, if the user is not satisfied with the purchase, he forgets about guarantees. But this is not a reason to offer low-quality goods/services in the hope that compensation for them will not be required.

4. Showcasing your offer

If your product or service has no obvious benefits (which is quite common), then you can simply show your potential client what is offered to them in the form of a demo. If this is a product, then you can make a video about its appearance to show the person what it really looks like. If a service is the process of its implementation. Remember, a person perceives 85% of information visually. Therefore, demonstrating your offer will be a significant advantage for your company.

5. Feedback from your clients

It is important that the reviews are real. In this case, they will become social proof, a reason for trust in your company and its activities. They will also create a competitive advantage over other companies. Video reviews where real customers express their opinions about a company, product or service work better. But if this option is difficult to implement, you can use a text review by inserting a phone number, a link to a social network or the client’s email address with prior agreement on the publication of his personal data.

6. USP

We will not go into detail about the unique selling proposition and its value, since we have already done that. Let’s just say that with the correct analysis of the business and target audience, as well as the competent construction of the USP, it can become the most powerful advantage of your organization and increase its sales.

Creating competitive advantages: how to turn something “simple” into something “golden”

Before you begin to develop a competitive advantage, you need to conduct two critical analyzes - the target audience and competitors.

Target audience analysis

You need to understand who your client is, how old he is, what his social status is. And, most importantly, what problems he wants to solve with the help of your product, service or company as a whole. Problems can be completely different: from the urgent need to buy a product here and now due to lack of time to meeting the requirements for its safety. For example, a person wants to make sure that all tools in your beauty salon are disinfected.

If your target audience consists of several different groups, you need to select one that your website and benefits development will be focused on. Ideally, the developed competitive advantages should satisfy the needs, overcome fears and solve problems of the entire target audience, even if it consists of several groups. But sometimes this is impossible to do, so it is advisable to work out competitive advantages for the most important and promising group.

Competitor analysis

Benefits wouldn't be called competitive if they weren't superior to your competitors. When analyzing market participants in your niche, it is important to highlight their strengths and weaknesses. Understand their advantages - what they are better than you at. And, conversely, identify their weaknesses, which in the future you can make your superiority over them.

Stages of developing competitive advantages

Once you are already familiar with your target audience and competitors, proceed to the main thing - step by step, work on highlighting the advantages.

Stage 1. Determine all competitive advantages of the company / product / service

Highlight all the benefits that you know. This is very important in order to identify those that will become competitive in the future. If you are determining the benefits of a product or service, you can survey your customers to find out which benefits are most important to them.

Stage 2. Ranking of benefits

Once you have compiled a list of benefits, you need to sift through those that are least important to your consumer and those that are the most important. This is necessary in order to highlight the most valuable factors that will help you develop your business and be able to “overcome” your strong competitors.

Stage 3. Comparison with competing companies

The list of selected benefits must be compared with the benefits of competitors. You need to know which companies have them on the market and which ones they don’t. And also know in what ways they are better and worse.

Stage 4. Highlighting unique advantages

You need to highlight absolute advantages - those that your competitors cannot copy. These are the benefits that are unique to your company, service or product. For example, only your company uses German equipment that allows you to print in a unique format. Or only your company presents the product in a unique limited edition packaging.

Stage 5: Developing False Advantages

It is not always possible to develop natural competitive advantages, especially in very popular and saturated niches. The only way out is to create false advantages.

False advantages are advantages that work on emotions and convince the consumer that your company/product/service is unique. For example, an advertisement for Jacobs coffee claims that it has “aromoxomite magic.” The concept of “aromoxamite” does not exist in nature, but this unique selling proposition of the brand has become its most important advantage.

Stage 6. Development and control

The formation of competitive advantages must end with the development of a plan. You need to think through a strategy on how to develop based on the identified advantages and how to maintain them in the future.

The most common mistakes when developing competitive advantages

A huge number of companies make critical mistakes when creating their advantages, after which, while working, they wonder why they cannot become leaders due to the great competitive pressure. Such errors are so common that they occur all the time. Most often, this is the use of stamps and clericalism. Here are the TOP 6 most common competitive advantages that have long ceased to be them.

We can do what you don't need

Very often, when creating their competitive advantages, companies completely forget about their customers. They talk about what they can offer, forgetting about what their target buyer really needs. As a result, such advantages do not work. They simply do not arouse interest, since a person understands that they will bring him absolutely no benefit.

Advice: When creating advantages, focus on the desires of your buyer, putting your capabilities on the back burner.

We help you increase your profits by 40% with our business plan.

15 years of experience

Almost every company considers it their duty to indicate their work experience. But this information is no longer valid for the potential client. He doesn't care if you've been in the market for 5, 15, or 30 years without ever going out of business. What matters to him is what you did during this time.

Tip: If you want to indicate your company's experience, be sure to indicate what you have achieved during this time.

Over the 10 years of work of the Gradostroy company, we have built 2 nine-story new buildings, in which 70 families already live.

High level of service/quality

To be honest, your client doesn’t care at all that your company employs certified specialists. The presence of certificates does not affect the quality of service at all. Therefore, using template phrases: “We guarantee a high level of service” or “We provide high quality goods” is just a waste of time.

Tip: Always be specific and qualify your statements. Tell the consumer how he will be provided with a high level of service.

The service station will perform a free diagnosis of your car's automatic transmission and provide a 2-year warranty upon completion of the service.

Individual approach

A boring, hackneyed and annoying phrase that already hurts the eyes and ears. By using this phrase to your advantage, you can be sure that your potential clients won't believe you. At a minimum, because it is used by a dozen of your competitors and thousands of other companies they have met.

Advice: Never use this unfortunate phrase under any circumstances. If you want to show your buyer that you work on special terms, be clear about it.

You can buy this product to order; we will develop a custom-made layout taking into account your dimensions; We will deliver the goods by courier at a time and place convenient for you.

Affordable prices

Top of all the pompous benefits that companies like to use is the claim of affordable/loyal pricing. Your client will not even perceive this phrase, let alone believe it.

Advice: Give specifics, speak in the language of numbers.

10% cheaper than market prices; 5% discount for each buyer; save 30% when purchasing this set.

A wide range of

And for dessert, a phrase that is sure to loom before your eyes on the website of an online store or in the advertising of any commercial company. This advantage has become so boring and banal that potential clients don’t even realize it.

Tip: If you want to focus on the assortment, talk specifically about the assortment of which product you are talking about.

1000+ models of women's boots made of leather, suede and nubuck.

Your company benefits don't have to be traditional and hackneyed. Try to highlight unique features that can not only attract the reader’s attention, but also motivate them to further action. After all, this is exactly what you expect from your potential client.

Recommendations on how to write competitive advantages and benefits

The best friend of competitive advantage is specificity. Each benefit must be clearly disclosed so that the potential buyer does not invent unnecessary and completely unnecessary things. We will provide recommendations on how to and how not to present the company's advantages and benefits using examples.

Only in fact

Free your client from vague phrases that do not provide value. Always speak accurately and factually.

• We are the best in our niche;
• We sell the highest quality products;
• We cooperate with large companies;
• A wide range - only with us.

• We do not use wet mixtures to reduce the construction time of a house;
• All products have been tested by the sanitary station and comply with GOST standards;
• When purchasing a frying pan, we offer a choice of 10 lid models;
• We cooperate with the network of gas stations “WOG”, “Gefest” and “Parallel”.

Without anonymity

Anonymity is confusing, and understatement only raises doubts. All statements must always be substantiated. Experienced users can easily see through your farce, so provide facts.

• We use the best parts for your car.

• We use new BMW spare parts from the manufacturer.

Only with evidence

Everything is clear here. If the client does not clearly highlight his benefits, then your statements are empty.

• We offer favorable terms of cooperation.

• Save 35% when purchasing cinder blocks in the amount of 20,000 UAH.

Possibility of verification

Your customer must trust you. And trust will not appear out of nowhere. Therefore, give him the opportunity to verify your statements.

• We build modern and comfortable facilities for living.

• You can visit and inspect the facilities built by the company at a time convenient for you.

Focus on target audience

Competitive advantage is not always aimed at all groups of the target audience. Therefore, it will only be partially beneficial. It is very important to understand who the competitive advantage is intended for, otherwise it will not bring effectiveness.

• The headphones transmit clear sound and do not get tangled in your pocket.

• The sensitivity of Earpods is 113 dB, allowing for accurate sound reproduction for sound engineers. Frequency range - 8 - 27000 Hz, which will allow you to enjoy crisp, deep bass and crystal clear high frequencies without distortion;
• The fabric braid prevents the headphones from getting tangled in your pocket, and you won’t waste time untangling them.

It's important to demonstrate true benefits. Otherwise, fictitious facts will only cause a negative impression of the company or product in the buyer, and he will go to your competitors.

We learn to develop a company's competitive advantages based on its shortcomings

Not all companies, especially young ones that are just entering the market, can compete with their competitors. To stay afloat, they have to inflate prices and extend delivery times due to the logistics department not yet being fully formed. All this can negatively affect the business, driving away customers. After all, no one wants to pay more or wait longer for their order when competitors have everything much cheaper and faster.

But there are special tricks that help turn disadvantages into advantages. These are facts that become a counterbalance to your weak points. Let's give specific examples.

Inconvenient office location, far from the center	The company's office has a showroom where you can see the product live. The warehouse is located on site. There is convenient parking, including for trucks. Pickup and delivery available throughout the city.
The price is significantly higher than in competing stores	Yes, but the package includes additional goodies: an operating system updated to the latest version, a case, headphones and protective glass as a gift.
Long delivery on order	It is possible to order spare parts from the manufacturer without intermediaries. It is possible to order rare spare parts.
Young company with no work experience	Sending goods on the day of order by Ukrposhta, Nova Poshta, Intime or Deliveri, free consultations, no prepayment.
Very small selection of products	Narrow specialization on a specific brand. Detailed consultation on the specifics of the product.

As you can see, even those shortcomings that can lead a company to failure can become powerful competitive advantages that even established companies in the market cannot provide.

Examples of competitive advantages in different areas of the company’s business

In theory, developing competitive advantages for companies in the retail sector is much easier than for those involved in more specialized businesses. Therefore, we will provide specific examples for some niches that can become inspiration for you and the basis for your ideas.

Benefits for tourism business

1. Tours to remote corners of the planet;
2. Discounts on last minute travel packages up to 80%;
3. Free guide;
4. Free transfer by luxury car;
5. Gifts from the tour operator when ordering certain tours.

Benefits for a law firm

1. Specialization;
2. Availability of lawyers, notaries and other highly specialized specialists;
3. Geographical location of the office;
4. Free online consultation;
5. The company has 15 years of experience and 98% of successfully completed cases in favor of the plaintiff.

Benefits for the transport company

1. Own fleet of vehicles with different tonnage;
2. Free delivery and cargo tracking for orders over a certain amount;
3. Built-in navigation in the car and the ability to track its location;
4. Responsibility for the condition of the cargo upon arrival;
5. Official cooperation agreement.

Benefits for a cleaning company

1. Cooperation by agreement. Full responsibility for the result;
2. Cleaning is performed using professional equipment using sulfate-free detergents;
3. Financial responsibility for the condition of expensive interior items;
4. Financial responsibility for the safety of material assets;
5. Working with complex contaminants.

Brand value development

Brand value is not only the positive characteristics and quality of the product. These are the emotions and associations that a name evokes in a potential buyer, allowing him to be confident in himself and in the company. When a brand becomes famous and wins love, it becomes a person's strongest motivator to action. Logically, if we know that a particular brand of toothpaste will help reduce tooth sensitivity, then we will choose it, and not any other, whose advertising announces a similar feature of the product.

How to develop brand value?

There are many ways to create brand value and further develop it. But, first of all, it is necessary to analyze the target audience, its needs and desires. You need to understand what is most important and valuable to them, so that you can focus on this when forming values. Once the target audience has been analyzed, you can use one of the following methods for forming and developing values.

Value+benefit

It is very effective to present to the buyer not only the value, but also the clear benefits that the brand will provide to him. For example, Head&Shoulders shampoo for women not only creates hair volume, but also eliminates dandruff. This means that girls using shampoo from this brand will get clean hair, voluminous hairstyle and self-confidence due to the absence of dandruff. The important thing to note here is that the benefits are real and the brand actually lives up to its claims.

Establishing Expectations

Brand values ​​can be developed based on the formation of some expectations. At the same time, a person subconsciously creates for himself a certain picture, image and feelings that he expects to receive using the brand. Even if the actual result is not as powerful as expected, the consumer will experience it to the maximum, since he has already convinced himself of it. For example, the slogan of the energy drink Red Bull: “Red Bull gives you wings.” This does not mean that a person will be able to fly. But he makes it clear that the charge of energy that he will receive after drinking the drink will allow him to feel a significant surge of strength.

Help effect

This method involves creating conditions under which the consumer participates in solving any problems. For example, the McDonald's company periodically organizes promotions to help orphans. When ordering fast food, the client is given a sticker in the shape of a palm, where he indicates his name. Thus, he is made to understand that with his purchase he gave part of the money to help those in need this children.

Creation of Alter Ego

Some brands demonstrate their value in their ability to create an alter ego in the client. A person gets the feeling that by using this particular brand, he is able to do something that he would not have dared to do before. Such brands very often work to provoke. This method is often used by fashion brands. Or for perfumes. For example, Ax deodorant for men is positioned as a way to reveal your sexuality and attract the attention of women.

Brand equity works very well for the future of the company as a whole. With the correct development of value, the company will receive stable growth and a constant increase in consumers thanks to the effective positioning of its brand.

Developing benefits and creating product value

Competing on product benefits is not always possible, especially if the product is in a very common niche. However, if your company is a manufacturer or you are the first to bring a product to the market, then you have every chance of becoming a leader.

But do not forget that your competitors are not asleep, and after some time they will present consumers with a similar product. Therefore, it is very important to develop absolute advantages that competitors cannot take from you. And, first of all, it is necessary to analyze the target audience, identifying their desires and needs. Based on the resulting portrait of the target consumer, formulate the advantages of the product. It could be:

• Low price compared to competitors;
• A unique product due to one, several or multiple properties;
• Unique composition or use of very rare ingredients;
• A special type, shape, volume or packaging of goods;
• The product is more effective compared to analogues;
• You, as a manufacturer, create an innovative product;
• The product is sold under special conditions.

When you become an innovator by introducing a completely new product concept to the market, you can create value. With its help, the recognition of your product and, consequently, its sales will increase. For example, Apple, having released the iPhone, advertised an absolute innovation in the field of smartphones - a unique operating system, unique processors. This became the main value of the product at the stage of its introduction to the market.

Each developed benefit of a product must provide benefits to the consumer. That is why it is important to know what exactly your target audience wants to get when purchasing a product.

Advantages of a product/service as an emotional component

The sale of a product or service carries with it the most important goal in terms of its consumption or use - to satisfy the buyer's main need. A person purchasing something from your store wants positive changes to happen in his life with their help. He wants to get something, become someone, or avoid something that might bring him discomfort.

Therefore, first of all, the key advantage of a product is its ability to satisfy the desires and emotions of the buyer. Agree, you visit the hairdresser once a month not to get a haircut, but to look more attractive and more confident after the hairdresser’s service.

Marketers and specialists in the promotion of goods and services identify 7 areas, one of which is a powerful motivator for the purchase of a particular product/service, depending on its specifics. Let's look at each and give specific examples.

Money

The client/buyer wants to make a profit or not lose it.

We save your money when promoting using an SEO audit for website development

By ordering a service, the client will certainly avoid all sorts of mistakes in website development that will negatively affect promotion. Result: saving money on updating the site and eliminating errors.

Energy/time

When purchasing a product or ordering a service, a person’s goal may be an urgent need to save time or effort: to make work easier or faster, or to increase personal productivity.

Lose weight without leaving your favorite couch

Preparations based on natural ingredients will help you lose weight and find the figure of your dreams without wasting your energy and time on going to the gym and grueling workouts.

Health/Beauty

An important motivation for purchasing a product or ordering a service may be the desire to improve your health or the health of a loved one, get rid of illness/pain, or maintain your health at a certain level.

This remedy is your self-confidence

With this line of cosmetics for the care of problem skin, you will get rid of skin imperfections and eliminate oily shine. As a result, you will get healthy skin and self-confidence and attractiveness.

Status/Affiliation

When purchasing goods and services, a person may have the goal of emphasizing with their help his individuality, taste, or attributing him to any group or, conversely, highlighting him.

You are unique in this dress

By purchasing a one-of-a-kind couture dress, you focus on your personality and individuality. Make a statement by letting others know that you are an independent woman.

Safety comes first

With our “Cuckoo” alarm you will increase the safety of your private property, life and health.

Recognition/compensation

The motivation for purchasing a product or service may be the desire to receive confirmation of its value or to avoid criticism.

Not one price is the same or how to develop a competitive advantage of a product without affecting the issue of its cost

Many entrepreneurs are confident that the only and most powerful competitive advantage of their product can be price. If the price of the product is lower than that of competitors, then your company will instantly receive an increase in profits. And this is quite possible. But the company cannot always reduce the price due to the expected damage. And clients are not always only interested in price.

Let's consider what characteristics of the product can be used to form its advantages and benefits for the buyer.

Features of the product itself

The unique characteristics of the product will create its competitive advantage. They can become the main motivator for purchase, even if the product is more expensive than your competitors. The advantages may include:

• Functionality;
• Corporate identity, symbols, logo;
• Appearance;
• Range;
• No need for maintenance;
• Superiority in quality.

Place of sale of goods

Significant advantages for the product will be:

• Location of the point of sale of goods;
• Product availability;
• Display of goods;
• Ease of access to the product.

Staff and people

It may be important for the consumer who represents the product, and when demonstrating the advantages in this category, they become a powerful motivator for purchase. These benefits may include:

• Company employees who provide free advice on product characteristics;
• Store personnel who are ready to recommend or consult about a product;
• Manufacturer, whose name characterizes the quality of the product;
• Public figures advertising a product.

Is it always necessary to demonstrate competitive advantages and benefits?

In the framework of fierce market competition, demonstrating to consumers the advantages of a company, product or service and the benefits that they will receive as a result, becomes almost the only way to promote your business and work for the future. This is a fairly simple option for promoting and positioning your name, which does not require financial investments, but at the same time is an effective tool for competing. Therefore, do not ignore our recommendations, work on your competitive advantages in order to soon take a leadership position in your niche.

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Course work on the subject "> on the topic: "Competitive advantages of the company" Checked by ____________________ _____________________ Completed by a student of the group _______ _____________________ CONTENTS INTRODUCTION Today, the competition between firms is moving to a new level, which is not always clear to their management. Too many firms and their top managers misunderstand the nature of competition and the challenge ahead: they focus on improving financial performance, obtaining government assistance, ensuring stability, and reducing risk through alliances and mergers with other firms. The realities of modern competition require leadership. Leaders believe. change, they bring to their organizations the energy needed to continually innovate, they recognize the importance of their home country's position to their firms' competitive success, and they work to improve that position. Most importantly, leaders understand the significance of difficulties and challenges. Because they are willing to help the government make appropriate—if painful—policy decisions and rules, they are often given the title of “statesmen,” although few of them consider themselves such. They are ready to trade a quiet life for difficulties in order to ultimately achieve an advantage over their competitors. The relevance of the research topic is due to the presence of residual phenomena of the economic crisis in the Russian economy, tightening competition, in which, in order to get a client, firms are ready to reduce prices for their products or services, sometimes bringing them to a minimum level. The purpose of the presented research is to expand the theoretical knowledge base on the issue of competitive advantages in order to develop in the future a strategy not only for survival, but also for development for one’s own company. Within the framework of this goal, the following tasks are formulated: - to reveal the meaning of the concept of “competitive advantage”; - consider the types of competitive advantages of the company; - explore several strategies for achieving a firm's competitive advantage. The subject of the study is competitive advantages as a form of economic relations, manifested in the consumer-recognized superiority of a company relative to a direct competitor in any field of activity. The object of the study is the process of forming a sustainable competitive advantage of a company or strategy. The theoretical and methodological basis of the study are the works of leading Russian and foreign scientists devoted to the concept of competitive advantages (G. L. Azoev, M. Porter, A. Yudanov...) 1. THEORETICAL FOUNDATIONS OF COMPETITIVE ADVANTAGES OF A FIRM 1.1 The concept of competitive advantages The specific market position of an organization determines its competitive advantages. In general terms, competitive advantage is superiority in some area that ensures success in the competition. The specific content of the concept of competitive advantage depends, firstly, on the subject of competition, and secondly, on the stage of competition. The competitive struggle, which is a consequence of limited resources, forces us to look for an answer to the question of the patterns of behavior of an economic entity in such conditions, this answer is given by science - economic theory, during this struggle there is a change in the methods of its implementation (policies for achieving competitive advantages, sources of competitive advantages), which is reflected in the evolution of the concept of competitive advantage. Limited resources are manifested at all levels: person, firm, region, country, respectively; the concept of “competitive advantages” can be applied to various subjects of competition1 http://www.dissland.com/catalog/formirovanie_ustoychivogo_konkurentnogo_preimushchestva_na_osnove_intellektualnogo_kapitala.html (access date 01/10/2011).

The most complete interpretation of the concept of “competitive advantage” existing in economic research is reflected by the definition of G.L. Azoeva. In accordance with this interpretation, competitive advantages are understood as “concentrated manifestations of superiority over competitors in the economic, technical, organizational areas of an enterprise’s activity, which can be measured by economic indicators (additional profit, higher profitability, market share, sales volume).” According to G.L. Azoev, superiority over competitors in the economic, technical, organizational spheres of an enterprise’s activity is a competitive advantage only if it is reflected in an increase in sales volumes, profits and market share2. Thus, competitive advantage is those characteristics and properties of a product or brand, as well as specific forms of business organization that provide the company with a certain advantage over its competitors. The key success factors influencing competitive advantage include: - technological: high research potential, ability for industrial innovation; - production: full use of production economies of scale and experience, high quality production, optimal use of production capacity, high productivity, necessary production flexibility; - marketing: use of marketing economies of scale and experience, high level of after-sales service, wide product line, powerful sales network, high speed of product delivery, low sales costs; - managerial: the ability to quickly respond to changes in the external environment, the presence of managerial experience; ability to quickly bring a product to the market from the R&D stage; - others: powerful information network, high image, favorable territorial location, access to financial resources, ability to protect intellectual property3. The main task of a company in the field of competition is to create such competitive advantages that would be real, expressive, and significant. Competitive advantages are not permanent; they are won and maintained only through continuous improvement in all areas of the company's activities, which is a labor-intensive and expensive process. 1.2 Types of competitive advantages of a company Let's consider the typologies of competitive advantages of a company. First typology (internal and external competitive advantages) Internal competitive advantage is based on the company's superiority in terms of costs, which allows the cost of manufactured products to be lower than that of competitors. Lower costs give the company an advantage if the products meet the industry average quality standard. Otherwise, a product of poorer quality may be sold through a reduction in its price, which reduces the share of profit. Accordingly, in this embodiment, the cost advantage does not provide benefits. Internal competitive advantage results from high productivity and effective cost management. Relatively low costs provide the company with greater profitability and resistance to lower sales prices imposed by the market or competition. Low costs allow, if necessary, to carry out a pricing dumping policy, setting lower prices in order to increase market share; low costs are also a source of profit that can be reinvested in production to improve product quality, other forms of product differentiation, or used to support other areas of business . In addition, they create effective protection against the five forces of competition (M. Porter). Such as the emergence of new competitors, the possibility of substitute products, the ability of consumers to defend their interests, the ability of suppliers to impose their conditions, competition between long-existing firms. Internal competitive advantage is based mainly on a proven production process and effective management of enterprise resources. External competitive advantage is based on the distinctive properties of a product or service that have greater “customer value” for the buyer than similar products of competitors. This allows you to charge higher sales prices than competitors that do not provide the same distinctive quality. Any innovation that gives an organization a real increase in its success in the market is a competitive advantage. Organizations achieve competitive advantage by finding new ways to compete in their industry and entering the market with them, which can be called in one word - “innovation”. Innovation in a broad sense includes both the improvement of technology and the improvement of ways and methods of doing business. Innovation can be expressed in a change in the product or production process, new approaches to marketing, new ways of distributing goods, new concepts of competition, etc. The most typical sources of obtaining external competitive advantages include: - new technologies; - changes in the structure and cost of individual elements in the technological chain of production and sale of goods; - new consumer requests; - emergence of a new market segment; - changes in the “rules of the game” in the market. A special source is information about your business plus professional skills that allow you to obtain and process such information so that the final processing product turns out to be a real competitive advantage. Competitive advantages based on cost alone are generally not as durable as advantages based on differentiation. (Cheap labor refers to the advantage of low rank). Competitive advantages of a higher level or order, such as proprietary technology, differentiation based on unique products or services, an organization's reputation based on enhanced marketing efforts, or close relationships with customers, can be maintained over a longer period of time. Typically, high-order benefits are achieved through long-term, intensive investment in production capacity, specialized training, R&D, and marketing investments. To maintain competitiveness, an organization must create new advantages at least as quickly as its competitors can copy existing ones.4 Second typology (by degree of sustainability) Distinguishes between sustainable and unsustainable competitive advantages Third typology (by sphere of manifestation) By sphere manifestations highlight: - competitive advantages in the field of R&D, expressed in the degree of novelty, the scientific and technical level of applied R&D and R&D, the optimal structure of R&D costs and their economic efficiency, in patent purity and patentability of developments, timeliness of preparation of R&D results for production development, completeness taking into account the conditions of consumption of developed products, the duration of R&D; - competitive advantages in the sphere of production, expressed in accordance with the level of concentration of production and the type of market (high level of concentration in conditions of pure monopoly, monopolistic and oligopolistic competition, low level in conditions of a free competition market), in the use of progressive forms of organization of production (specialization, cooperation, combination ), in the amount of production capacity of the enterprise, in the use of advanced equipment, technology, construction materials, in the high professional and qualification level of labor personnel and scientific organization of labor, the efficiency of use of production resources, the efficiency of design and technological preparation of production and the efficiency of production in general; - competitive advantages in the field of sales, expressed in improved pricing, more efficient distribution of goods and sales promotion, more rational relations with intermediaries, more efficient systems of settlements with consumers; - competitive advantages in the service sector, expressed in more effective pre-sales and after-sales service of products, warranty and post-warranty service. Fourth typology (by type of manifestation) By type of manifestation, it is necessary to distinguish between technical, economic, and managerial competitive advantages: - technical competitive advantages are manifested in superiority in production technology, superiority of technical characteristics of machines and equipment, technological features of raw materials used in production, technical parameters of products ; - economic competitive advantages consist of a more favorable economic-geographical position and a more rational location of the enterprise, greater economic potential of the enterprise, more efficient use of the enterprise's resources, allowing to reduce the cost of production, better economic characteristics of the products compared to competitors, a better financial condition of the enterprise, making it easier access to credit resources and expanding investment opportunities; - managerial competitive advantages are manifested in more effective implementation of the functions of forecasting, planning, organization, regulation, accounting, control and analysis of production and economic activities. Fifth typology of competitive advantages The following types of competitive advantages are distinguished: 1) competitive advantages based on economic factors; 2) competitive advantages of a structural nature; 3) competitive advantages of a regulatory nature; 4) competitive advantages associated with the development of market infrastructure; 5) competitive advantages of a technological nature; 6) competitive advantages associated with the level of information support; 7) competitive advantages based on geographical factors; 8) competitive advantages based on demographic factors; 9) competitive advantages achieved as a result of actions that violate the law. Competitive advantages based on economic factors are determined by: 1) the best general economic state of the markets in which the enterprise operates, expressed in high industry average profits, long payback periods on investments, favorable price dynamics, high levels of disposable income per capita, the absence of non-payments, and inflationary processes etc.; 2) objective factors stimulating demand: large and growing market capacity, low sensitivity of consumers to price changes, weak cyclicality and seasonality of demand, lack of substitute goods; 3) effect of scale of production. 4) the effect of scale of activity, which manifests itself in the ability to satisfy a wide variety of consumer needs, while setting high prices for the product due to its complex nature; 5) the effect of learning experience, which is expressed in greater labor efficiency due to specialization in types and methods of work, technological innovations in production processes, optimal loading of equipment, more complete use of resources, and the introduction of new product concepts; 6) economic potential of the enterprise. Competitive advantages of a structural nature are determined mainly by the high level of integration of the production and sales process in the company, which makes it possible to realize the advantages of intracorporate connections in the form of internal transfer prices, access to total investment, raw materials, production, innovation and information resources, and a common sales network. Within the framework of integrated structures, potential opportunities are created for concluding anti-competitive agreements and coordinated actions of group members (both horizontal and vertical), including with government authorities. A powerful source of strengthening a company's competitive position is the use of relationships between its various divisions and strategic business areas. The phenomenon when income from the joint use of resources exceeds the amount of income from the separate use of the same resources is called the synergy effect. Structural competitive advantages also include the ability to quickly penetrate unoccupied market segments. Competitive advantages of a regulatory nature are based on legislative and administrative measures, as well as on government incentive policies in the field of investment volumes, credit, tax and customs rates in a certain product area. Such competitive advantages exist due to laws, regulations, privileges and other decisions of government and management authorities. These include: - benefits provided to the region or individual enterprises by government authorities; - the possibility of unhindered import and export of goods outside the administrative-territorial entity (region, territory); - exclusive rights to intellectual property, ensuring a monopoly position for a certain period. Advantages of a regulatory nature differ from others in that they can be eliminated relatively quickly by repealing the relevant legislation. Competitive advantages associated with the development of market infrastructure arise as a result of varying degrees: - development of the necessary means of communication (transport, communications); - organization and openness of labor, capital, investment goods and technology markets; - development of a distribution network, including retail, wholesale, futures trade, services for the provision of consulting, information, leasing and other services; - development of inter-company cooperation. Technological competitive advantages are determined by the high level of applied science and technology in the industry, special technical characteristics of machinery and equipment, technological features of raw materials and materials used in the production of goods, and technical parameters of products. Competitive advantages associated with the level of information support are determined by good awareness and are based on the availability of an extensive data bank about sellers, buyers, advertising activities, and information about the market infrastructure. The absence, insufficiency and unreliability of information becomes a serious obstacle to competition. Specific advantages based on geographical factors are associated with the ability to economically overcome the geographical boundaries of markets (local, regional, national, global), as well as the favorable geographical location of the enterprise. In addition, the geographic barrier to entry for potential competitors into the market is the difficulty of moving goods between territories due to the unavailability of vehicles for transporting goods, significant additional costs for crossing market borders, and loss of quality and consumer properties of goods during their transportation. Demographic-based competitive advantages are created as a result of demographic changes in the target market segment. Factors influencing the volume and structure of demand for the products offered include changes in the size of the target population, its gender and age composition, population migration, as well as changes in the level of education and professional level. Competitive advantages achieved as a result of actions that violate legal norms include: - unfair competition; - directly or indirectly fix sales or purchase prices or any other trading conditions; - restrict or control production, markets, technological development or investment; - share markets or sources of supply; - apply different conditions to identical transactions with other parties, thereby placing them at a disadvantage; - make the issue of concluding contracts dependent on the acceptance by other parties of additional obligations that are not related to the subject of these contracts, etc. clause 2. STRATEGIES FOR IMPLEMENTING COMPETITIVE ADVANTAGES 2.1 Strategic competitive advantages of the company and ways of their implementation in the domestic market The main task in the strategic orientation of the company is the choice of a basic competitive strategy in relation to a certain area of ​​business. A competitive strategy must be based on two essential conditions: - it is necessary to determine the strategic goal of the company regarding a given product or service in terms of the scale of competition. - it is necessary to choose the type of competitive advantage. The strategic goal of the company involves targeting the entire market or a specific segment. Basic competitive strategies vary depending on what advantage they rely on. Here it is necessary to decide what type of competitive advantage to give preference to - internal, based on cost reduction, or external, based on the uniqueness of the product; which is easier to defend in a competitive market. The main factors influencing competitive advantage include: - technological: high research potential, ability for industrial innovation; - production: full use of production economies of scale and experience, high quality production, optimal use of production capacity, high productivity, necessary production flexibility; - marketing: use of marketing economies of scale and experience, high level of after-sales service, wide product line, powerful sales network, high speed of product delivery, low sales costs; In addition, this strategy provides the widest possible boundaries of the potential market. The focus of the entire strategy is to create internal competitive advantage, which can be achieved through higher productivity and effective cost management. The company's goal in this case is related to the use of cost superiority as the basis for increasing market share through price leadership or generating additional profits. Leadership due to the advantage of lower costs than competitors gives the company the opportunity to resist its direct competitors even in the event of a price war. Low costs are a high barrier to entry for potential competitors and a good defense against substitute products. The main factors of superiority in costs include: the use of advantages due to the effects of scale and experience; - control over fixed costs; - high technological level of production; - stronger staff motivation; - privileged access to sources of raw materials. As a rule, these advantages manifest themselves in the manufacture of standard products of mass demand, when the possibilities of differentiation are limited and demand is price elastic, and the likelihood of consumers switching to others is high. The cost minimization strategy has disadvantages. Cost reduction techniques can be easily copied by competitors; technological breakthroughs can neutralize existing internal competitive advantages associated with accumulated experience; due to an excessive focus on cost reduction - insufficient attention to changes in market requirements, a decrease in product quality is possible. This strategy is aggressive and is most easily implemented when the enterprise has access to exclusive, low-cost resources. Strategy of differentiation by segments (classes) of manufactured goods The main goal of each differentiation strategy is to give the product or service properties that are distinctive from similar competing goods or services, which create “customer value” associated with the advantage of the product, time, place, service. Customer value is the utility or overall satisfaction they receive from using a product, as well as the minimal operating costs over its life. The main point of differentiation strategy is understanding the needs of customers. In this case, we can say that with a certain set of qualities of an exclusive product or service, the company creates a permanent group of buyers in a specific market segment, i.e. almost a mini-monopoly. Unlike cost leadership strategy, which can only be achieved through an efficient cost structure, differentiation can be achieved in a variety of ways. The main approaches used in the differentiation strategy include: - development of such product characteristics that reduce the buyer’s total costs of operating the manufacturer’s products (increased reliability, quality, energy saving, environmental friendliness); - creation of product features that increase the effectiveness of its use by the consumer (additional functions, complementarity with another product, interchangeability); - giving the product features that increase the level of customer satisfaction (status, image, lifestyle). Based on the nature of the focus, innovation and marketing differentiation strategies can be distinguished. Innovative differentiation An innovative differentiation strategy is a real differentiation associated with the production of truly different products using different technologies. This strategy involves acquiring competitive advantages through the creation of fundamentally new products, technologies or upgrades and modifications of existing products. In this case, differentiation affects not only the product itself, but also the technology being implemented, which requires taking into account the factor of scientific and technological progress. Scientific discoveries and evolving technologies offer new ways to meet consumer needs. Real differentiation is more characteristic of the market for industrial goods and products of high-tech industries, where the largest gap in competition is determined by an effective innovation strategy. Marketing differentiation A marketing differentiation strategy involves achieving competitive advantages by creating distinctive properties associated not with the product itself, but with its price, packaging, delivery methods (without prepayment, with the provision of transport, etc.); placement, promotion, after-sales service (warranties, service), a trademark that creates an image. The presence of distinctive qualities usually requires higher costs, which leads to higher prices. However, successful differentiation allows a firm to achieve greater profitability because consumers are willing to pay for product uniqueness. Differentiation strategies require significant investments in functional marketing and, especially, in advertising in order to convey to consumers information about the claimed distinctive features of the product. Focus strategy A focus (specialization) strategy is a typical business strategy that involves concentrating on a narrow market segment or a specific group of customers, as well as specializing in a certain part of the product and/or geographic region. Here, the main goal is to meet the needs of the selected segment with greater efficiency in comparison with competitors serving a wider market segment. A successful focus strategy achieves a high market share in the target segment, but always leads to a low market share in the overall market. This strategy is the preferred development option for firms with limited resources. A focus strategy takes the form of a focused low-cost strategy if the segment's buyers' price requirements for the product differ from those of the primary market, or a focused differentiation strategy if the target segment requires unique product characteristics. Like other basic business strategies, a focus strategy protects a firm from competitive forces in the following ways: focusing on a segment allows it to compete successfully with firms operating in different segments; the firm's specific competencies and capabilities create barriers to entry for potential competitors and the penetration of substitute products; pressure from buyers and suppliers is reduced due to their own reluctance to deal with other, less competent competitors. The reason for choosing such a strategy is the lack or lack of resources, strengthening barriers to entry into the market. Therefore, the focusing strategy is, as a rule, inherent in small companies5 http://www.logistics.ru/9/2/i20_64.htm (accessed January 15, 2011). 2.2 Problems of realizing competitive advantages in the international market Everything that was said above about competition and competitive strategy can equally apply to both foreign and domestic markets. At the same time, international competition has some peculiarities. Feature one Each country, to one degree or another, possesses the factors of production necessary for the activities of firms in any industry. The theory of comparative advantage in the Heckscher-Ohlin model is devoted to the comparison of available factors. The country exports goods in the production of which various factors are intensively used. However, factors, as a rule, are not only inherited, but also created, therefore, in order to obtain and develop competitive advantages, it is not so much the stock of factors at the moment that is important, but the speed of their creation. In addition, an abundance of factors can undermine competitive advantage, while a lack of factors can encourage renewal, which can lead to long-term competitive advantage. The combination of factors used differs in different industries. Firms achieve competitive advantage when they have low-cost or high-quality inputs that are important when competing in a particular industry. Thus, Singapore's location on an important trade route between Japan and the Middle East made it the center of the ship repair industry. However, gaining a competitive advantage based on factors depends not so much on their availability as on their effective use, since MNCs can provide missing factors by purchasing or locating operations abroad, and many factors move relatively easily from country to country. Factors are divided into basic and developed. The main factors include natural resources, climatic conditions, geographical location, unskilled labor, etc. The country receives them by inheritance or with minor investments. They are not particularly important for a country's competitive advantage, or the advantage they create is unsustainable. The role of the main factors is reduced due to a reduction in the need for them or due to their increased availability (including as a result of the transfer of activities or procurement abroad). These factors are important in extractive industries and agriculture-related industries. Developed factors include modern infrastructure, highly qualified labor force, etc. It is these factors that are most important, as they allow you to achieve a higher level of competitive advantage. Feature two The second determinant of national competitive advantage is the demand in the domestic market for goods or services offered by this industry. By influencing economies of scale, demand in the domestic market determines the nature and speed of innovation. The volume and nature of growth in domestic demand allow firms to gain a competitive advantage if: - there is demand abroad for a product that is in great demand in the domestic market; - there are a large number of independent buyers, which creates a more favorable environment for renewal; - domestic demand is growing rapidly, which stimulates the intensification of capital investment and the speed of renewal; - the domestic market is quickly becoming saturated, as a result, competition is becoming tougher, in which the strongest survive, which forces them to enter the foreign market. Firms achieve competitive advantage by internationalizing demand in the domestic market, i.e. when preference is given to foreign consumers. Feature Three The third determinant that determines a national competitive advantage is the presence in the country of supplier industries or related industries that are competitive in the world market. In the presence of competitive supplying industries, the following are possible: - effective and quick access to expensive resources, for example, equipment or skilled labor, etc.; - coordination of suppliers in the domestic market; - assisting the innovation process. National firms benefit most when their suppliers are globally competitive. The presence of competitive related industries in a country often leads to the emergence of new highly developed types of production. Related industries are those in which firms can interact with each other in the process of forming a value chain, as well as industries that deal with complementary products, such as computers and software. Interaction can occur in the field of technology development, production, marketing, and service. If there are related industries in the country that can compete in the world market, access to information exchange and technical cooperation opens up. Geographical proximity and cultural kinship lead to more active exchanges than with foreign firms. Success in the global market of one industry may lead to the development of the production of additional goods and services. For example, the sale of American computers abroad has led to increased demand for American peripherals, software, and the development of American database services. Feature Four The fourth important determinant of industry competitiveness is the fact that firms are created, organized and managed depending on the nature of competition in the domestic market, with different strategies and goals being developed. National characteristics influence the management of firms and the form of competition between them. In Italy, many companies that successfully operate in the global market are small or medium-sized (in size) family businesses. In Germany, large companies with a hierarchical management system are more common. In addition, we can recall the American and Japanese control systems. These national characteristics significantly influence the positions of firms when targeting global competition. Of particular importance for achieving high competitiveness in the industry is strong competition in the domestic market; competition in the domestic market creates advantages for the national industry as a whole, and not just for individual firms. Competitors borrow progressive ideas from each other and develop them, since ideas spread faster within one nation than between different nations. These advantages are enhanced when competitors are concentrated in one geographic area. The role of the government The role of the government in the formation of national advantages lies in the fact that it influences all four determinants: - on the parameters of factors - through subsidies, capital market policies, etc.; - on demand parameters - by establishing various standards and carrying out public procurement; - on the conditions for the development of related industries and supplier industries - through control over advertising media or regulation of infrastructure development; - on the strategy of firms, their structure and competition - through their tax policy, antitrust legislation, by regulating investments and the activities of the securities market, etc. All four determinants can also have the opposite effect on government. The role of government can be positive or negative. The determinants of national competitiveness are a complex system that is in constant development. Some determinants regularly influence others. The action of the system of determinants leads to the fact that competitive national industries are not distributed evenly throughout the economy, but are connected in bundles, or “clusters,” consisting of industries that depend on each other. 2.3 Benchmarking as a strategy for achieving competitive advantage6http://www.support17.com/component/content/296.html?task=view (accessed January 12, 2011) The term “benchmarking” comes from the English word benchmark (bench- place, to mark - note), is a way of studying the activities of business entities, primarily their competitors, with the aim of using positive experience in their work. Benchmarking includes a set of tools that allow you to systematically find, evaluate and organize the use of all the positive advantages of other people's experience in your work. Benchmarking is based on the idea of ​​comparing the activities of not only competing enterprises, but also leading firms in other industries. Proper use of the experience of competitors and successful companies allows you to reduce costs, increase profits and optimize the choice of strategy for your organization. Benchmarking is a constant study of the best practices of competitors, comparing a company with a created reference model of its own business. Benchmarking allows you to identify and use in your business what others do better. Benchmarking is based on the concept of continuous performance improvement, which involves a continuous cycle of planning, coordinating, motivating and evaluating actions with the goal of sustainable improvement of the organization's performance. The core of benchmarking is finding the best business standards for use by the research organization. It focuses not on simply measuring and comparing achievements, but on how any given process can be improved by applying best practices. Benchmarking requires a company to be humble enough to accept that someone else may be better at something, and wise enough to try to learn how to catch up and even surpass others' achievements. Benchmarking reflects an organization's continuous improvement efforts and helps integrate disparate improvements into a unified change management system. Types of benchmarking - internal - comparison of the work of company divisions; - competitive - comparison of your enterprise with competitors according to various parameters; - general - comparison of the company with indirect competitors according to selected parameters; - functional - comparison by function (sales, purchasing, production, etc.). General benchmarking is a comparison of the production and sales performance of one’s products with the business performance of a sufficiently large number of producers or sellers of a similar product. Such a comparison allows us to outline clear directions for investment activity. The parameters used to compare product characteristics depend on the specific type of product. Functional benchmarking means comparing the performance parameters of individual functions (for example, operations, processes, work methods, etc.) of a seller with similar parameters of the best enterprises (sellers) operating in similar conditions. Competitive benchmarking examines the products, services, and processes of an organization's direct competitors. Benchmarking is close to the concept of marketing intelligence, which means the constant activity of collecting current information about changes in the external marketing environment, necessary for both the development and adjustment of marketing plans. However, marketing intelligence aims to collect confidential information, and benchmarking can be seen as the activity of thinking about strategy based on the best experience of partners and competitors. F. Kotler identifies benchmarking with basic analysis - the process of “searching, studying and mastering the most advanced practices and technologies used by organizations in various countries around the world, with the goal of making your organization more effective.” Benchmarking is becoming a powerful lever for enhancing a company's competitiveness and the art of understanding how and why some companies achieve significantly better results than others. With the help of benchmarking, you can improve the best technologies of other companies, i.e. it is aimed at mastering “the most advanced world experience.” CONCLUSION In conditions of fierce competition and a rapidly changing situation, firms must not only focus on the internal state of affairs, but also develop a long-term strategy aimed at creating sustainable competitive advantages. Accelerating changes in the environment, the emergence of new demands and changing consumer positions, changes in government policy, and the entry of new competitors into the market lead to the need for constant analysis and optimization of existing competitive advantages. The most significant or long-term competitive advantage, in my opinion, is given to a company by the introduction of new technology or “know-how” created by the company itself through innovation. Not every company can create this competitive advantage (the main problem is the lack of sufficient financial and human resources). From the study we can conclude that there is no competitive advantage that is uniform for all companies. Each company is unique in its own way, therefore the process of creating competitive advantages for each company is unique, since it depends on many factors: the company’s position in the market, the dynamics of its development, potential, the behavior of competitors, the characteristics of the goods produced or services provided, the state of the economy , cultural environment and many other factors. At the same time, there are some fundamental points and strategies that allow us to talk about general principles of competitive behavior and the implementation of strategic planning aimed at creating a sustainable competitive advantage. REFERENCES 1. Azoev G.L., Chelenkov A.P. Competitive advantages of the company. - M.: JSC Printing House NEWS, 2007. 2. Benchmarketing [Electronic resource] 3. Golovikhin S.A., Shipilova S.M. Theoretical foundations for determining the competitive advantages of a machine-building enterprise 4. Zakharov A.N., Zokin A.A., Competitiveness of an enterprise: essence, assessment methods and mechanisms of increase 5. Porter M. “International competition”: trans. from English: ed. V.D. Shchetinina. M.: International relations, 1993 6. Fatkhutdinov R.A. Strategic management. 7th ed., rev. and additional - M.: Delo, 2005. - 448 p. 7. Shifrin M.B. Strategic management. - St. Petersburg: Peter, 2008, p. 113 8. Yagafarova E. F. Abstract of dissertation research on the topic "The role of intellectual capital in the formation of a sustainable competitive advantage of a company"

1. Yagafarova E. F. Abstract of dissertation research on the topic "The role of intellectual capital in the formation of a sustainable competitive advantage of a company" [Electronic resource] URL:
2. S.A. Golovikhin, S.M. Shipilova. Theoretical foundations for determining the competitive advantages of a machine-building enterprise [Electronic resource] URL: http://www.lib.csu.ru/vch/8/2004_01/023.pdf (access date 12/18/2010)
3. Shifrin M.B. Strategic management. - St. Petersburg: Peter, 2008, p. 113
4. Azoev G.L., Chelenkov A.P. Competitive advantages of the company. - M.: JSC “Printing house “NEWS”, 2007.
5. A.N. Zakharov, A.A. Zokin, Competitiveness of an enterprise: essence, methods of assessment and mechanisms for increasing [Electronic resource] URL:

In December, we started a series of articles about texts: we managed to tell why they are needed in general, what to write for specific pages of the site, what should be the structure of the selling text for the main page. In January we talked about headings and remembered the basic rules for creating Title and Description.

Let's continue our tutorial on writing texts and talk about how to sell trust in a company, product or service.

Let's say you got to work: developed a SYNOPSIS, came up with a USP, composed strong, attractive headlines, sketched out a text outline. And everything seems to be fine - you are the coolest and the coolest and the products are super. But the trouble is, clients are now picky and won’t just take your word for it.

Why are you better than Vasya Pupkin or Worldwide Stroy Publishing Inc. LLC? Why should a user spend his hard-earned money with you? Won't you deceive him? What benefit will he ultimately receive?

You need to provide the person with evidence of why you are truly the best, demonstrate what benefits he will receive by purchasing a product or becoming a client of the company. This is a prerequisite for all texts. It’s not enough just to interest the user, you need to convince him to contact you.

How to talk about advantages over competitors?

Do some research - analyze your competitors, their services and products. Look at their strengths and weaknesses, think about what you are better at. Remember, you don't just need to talk about your achievements or the bare features of the product. It should be shown what they will give to the client.

Let's look at examples to see what mistakes are most often encountered when trying to talk about a company and what to do about them:

1. Same type, meager benefits without evidence

   We often hear the following from clients: “We are like everyone else, there are no differences. I like the way site.com is written - everything is exactly the same with us, write it the same way.” So no need to do it.

   Users always choose from several offers, rather than rushing to the first one they come across. How can you decide where to turn if it’s the same everywhere?

   You don't need to go far for an example. Let's say you want to order sushi for your office. We start choosing and see the following picture on 4 different delivery service sites:

   

   

   Find 5 differences between these 4 sites.

   All have the freshest ingredients, attractive selection, fast delivery and competitive prices. And no, the blocks are not taken out of context - there is no detailed explanation for them anywhere, delivery time, discount amount and other information are not indicated - guess for yourself.

   Or another example:

   

   This set is suitable for absolutely any company: building houses, selling spare parts, delivering flowers, sushi and everything else. The site will be lost among thousands of similar ones.

   Now let's look at this option:

   Of course, the block is not perfect, there is something to be improved. But nevertheless, the time is indicated - from 60 minutes to receive the coveted rolls, and you can pay for the order by card, so you don’t have to run for cash.

   

   This option also lacks factual information in places, but the benefits are still obvious, especially against the backdrop of absolutely identical competitors.

   Another example, from our website from the page describing the SEO service on a subscription basis:

   

   I think you understand the difference between a good option and a bad one.

   What to do:

   Get rid of cliches and cliches. Don't forget about specifics. Website owners should not hide information and do not play spy. Provide the copywriter with all the information. We will not tire of repeating: competitors will spend time and study your prices, advantages and features, but the client will not do this - he will simply leave the site and will not return.

   Copywriters should actively ask questions to the client, ask for factual information and not limit themselves to template phrases about favorable prices, high quality and a wide range.

2. Solid “we-we-we”

   Write not about how good you are, but about what benefits the user will receive by becoming a client of the company.

   

   You read this and the question arises, what’s in it for me as a client? What will I get?

   And when I see the text about “young dynamically developing companies,” I actually want to cry.

   What to do:

   When describing benefits, think from the person and their personal interests. Less We, more You.

   Focus on what the customer gets. The user doesn’t care whether you are developing dynamically or not, he wants to solve his problem with the help of a specific product or service. Show how this will happen.

   

3. Much water"

   Brevity is not always the sister of talent. But lengthy descriptions of the benefits of work will also not bring any benefit.

   

   No one will wade through this sheet of text, which consists of 90% template phrases.

   What to do:

   Write clearly and to the point, structure the information, and don’t spill the beans. Don’t forget to present the benefits in an easy-to-read form: use icons, lists, tables.

   

4. Lack of facts and evidence

   This has already been mentioned, but we will repeat it again. In words, all without exception are the best. If you are faster, more attentive, more reliable than your competitors - prove it, don’t be modest. The client's doubts can be dispelled by facts. Without them, he again gets another set of cliches that will not persuade him to buy from you.

   

   

   What to do:

   Operate with facts: a wide range - exactly how many items and what it will give the client, low cost - what is the minimum threshold and why the price is low, quality guarantee - what exactly, for how many years, etc.

   Show advantages in comparison with competitors. Describe how things are going for you and how they are in other companies. Let the client clearly see that ordering products from you is clearly more profitable.

5. Benefits for optimization or just “so it will be”

   Some still believe that text is only needed for optimization and it is important to cram as many keywords into it as possible. People often forget about the fact that you need to write for people, and not for search robots.

   The result is this:

   

   What are the advantages here is a mystery. What kind of purchase and trust in the company can we talk about? And search engines will not be happy with such text.

   What to do:

   Write for people, not for robots. Optimization should be organic and invisible; if a keyword doesn’t fit into your description of benefits, don’t use it.

6. Substitution of advantages with technical properties or characteristics of the product

   Another common mistake. Under the guise of benefits, the user is offered a 1 TB memory capacity, 4K FullHD super technology, and a unique method of singular spectral analysis, but they do not write what this will give the client.

   

   Not everyone will understand why they need these terabytes of memory or how the innovative pistol for Karcher differs from all others.

   What to do:

   Turn properties into benefits. Think and tell us what the compact size of an electric smokehouse will give the user, what is good about the wool of English sheep or an innovative box for an action camera. Explain to the user how much easier and better life will be with your services or products.

   

Instead of output:

The benefits block is an important element of the text. The reader should immediately receive an answer to the question “what is beneficial for me?” You need to win over the person, gain his trust and push him to take the target action.

How to do this, you ask? It is difficult to give a universal answer - after all, this is how new patterns and clichés are created. Each company, product or service has its own unique advantages, it is important to be able to highlight and show them. When working, we do not just present the company and products in a favorable light, but carefully study the needs of the target audience and tell clients exactly what benefits and benefits they will receive. We will be happy to help

Firms, not countries, compete in the international market. It is necessary to understand how a firm creates and maintains competitive advantage to understand the country's role in this process. At the present stage, the competitive capabilities of firms are not limited by the borders of their home country. The role of global strategies in creating competitive advantage should be given special attention, since these strategies completely change the role of the home country.

Let's start with the basic principles of competitive strategy. In competition in domestic and international markets, many principles coincide. Then we'll look at ways to enhance competitive advantage through global competition.

Competitive strategy

To understand the nature of competition, the basic unit is the industry (whether processing or service), that is, a group of competitors producing goods or services and directly competing with each other. A strategically significant industry includes products with similar sources of competitive advantage. Examples include the production of facsimile machines, polyethylene, heavy-duty long-haul trucks, and plastic injection molding equipment. In addition, there may be related industries whose products have the same buyers, production technology or distribution channels, but they have their own requirements for competitive advantage. In practice, the boundaries between industries are always very blurry.

Many discussions about trade and competition use overly broad definitions of industries, such as “banking,” “chemicals,” or “engineering.” This is a very broad approach, since both the nature of competition and the sources of competitive advantage vary significantly within each such group. For example, mechanical engineering is not a single industry, but dozens of industries with different strategies, such as the production of equipment for the weaving industry, for the manufacture of rubber products or for printing, and each has its own special requirements for achieving competitive advantage.

When developing a competitive strategy, firms strive to find and implement a way to compete profitably and lastingly in their industry. There is no universal competitive strategy; only a strategy matched to the conditions of a particular industry, the skills and capital possessed by a particular firm, can bring success.

The choice of competitive strategy is determined by two main points. The first is the structure of the industry in which the firm operates. The nature of competition varies widely across industries, and the likelihood of long-term profits varies across industries. For example, the average profitability in the pharmaceutical and cosmetics industries is very high, but not in steel and many types of clothing. The second main point is the position that the firm occupies within the industry. Some positions are more profitable than others, regardless of the average profitability of the industry itself.

Each of these points in itself is not sufficient for choosing a strategy. Thus, a firm in a very profitable industry may not make much profit if it chooses its position in the industry incorrectly. Both the structure of the industry and the position in it can change. An industry may become more (or less) “attractive” over time as the conditions for creating the industry in the country or other elements of the industry structure change. The position in the industry is a reflection of the never-ending war of competitors.

A company can influence both the structure of the industry and its position in its “table of ranks.” Firms that are doing well not only respond to changes in the “environment”, but also try to change it themselves to their benefit. A significant change in position in the competitive race entails changes in the structure of the industry or the emergence of new bases for competitive advantage. Thus, Japanese companies producing televisions have become world leaders thanks to the trend of transition to compact, portable televisions and the replacement of lamp element base with semiconductor ones. Firms in one country take over from firms in another country if they are better able to respond to such changes.

Structural analysis of industries

Competitive strategy must be based on a comprehensive understanding of industry structure and how it is changing. In any sector of the economy - it doesn’t matter whether it operates only on the domestic market or on the foreign market too - the essence of competition is expressed by five forces: 1) the threat of the emergence of new competitors; 2) the threat of the emergence of substitute goods or services; 3) the ability of suppliers of components, etc. to bargain; 4) the ability of buyers to bargain; 5) rivalry between existing competitors (see Figure 1).

Picture 1. Five forces driving industry competition

The importance of each of the five forces varies from industry to industry and ultimately determines the profitability of industries. In industries where these forces operate favorably (say, soft drinks, industrial computers, software trading, pharmaceuticals, or cosmetics), multiple competitors can earn high returns on their capital. In industries where one or more forces are unfavorable (for example, rubber, aluminum, many metal products, semiconductors, and personal computers), very few firms can maintain high profits for long.

The five forces of competition determine the profitability of an industry because they influence the prices firms can command, the costs they must incur, and the amount of capital investment required to compete in the industry. The threat of new competitors reduces the overall profitability potential of an industry because they bring new production capacity into the industry and seek market share, thereby reducing positional profits. Powerful buyers or suppliers benefit from bargaining and reduce the firm's profits. Intense competition in the industry reduces profitability, because in order to remain competitive, you have to pay (advertising, sales, research and development (R&D) costs), or profits “flow” to the buyer through lower prices.

The availability of substitute products limits the price that firms competing in the industry can charge; higher prices will encourage buyers to turn to a substitute and reduce industry output.

The significance of each of the five forces of competition is determined by the structure of the industry, that is, its basic economic and technical characteristics. For example, buyer impact is a reflection of questions such as: how many buyers the firm has; what part of the sales volume falls on one buyer; Is the price of the product a significant part of the buyer's total costs (making the product "price sensitive")? The threat of new competitors depends on how difficult it is for a new competitor to break into the industry (determined by factors such as brand loyalty, the size of the economy, and the need to tap into a network of intermediaries).

Each sector of the economy is unique and has a structure unique to it. For example, it is difficult for a new competitor to enter the pharmaceutical industry, since it requires huge R&D costs and large economics when selling products to doctors. It takes a long time to develop a substitute for an effective drug, and high prices do not frighten buyers at any time. The influence of suppliers is not significant. Finally, rivalry between competitors has been and continues to be moderate and focused not on price gouging, which reduces industry-wide profits, but on other variables, such as R&D, that increase industry-wide output. The presence of patents also discourages those who intend to compete by copying someone else's product. The structure of the pharmaceutical industry produces some of the highest returns on capital employed in major industries.

The structure of the industry is relatively stable, but can still change over time. For example, the consolidation of product distribution channels taking place in several European countries is increasing buyer power. Through their strategy, firms can also change all five forces in one direction or another. For example, the introduction of computer information systems in airlines makes it difficult for new competitors to emerge, because such a system costs hundreds of millions of dollars.

Industry structure is important to international competition for a number of reasons. First, given the different structures in different industries, different requirements must be met to compete successfully. Competing in an industry as fragmented as clothing requires very different resources and skills than in aircraft manufacturing. Country conditions for competition are more favorable in some industries than in others.

Secondly, often the industries that are important for a high standard of living are precisely those that have an attractive structure. Industries with attractive structures and opportunities for new competitors (in terms of technology, specialized skills, access to distribution channels, brand reputation, etc.) are often associated with high productivity and high returns on capital invested. The standard of living depends to a large extent on the ability of a country's firms to successfully enter industries with a profitable structure. A reliable indicator of an industry's "attractiveness" is not its size, speed of growth, or newness of technology (these traits are often emphasized by businessmen or government planners) but the structure of the industry. By targeting structurally disadvantaged industries, developing countries often misuse resources they don't have much of.

Finally, another reason why industry structure is important in international competition is that changing structure creates real opportunities for a country to enter new industries. Thus, Japanese companies producing copiers began to successfully compete with American leaders in this area (specifically, Xerox and IBM) due to the fact that they turned to a market sector that was left almost without attention (small-sized copiers) and applied a new approach to the buyer (selling through dealers instead of direct sales), changed production (mass production instead of small-scale production) and pricing approach (selling instead of renting, which is expensive for the customer). This new strategy made it easier to enter the industry and erased the advantage of the previous leader. How domestic conditions guide firms or force them to recognize and respond to structural changes is critical to understanding “patterns of success” in international competition.

Industry position

Firms must not only respond to changes in industry structure and try to change it themselves in their favor, but also choose a position within the industry. This concept includes the firm's overall approach to competition. For example, in the production of chocolate, American firms (Hershey, M&M's/Mars, etc.) compete by producing and selling in huge quantities a relatively small set of varieties of chocolate. On the contrary, Swiss firms (Lindt, Sprungli, Tobler/Jacobs and etc.) sell mainly refined and expensive products through narrower and more specialized distribution channels. They produce hundreds of products, use the highest quality components and a longer production process. As this example shows, position in the industry is the company's overall approach to competition. , and not just its products or who they are aimed at.

Competitive advantage determines your position in an industry. Ultimately, firms outperform their rivals if they have a strong competitive advantage. Competitive advantage is divided into two main types: lower costs and product differentiation. Low costs reflect a firm's ability to develop, produce, and sell a comparable product at a lower cost than its competitors. By selling a product at the same (or approximately the same) price as its competitors, the company in this case makes a greater profit. Thus, Korean companies producing steel and semiconductor devices defeated foreign competitors in this way. They produce comparable products at very low costs, using low-paid but highly productive labor and modern technology and equipment purchased abroad or manufactured under license.

Differentiation is the ability to provide the buyer with unique and greater value in the form of new product quality, special consumer properties or after-sales service. Thus, German machine tool firms compete using a differentiation strategy based on high product performance, reliability and fast maintenance. Differentiation allows the company to dictate high prices, which, with equal costs to its competitors, again gives greater profits.

Any type of competitive advantage results in greater productivity than competitors. A firm with a low cost of production produces a given value at a lower cost than its competitors; A firm with differentiated products has higher unit profits than its competitors. Thus, competitive advantage is directly related to the generation of national income.

It is difficult, but still possible, to gain a competitive advantage based on both lower costs and differentiation6. This is difficult to do because ensuring very high consumer properties, quality or excellent service inevitably leads to an increase in the price of the product; it will cost more than if you just strive to be on par with your competitors. Of course, firms can improve technology or production methods in ways that simultaneously reduce costs and increase differentiation, but eventually competitors will do the same and force a decision on what type of competitive advantage to focus on.

However, any effective strategy must pay attention to both types of competitive advantage, although strictly adhering to one of them. A firm that focuses on low costs must still provide acceptable quality and service. In the same way, the product of a firm producing differentiated products should not be so much more expensive than that of its competitors that this would be to the detriment of the company.

Another important variable that determines industry position is the scope of competition, or the breadth of goals a firm aims to achieve within its industry. A firm must decide for itself how many varieties of products it will produce, which distribution channels it will use, which customers it will serve, in which areas of the world it will sell its products, and in which related industries it will compete.

One of the reasons why the competitive field is important is that industries are segmented. Almost every industry has clearly defined product lines, multiple distribution and sales channels, and multiple types of buyers. Segmentation is important because different sectors of the market have different needs: an ordinary men's shirt sold without any advertising, and a shirt created by a famous fashion designer, are designed for buyers with very different needs and criteria. In both cases, we have shirts, but each has its own type of buyer. Different market sectors require different strategies and different capabilities; Accordingly, the sources of competitive advantage in different market sectors are also very different, although these sectors are “served” by the same industry. And the situation when firms from one country achieve success in one sector of the market (for example, Taiwanese firms in the production of cheap leather shoes), and firms from another country in the same industry - in another sector (Italian firms in the production of fashionable leather shoes) - is not rarity.

The area of ​​competition is also important because firms can sometimes gain a competitive advantage through the scale of their goals when competing globally, or through the use of linkages between industries when competing in related industries. For example, Sony benefits greatly from the fact that a wide range of electronic products bearing its brand, using its technology, and being distributed through its channels are produced throughout the world. Interrelations between clearly demarcated industries arise because of the commonality of important activities or skills among firms competing in these industries. The sources of competitive advantage around the world will be discussed below.

Firms in the same industry may choose different areas of competition. Moreover, it is typical that firms from different countries in the same industry choose different areas of competition. Basically, the choice is this: compete on a “broad front” or target one sector of the market. Thus, in the production of packaging equipment, German firms offer lines of equipment for a wide range of purposes, while Italian firms strive to focus on highly specialized equipment used only in certain market sectors. In the automotive industry, leading American and Japanese companies produce a whole range of cars of different classes, while BMW and Daimler-Benz (Germany) primarily produce powerful, high-speed and expensive high-class cars and sports cars, and Korean companies Hyundai and Daewoo focus on small and ultra-small class cars.

The type of competitive advantage and the area in which it is achieved can be combined into the concept of standard strategies, that is, completely different approaches to what high performance in the industry is. Each of these archetypal strategies, depicted in Figure 2, represents a fundamentally different concept of how to compete and succeed in competition. For example, in shipbuilding, Japanese firms have adopted a differentiation strategy and offer a wide range of high-quality ships at high prices. Korean shipbuilding firms have chosen a cost leadership strategy and also offer various types of ships, but not of the highest, but simply of good quality; however, the cost of Korean ships is less than Japanese ones. The strategy of successful Scandinavian shipyards is focused differentiation: they produce mainly specialized types of ships, such as icebreakers or cruise ships. They are manufactured using specialized technology and are sold at a very high price to justify the cost of labor, which is expensive in Scandinavian countries. Finally, Chinese shipbuilders, who have recently begun to actively compete in the world market (strategy - focusing on the level of costs), offer relatively simple and standard ships with even lower costs and at even lower prices than Korean ones.

Figure 2. Typical strategies

Based on the example of typical strategies, it becomes clear that no single strategy is suitable for absolutely all industries. On the contrary, many industries have a great combination of multiple strategies. Moreover, the structure of the industry limits the choice of possible strategy options, but you will not find an industry in which only one strategy can bring success. In addition, there may be variations on typical strategies with different ways of differentiation or focus.

The concept of generic strategies is based on the idea that each of them is based on competitive advantage and that in order to achieve it, a firm must choose its own strategy. The firm must decide what type of competitive advantage it wants to achieve and in what area it is possible.

The biggest strategic mistake is the desire to “chase all the rabbits,” that is, to use all competitive strategies at the same time. This is a recipe for strategic mediocrity and poor performance, because a firm that tries to use all the strategies at once will not be able to use any of them well due to their “built-in” contradictions. An example of this is the same shipbuilding: Spanish and British shipbuilding companies are declining because their production costs are higher than those of the Koreans, they do not have a basis for differentiation compared to the Japanese (that is, they do not produce anything that the Japanese would not produce ), but they were unable to find any market segments where they could gain a competitive advantage (such as Finland in the icebreaker market). Thus, they have no competitive advantage and are supported mainly by government orders.

Sources of Competitive Advantage

Competitive advantage is achieved based on how the company organizes and performs individual activities. The activities of any company are divided into different types. For example, sales agents conduct telephone conversations, service technicians perform customer-ordered repairs, scientists in a laboratory develop new products or processes, and financiers raise capital.

Through these activities, firms create certain values ​​for their customers. The ultimate value created by a firm is determined by how much customers are willing to pay for the goods or services offered by the firm. If this amount exceeds the total costs of all necessary activities, the firm is profitable. To gain a competitive advantage, a firm must either provide customers with approximately the same value as its competitors but produce the product at a lower cost (lower-cost strategy), or act to provide customers with a product with greater value for which it can command a higher price (low-cost strategy). differentiation strategy).

The activities of competition in any given industry can be divided into categories, as shown in Figure 3. These are organized into what is called a value chain. All activities included in the value chain contribute to use value. They can be roughly divided into two categories: primary activities (ongoing production, sales, delivery and servicing of goods) and secondary (providing production components, such as technology, human resources, etc., or providing infrastructure functions in support of other activities ), that is, supporting activities. Each activity requires purchased “components,” human resources, a combination of certain technologies, and is based on the firm’s infrastructure, such as management and financial activities.

A firm's chosen competitive strategy determines the way the firm performs individual activities and the entire value chain. In different industries, specific activities have different importance for achieving competitive advantage. Thus, in the production of printing presses, technology development, build quality and after-sales service are mandatory for success; In the production of detergents, advertising plays a major role, since the manufacturing process here is simple, and there is no talk of after-sales service.

Firms gain competitive advantage by developing new ways of performing activities, introducing new technologies or input components of production. For example, the Japanese company Makita has become a leader in the production of power tools thanks to the use of new, cheaper materials and the sale of standard models of tools produced in a single plant in the whole world. Swiss chocolate companies have achieved recognition in the world because they were the first to introduce a number of new recipes (including creamy chocolate) and apply new technologies (for example, continuous mixing of chocolate mass), which significantly improved the quality of the finished product.

Figure 3. Value chain

But a company is not only the sum of all its activities. A company's value chain is a system of interdependent activities with links between them. These relationships arise when the method of one activity affects the cost or efficiency of others. Connections often lead to the fact that additional costs when “adjusting” individual activities to each other pay off in the future. For example, more expensive designs and components or greater quality control can reduce after-sales service costs. Firms must incur such costs as part of their strategy for the sake of competitive advantage.

The presence of connections also requires the coordination of different types of activities. In order not to miss delivery deadlines, for example, it is necessary that production, supply of raw materials and components, and auxiliary activities (for example, commissioning) be well linked. Clear coordination ensures timely delivery of goods to the customer without the need to have expensive delivery means (that is, a large fleet of vehicles when you can get by with a small one, etc.). Coordination of related activities reduces transaction costs, provides clearer information (making it easier to manage), and allows costly activities in one activity to be replaced by lower-cost activities in another. It is also an effective way to reduce the overall time required to perform different activities, which is increasingly important for competitive advantage. For example, such coordination significantly reduces the time for developing and launching new products, as well as accepting orders and delivering goods.

Careful relationship management can be a critical source of competitive advantage. Many of these connections are subtle and may not be noticed by competing firms. In order to benefit from these connections, complex organizational procedures and compromise decisions are needed for the sake of future benefits, including in cases where organizational lines do not intersect (such cases are rare). Japanese firms are particularly good at relationship management. With their instigation, the practice of mutually “overlapping” the stages of developing new products in order to simplify their release and reduce development time, as well as enhanced quality control “on-line” to reduce after-sales service costs, became popular.

To achieve competitive advantage, you must approach the value chain as a system rather than a set of components. Changing the value chain by rearranging, regrouping or even eliminating certain activities from it often leads to a significant improvement in competitive position. An example of this is the production of electrical household equipment. Italian firms in this field completely changed the manufacturing process and used a completely new distribution channel, thanks to which they became world export leaders in the 1960s and 1970s. Japanese photographic equipment companies have become world leaders by putting single-lens reflex cameras on stream, introducing automated mass production and, for the first time in the world, establishing mass sales of such cameras.

An individual firm's value chain as it competes in a given industry is part of a larger system of activities that can be called a value system (see Figure 4). It includes suppliers of raw materials, components, equipment and services. On the way to the final consumer, a given company's product often passes through value chains of distribution channels. Ultimately, the product becomes an aggregate element in the value chain of the buyer, who uses it in carrying out his activities.

Figure 4. Value system

Competitive advantage is increasingly determined by how clearly a firm can organize this entire system. The above-mentioned connections not only connect different types of activities of the company, but also determine the mutual dependence of the company, allied companies and distribution channels. A firm can achieve competitive advantage by better managing these relationships. Regular and timely deliveries (a practice pioneered in Japan and known as kenban) can reduce a firm's operating costs and allow it to reduce inventory levels. However, the opportunities to save money by coordinating connections are by no means limited to ensuring supplies and accepting orders; this also includes R&D, after-sales service and many other activities. Both the company itself, its affiliates, and the distribution network can benefit if they are able to recognize and use such connections. The ability of firms in a given country to leverage connections with suppliers and buyers in their country largely explains the country's competitive position in the relevant industry.

The value chain allows you to better understand the sources of cost gains. The cost benefit is determined by the amount of costs in all necessary activities (compared to competitors) and can arise at any stage. Many managers view costs too narrowly, focusing on the production process. However, firms that lead by reducing costs also achieve gains by developing new, cheaper products, using less expensive marketing, reducing service costs, that is, they extract cost benefits from all parts of the value chain. In addition, to obtain cost benefits, careful “adjustment” is most often required not only of connections with suppliers and the distribution network, but also within the company.

The value chain also helps to understand the margins for differentiation. A firm creates special value for the buyer (and this is the meaning of differentiation) if it provides the buyer with savings or consumer benefits that he cannot obtain by purchasing a competitor's product. Essentially, differentiation is the result of how a product, related services, or other firm activities affect the buyer's activities. A firm and its customers have many points of contact, each of which can become a source of differentiation. The most obvious of these shows how a product affects the buyer's activity in which the product is used (say, a computer used to take orders, or a detergent for washing clothes). Creating additional value at this level can be called first-order differentiation. But almost all products have a much more complex effect on consumers. Thus, a structural element included in a product purchased by the buyer must be capitalized and - in the event of failure in the entire product - repaired as part of the product sold to the final customer. At each stage of such indirect influence of the product on the buyer's activity, new opportunities for differentiation open up. In addition, almost all activities of the company affect the buyer in one way or another. For example, developers from a related company can help integrate a component into the final product. Such high-order connections between the firm and customers are another potential source of differentiation.

The basis for differentiation varies across industries, and this has important implications for countries' competitive advantage. There are several clearly different types of firm-client relationships, and firms in different countries use different approaches to improve them. Swedish, German and Swiss firms often succeed in industries that require close cooperation with customers and high demands on after-sales service. In contrast, Japanese and American firms thrive where the product is more standard.

The value chain concept allows us to better understand not only the types of competitive advantage, but also the role of competition in achieving it. The scope of competition is important because it determines the direction of a firm's activities, how those activities are carried out, and the configuration of the value chain. Thus, by selecting a narrow target market segment, a firm can tailor its activities precisely to the requirements of that segment and thereby potentially gain cost or differentiation benefits over competitors serving a broader market. However, targeting a broad market can provide a competitive advantage if the firm is able to operate in different segments of an industry or even in several interrelated industries. Thus, German chemical companies (BASF, Bayer, Hoechst, etc.) compete in the production of a wide variety of chemical products, but certain product groups are produced at the same factories and have common distribution channels. Similarly, Japanese consumer electronics firms such as Sony, Matsushita, and Toshiba benefit from their activities in related industries (TVs, audio, and VCRs). They share the same brands, worldwide distribution channels, common technology and joint purchasing for these products.

An important reason for competitive advantage is that the company chooses an area of ​​competition that is different from that chosen by competitors (another market segment, region of the world), or by combining products from related industries. For example, Swiss hearing aid firms have focused on high-power hearing aids for people with severe hearing loss, outperforming American and Danish competitors on a broader front. Another common technique for enhancing competitive advantage is to be among the first firms to move to global competition, while other domestic firms are still limited to the domestic market. Home country plays an important role in how these differences in competition manifest themselves.

Firms achieve competitive advantage by finding new ways to compete in their industry and entering the market with them, which can be called in one word - “innovation.” Innovation in a broad sense includes both the improvement of technology and the improvement of ways and methods of doing business. Specifically, the update can be expressed in a change in the product or production process, new approaches to marketing, new ways of distributing the product and new concepts in the field of competition. Innovative firms not only recognize the opportunity for change, but also make that change happen faster. Strictly speaking, most of the changes are evolutionary rather than radical; often the accumulation of small changes adds up to more than a major technological breakthrough. Moreover, the truth is often confirmed that “the new is the well-forgotten old”: many new ideas, in fact, are not so new, they just have not been properly developed. Innovation is equally the result of improving the organizational structure and R&D. It always involves investment in the development of skills and knowledge, and most often in fixed assets and additional marketing efforts.

Innovation leads to a change in competitive leadership if other competitors either have not yet recognized the new way of doing things or are unable or unwilling to change their approach. There are a lot of reasons for this: complacency and complacency, inertia of thinking (wary attitude towards new things), funds invested in specialized funds and equipment (this “ties our hands”), and, finally, there may be “mixed” motives. It was precisely these “mixed” motives that Swiss watch companies had, for example, when the American company Timex released cheap watches that could not be repaired onto the market, and the Swiss were all afraid of undermining the image of their watches as the equivalent of quality and reliability. In addition, their factories turned out to be completely unsuited to the mass production of cheap products. However, without a new approach to competition, the challenger will rarely succeed (unless he changes the very nature of competition). Recognized leaders will most often immediately take decisive retaliatory actions and “avenge themselves.”

In the international market, innovations that provide competitive advantage anticipate new needs both in the home country and abroad. Thus, as global concerns about product safety grew, Swedish firms Volvo, Atlas Copco, AGA and others succeeded because they foresaw this development in advance. However, innovations undertaken in response to a situation specific to the domestic market can achieve the opposite of the desired effect - pushing back the country's success in the international market!

Opportunities for new ways to compete usually arise from some kind of “disruption” or change in the structure of an industry. And it happened that the opportunities that appeared with such changes remained unnoticed for a long time.

Here are the most typical reasons for innovation that gives a competitive advantage:

1. New technologies. Changes in technology can create new opportunities for product development, new ways of marketing, manufacturing or delivery, and improvements in related services. It is this that most often precedes strategically important innovations. New industries emerge when a change in technology makes a new product possible. Thus, German companies became the first in the X-ray equipment market, because X-rays were discovered in Germany. Changes in leadership are most likely to occur in industries where dramatic changes in technology render the knowledge and assets of previous industry leaders obsolete. For example, in the same X-ray and other types of medical equipment for such purposes (tomographs, etc.), Japanese companies have overtaken German and American competitors thanks to the emergence of new electronics-based technologies that have made it possible to replace traditional X-rays.

Firms that are ingrained in old technology find it difficult to understand the significance of a new technology that has just emerged, and even more difficult to respond to it. Thus, the leading American companies that produced radio tubes - RCA, General Electric, GTE-Sylvania - got involved in the production of semiconductor devices, and all without success! Those companies that took on the production of semiconductor devices from scratch (for example, Texas Instruments) turned out to be more committed to the new technology, more adapted to it in terms of personnel and management, and had the right approach to how to develop this technology.

1. New or changed customer requests. Often, competitive advantage arises or changes hands when customers have completely new needs or their views on “what is good and what is bad” change dramatically. Those firms that are already established in the market may not notice this or be unable to respond appropriately because responding to these demands requires the creation of a new value chain. Thus, American fast food companies gained an advantage in many countries because customers demanded cheap and always available food, and restaurants were slow to respond to this demand, because a fast food chain operates completely differently from a traditional restaurant.
2. The emergence of a new industry segment. Another opportunity for competitive advantage arises when an entirely new industry segment is formed or existing segments are regrouped. There is an opportunity here not only to reach a new group of buyers, but also to find a new, more effective way to produce certain types of products or new approaches to a certain group of buyers. A striking example of this is the production of forklifts. Japanese firms discovered an overlooked segment - small multi-purpose forklifts - and took it on. At the same time, they achieved unification of models and highly automated production. This example shows how taking on a new segment can greatly change the value chain, which can be a very difficult task for competitors who have already established themselves in the market.
3. Changes in the cost or availability of production components. Competitive advantage often changes hands due to changes in the absolute or relative costs of components such as labor, raw materials, energy, transportation, communications, media, or equipment. This indicates a change in conditions with suppliers or the possibility of using new or different components. A firm achieves competitive advantage by adapting to new conditions, while competitors are tied hand and foot by investments and tactics adapted to old conditions.

A classic example is the change in the labor cost ratio between countries. Thus, Korea, and now other Asian countries, have become strong competitors in relatively uncomplicated international construction projects when wages have risen sharply in more developed countries. Recently, a sharp drop in prices for transport and communications opens up opportunities to organize the management of firms in a new way and thus gain a competitive advantage, for example, the ability to rely on specialized subcontractors or expand production around the world.

1. Changes in government regulations. Changes in government policy in areas such as standards, environmental protection, requirements for new industries, and trade restrictions are another common stimulus for innovation that leads to competitive advantage. Existing market leaders have adapted to certain "rules of the game" from the government, and when those rules suddenly change, they may not be able to respond to these changes. American exchanges benefited from reduced regulation in securities markets in other countries because the United States was the first to introduce such practices, and by the time they spread throughout the world, American firms had already adapted to them.

It is important to respond quickly to changes in industry structure

The above can give firms a competitive advantage if firms understand their significance in time and take a decisive offensive. In many industries, early movers have held the leadership position for decades. Thus, German and Swiss companies producing dyes - Bayer, Hoechst, BASF, Sandoz, Ciba and Geigy (later merged into Ciba-Geigy) - became leaders even before the First World War and have not lost ground to this day. Procter & Gamble, Unilever and Colgate have been world leaders in the production of detergents since the 1930s.

Early birds gain an advantage by being the first to benefit from economies of scale, reducing costs through intensive staff training, building a brand image and customer relationships before intense competition, being able to choose distribution channels or obtaining the most advantageous plant locations and the most profitable sources of raw materials and other factors of production. Reacting quickly to a new situation can give the firm a different kind of advantage that may be easier to maintain. The innovation itself can be copied by competitors, but the benefits gained from it often remain with the innovating company.

Early birds benefit most from industries where economies of scale are important and where customers hold tight to their peers. In such conditions, it is very difficult for a competitor that is well established in the market to challenge it. How long an early bird can maintain an advantage depends on how quickly changes in industry structure occur that will erase that advantage. For example, in the consumer packaged goods industry, customer loyalty to any given brand of product is very strong and changes in the situation are insignificant. Companies such as Ivory Soap, M&M's/Mars, Lindt, Nestle and Persil have maintained their positions for more than one generation.

Every major change in industry structure creates the opportunity for new early birds to emerge. Thus, in the watch industry, the emergence in the 1950s and 1960s of new sales channels, mass marketing and mass production allowed the American firms Timex and Bulova to surpass their Swiss competitors in terms of sales. Later, the transition from mechanical watches to electronic ones created a “breakthrough” that allowed the Japanese firms Seiko, Citizen, and then Casio to get ahead. That is, the “early birds” who win a technology or product in one generation may well end up losing when generations change, since their investments and skills are specialized.

But the example of the watch industry reveals another important principle: early birds will succeed only if they are able to correctly predict changes in technology. American firms (for example, Pulsar, Fairchild and Texas Instruments) were among the first to start producing electronic watches, based on their positions in the production of semiconductors. But they relied on watches with LED displays (LEDs), and LEDs were inferior to liquid crystal displays (LCDs) in cheaper watch models, and traditional pointer displays combined with quartz movements in more expensive and prestigious models. Seiko decided not to produce watches with LEDs, but from the very beginning focused on watches with LCDs and quartz dial watches. The introduction of LCD and quartz watch movements provided Japan with leadership in the mass sale of watches, and Seiko with global leadership in the industry.

Notice something new and implement it

Information plays a big role in the renewal process: information that competitors are not looking for; information not available to them; information available to everyone, but processed in a new way. Sometimes it is obtained by investing in market research or R&D. And yet, surprisingly often, the role of innovators is played by companies that simply look in the right place, without complicating their lives with unnecessary considerations.

Innovation often comes from outsiders in the industry. The role of an innovator can be a new company whose founder came to this industry in an unusual way or was simply not appreciated in an old company with traditional thinking. Or the role of innovator can be played by managers and directors who have not previously worked in this industry, and therefore are more able to see an opportunity for innovation and are more actively implementing these innovations. In addition, innovation can occur when a firm expands its scope of activities and brings new resources, skills, or perspectives into another industry. The source of innovation may be another country with different conditions or methods of competition.

Outsiders are often more likely to see new opportunities or have different skills and resources than long-standing competitors—just the ones needed to compete in new ways. The leaders of innovative firms are often outsiders also in a hidden, social sense (not in the sense that they are the dregs of society), they simply do not belong to the industrial elite, they are not even recognized as full-fledged competitors, and therefore they will not stop before to violate established norms or even use unfair methods of competition.

With rare exceptions, innovations come at the cost of enormous effort. Success in applying new or improved methods of competition is achieved by the firm that stubbornly pursues its line, despite all the difficulties. This is where the lone wolf or small group strategy comes into play. As a result, innovation is often the result of necessity, if not the threat of failure: the fear of failure is much more motivating than the hope of victory.

For the above reasons, innovations often do not come from recognized leaders or even from large companies. Economies of scale in R&D, which play into the hands of large firms, are not so important, since many innovations do not require complex technology, and large companies, for various reasons, are often unable to see a change in the situation and quickly respond to it. In our study, along with large firms, smaller ones were also analyzed. In those cases where large firms were innovators, they often acted as newcomers in one industry while having a strong position in another.

Why are some firms able to recognize new ways of competing while others are not? Why do some companies figure out these methods before others? Why are some companies better at guessing the direction in which technology will develop? Why is such a huge effort made to find new paths? These intriguing questions will be central to subsequent chapters. The answers must be found in concepts such as the choice of direction for the firm's major efforts, the availability of the necessary resources and skills, and the forces influencing change. The national environment plays a big role in all this. Moreover, the extent to which conditions in a country favor the emergence of the aforementioned domestic outsiders and thereby prevent foreign firms from taking over the country's leadership in existing or new industries largely determines national prosperity.

Maintain the advantage

How long a competitive advantage can be maintained depends on three factors. The first factor is determined by what the source of advantage is. There is a whole hierarchy of sources of competitive advantage in terms of their retention. Low-ranking advantages, such as cheap labor or raw materials, can be obtained quite easily by competitors. They can copy these advantages by finding another source of cheap labor or raw materials, or they can nullify them by producing their own products or getting resources from the same place as the leader. For example, in the production of consumer electronics, Japan's advantage in labor costs has long been lost to Korea and Hong Kong. In turn, their firms are already threatened by even greater labor prices in Malaysia and Thailand. Therefore, Japanese electronics firms are moving production abroad. Also at the lower levels of the hierarchy there is an advantage based solely on the scale factor from the use of technology, equipment or methods taken from (or available to) competitors. Such economies of scale disappear when a new technology or method makes the old one obsolete (similarly, when a new type of product appears).

Higher-order advantages (proprietary technology, differentiation based on unique products or services, a firm's reputation based on enhanced marketing efforts, or close customer ties enhanced by the cost of changing suppliers) can be sustained over a longer period of time. They have certain characteristics.

First, achieving such benefits requires greater skill and ability - specialized and better trained personnel, appropriate technical equipment and, in many cases, close relationships with major clients.

Second, high-order benefits are usually possible through long-term, intensive investment in production capacity, specialized, often risky training, R&D, or marketing. The implementation of certain types of activities (advertising, product sales, R&D) creates tangible and intangible assets - the company's reputation, good relationships with clients and a specialized knowledge base. Often the first company to react to a changed situation is the one that has invested in these activities longer than its competitors. Competitors will have to invest just as much, if not more, to get the same benefits, or come up with ways to achieve them without spending as much. Finally, the longest-lasting benefits come from a combination of large capital investments and higher quality performance, which makes the benefits dynamic. Continuous investments in new technologies, marketing, developing a worldwide branded service network, or rapidly developing new products make it even more difficult for competitors. Higher-order benefits not only last longer, but are also associated with higher levels of productivity.

Advantages based on cost alone are generally not as durable as those based on differentiation. One reason for this is that any new source of cost reduction, no matter how simple, can immediately eliminate a firm's cost advantage. Thus, if labor is cheap, you can beat a firm with much higher labor productivity, while in the case of differentiation, to beat a competitor, you usually need to offer the same range of products, if not more. In addition, cost-only advantages are also more vulnerable because the introduction of new products or other forms of differentiation may eliminate the advantage gained from producing older products.

The second determinant of the persistence of competitive advantage is the number of clear sources of competitive advantage available to firms. If a firm relies on only one advantage (say, a less expensive design or access to cheaper raw materials), competitors will try to deprive it of that advantage or find a way to circumvent it by gaining something else. Firms that have held leadership for many years strive to secure as many advantages as possible in all parts of the value chain. Thus, Japanese small-sized copiers have modern design features that increase ease of use, they are cheap to manufacture due to a high degree of flexible automation, and they are sold through a wide network of agents (dealers) - this provides a larger clientele than traditional direct sales. In addition, they have high reliability, which reduces after-sales service costs. The presence of a large number of advantages over competitors makes the latter's task much more difficult.

The third and most important reason for maintaining a competitive advantage is the constant modernization of production and other activities. If a leader, having achieved an advantage, rests on his laurels, almost any advantage will eventually be copied by competitors. If you want to maintain an advantage, you can't stand still: the company must create new advantages at least as quickly as competitors can copy existing ones.

The main goal is to constantly improve the company's performance in order to enhance existing advantages, for example, to operate production facilities more efficiently or organize more flexible customer service. Then it will be even more difficult for competitors to bypass it, because to do this they will need to urgently improve their own performance, which they may simply not have the strength to do.

However, ultimately, in order to maintain a competitive advantage, it is necessary to expand the set of its sources and improve them, moving to higher-order advantages that last longer. This is exactly what Japanese automobile companies did: they initially entered foreign markets with inexpensive, small-class cars of fairly high quality, achieving success through cheap labor. But even then, while still having this advantage, Japanese automakers began to improve their strategy. They began to actively invest in the construction of large factories with modern equipment and benefit from economies of scale, then began to update technology, being the first to introduce the “just in time” system and a number of other methods to improve quality and efficiency. This gave higher quality than that of foreign competitors, and, as a result, reliability and customer satisfaction with the product. Recently, Japanese automobile companies have become leaders in the field of technology and are introducing new brands with enhanced consumer properties.

Changes are needed to maintain the advantage; Firms must benefit from industry trends, but never ignore them. Firms must also invest to protect areas vulnerable to competitors. Thus, if biotechnology threatens to change the direction of research in the pharmaceutical industry, a pharmaceutical company seeking to maintain a competitive advantage must quickly develop a biotechnology base superior to that of its competitors. Relying on the failure of a competitor's new technology or ignoring a new market segment or distribution channel are clear signs that competitive advantage is slipping away. And such a reaction, alas, occurs all the time!

To maintain their position, firms sometimes have to give up existing advantages in order to achieve new ones. For example, Korean shipbuilding firms became world leaders only when they dramatically increased shipyard capacity, significantly increased efficiency through new technologies while reducing labor requirements, and mastered the production of more complex types of ships. All these measures reduced the importance of labor costs, although at that time Korea still had an advantage in this regard. The apparent paradox of giving up previous advantages often acts as a deterrent. However, if a company does not take this step, no matter how difficult and counterintuitive it may seem, its competitors will do it for it and ultimately win. How the country's “environment” encourages firms to take such steps will be discussed later.

The reason that only a few companies manage to maintain leadership lies in the fact that it is extremely difficult and unpleasant for any successful organization to change strategy. Success breeds complacency; a successful strategy becomes a routine; The search and analysis of information that could change it stops. The old strategy takes on an aura of sanctity and infallibility and becomes deeply rooted in the firm's thinking. Any proposal to make a change is regarded almost as a betrayal of the interests of the company. Successful firms often seek predictability and stability; they are entirely occupied with maintaining the achieved positions, and making changes is hampered by the fact that the company has something to lose. People think about replacing old advantages or adding new ones only when there is nothing left of the old advantages. But the old strategy has already ossified, and when changes occur in the structure of the industry, leadership changes. Small firms whose hands are not tied by history and previous investments are becoming innovators and new leaders.

In addition, a change in strategy is also blocked by the fact that the company’s previous strategy is embodied in the skills, organizational structures, specialized equipment and reputation of the company, and with the new strategy they may not “make money.” This is not surprising, because it is precisely on such specialization that the advantage is based. Rebuilding the value chain is a difficult and expensive process. In large companies, moreover, the sheer size of the firm makes it difficult to change strategy. The process of changing strategy often requires financial sacrifice and troublesome, often painful changes in the organizational structure of the company. For firms unencumbered by the old strategy and previous capital investments, adopting a new strategy is likely to be less costly (in purely financial terms, not to mention fewer organizational problems). This is one of the reasons why the outsiders mentioned above act as innovators.

Further, tactics aimed at maintaining a competitive advantage for firms that have a foothold in the industry are in many respects something unnatural. Most often, companies overcome the inertia of thinking and obstacles to the development of advantages under pressure from competitors, the influence of customers or difficulties of a purely technical nature. Few firms make significant improvements or change strategies voluntarily; most do this out of necessity, and this happens mainly under pressure from the outside (that is, the external environment), and not from the inside.

The management of companies that maintain a competitive advantage is always in a somewhat alarming state. It acutely senses a threat to its firm's leading position from the outside and takes retaliatory action. The influence of the situation in the country on the actions of company management is an important issue that will be discussed in detail in subsequent chapters.

Competing in the global market

The given basic principles of competitive strategy exist regardless of whether the company operates in the domestic or international market. But when analyzing the role of a country in the formation of a competitive advantage, those industries where competition is international in nature are primarily of interest. It is necessary to understand how firms achieve competitive advantage through international strategies and how this enhances the advantages gained in the domestic market.

The forms of international competition vary significantly across industries. At one end of the spectrum of forms of competition is a form that can be called “multidomestic.” Competition in each country or small group of countries is essentially independent; The industry in question exists in many countries (for example, savings banks exist in Korea, Italy and the USA), but in each of them competition occurs in its own way. The reputation, range of clients and capital of a bank in one country do not affect (or have almost no effect on) the success of its operations in other countries. Competitors may include MNCs, but their competitive advantages are in most cases limited to the country in which these companies operate. Thus, an international industry is like a set of industries (each within its own country). Hence the term “multi-national” competition. Industries where competition has traditionally taken this form include many types of retail, food manufacturing, wholesale trade, life insurance, savings banks, simple hardware, and caustic chemicals.

At the opposite end of the spectrum are global industries, in which a firm's competitive position in one country significantly influences its position in other countries. Here competition occurs on a truly global basis, with competing firms relying on advantages arising from their activities around the world. Firms combine the advantages achieved in their home country with those they have achieved through their presence in other countries, such as economies of scale, the ability to serve customers in many countries, or a reputation that can be established in another country. Global competition occurs in industries such as commercial aircraft, televisions, semiconductors, copiers, automobiles, and watches. The globalization of industries especially intensified after World War II.

In the extreme expression of a “multi-national” industry, achieving national advantage or competitiveness in the international market is not even a question. Almost every country has such industries. Most (if not all) firms competing in these industries are local, because when competition in each country follows its own rules, it is very difficult for foreign firms to achieve a competitive advantage. International trade in such industries is modest, if not non-existent. If the firm is owned by a foreign company (which is rare), there is very little control by the foreign owner from its headquarters. Securing jobs in the foreign subsidiary, status as a "local corporate citizen" and where the necessary research is carried out (at home or abroad) are not his concerns: the national subsidiary controls all or almost all the activities necessary to ensure competitive status. In industries such as retail or metal fabrication, heated debates about trade issues typically do not arise.

On the contrary, global industries are an arena where firms from different countries compete in ways that significantly affect the economic prosperity of countries. The ability of the country's firms to gain a competitive advantage in global industries promises great benefits in both trade and foreign investment.

In global industries, firms must compete internationally to gain or maintain a competitive advantage in critical industry segments. True, in such industries there may well be purely national segments; due to the unique needs in such segments, firms only from this country can flourish. But focusing primarily on the domestic market while operating in a global industry is a dangerous business, no matter in which country the company is based.

Achieving competitive advantage through global strategy

A global strategy is one in which a company sells its products in many countries using a unified approach. The mere fact of transnationality does not automatically mean the presence of a global strategy; if an MNE has branches that operate independently and each in their own country, this is not yet a global strategy. Thus, many European MNCs, such as Brown Boveri (now Asea-Brown Boveri) and Phillips, and some American ones, such as General Motors and ITT, have always competed in this way, but at the same time it weakened their competitive advantage, giving competitors the opportunity to get ahead of them.

With a global strategy, the company sells its goods in all countries (or, at least, in most countries) that are an important market for its products. This creates economies of scale that reduce the burden of R&D costs and enable the use of advanced manufacturing technology. The main issue becomes the placement of different links in the value chain and ensuring its operation so that the company's product can be sold throughout the world.

In global strategy, there are two distinct methods by which a firm can achieve competitive advantage or compensate for various disadvantages due to country conditions. The first is the most advantageous location of various activities in different countries to best serve the global market. The second is the ability of a global firm to coordinate the activities of its dispersed subsidiaries. The location of the parts of the value chain directly related to the buyer (marketing, distribution and after-sales service) is usually tied to the location of the buyer. Thus, to sell its product in Japan, a company usually needs to have sales agents or distributors there and provide after-sales service on site. In addition, the location of other activities may be tied to the location of the buyer due to high transportation costs or the need for close interaction with the buyer. Thus, in many industries, production, delivery and marketing must be carried out as close as possible to the buyer. Most often, such a physical connection of activities with the client is required in all countries where the company operates.

On the contrary, activities such as production and supply of raw materials, etc., as well as auxiliary activities (development or acquisition of technology, etc.) can be located regardless of the location of the client - such activities can be performed anywhere. Under a global strategy, a firm locates these activities based on the benefits of lower costs or differentiation on a global scale. It could, for example, build one large plant designed for the global market, benefiting from economies of scale. As such, very few activities need to be performed only in the firm's home country.

Decisions unique to global strategy can be divided into two significant areas:

1. Configuration. In which and how many countries is each value chain activity performed? For example, do Sony and Matsushita make VCRs in one large plant in Japan, or do they build additional plants in the US and UK?
2. Coordination. How are dispersed activities (that is, activities carried out in different countries) coordinated? For example, do different countries use the same brand and sales tactics, or does each branch use a different brand and tactics tailored to local conditions?

In multinational competition, MNEs have autonomous branches in each country and manage them in much the same way as a bank manages securities. With global competition, firms are trying to gain a much greater competitive advantage from their presence in different countries, placing their activities with a global focus and clearly coordinating them.

Configuration of activities under the global strategy

When planning its activities around the world within a given industry, a company faces two choices. First: should activities be concentrated in one or two countries or dispersed across many countries? Second: in which countries should this or that activity be located?

Concentration of activities. In some industries, a competitive advantage is gained by concentrating activities in one country and exporting finished products or parts abroad. This occurs in the following cases: when there is a large effect of scale in performing a particular activity; when there is a sharp drop in production costs as a new product is developed, due to which it is profitable to produce products at one plant; when it is advantageous to place related activities in the same place, which will facilitate their coordination. A focused, or export-based, global strategy is typical for industries such as aircraft, heavy engineering, structural materials, or agricultural products. As a rule, the company's activities are concentrated in its home country.

A focused global strategy is particularly common in some countries. It is common in Korea and Italy. Today, in these countries, most of the products are developed and produced within the country, and only marketing is done in foreign countries. In Japan, this strategy is followed by most of the industries in which the country is successful in the international market, although Japanese firms are now rapidly dispersing activities such as raw material purchasing or assembly operations for various reasons. The type of international competitive strategy that a country promotes and develops determines the nature of the industries in which that country successfully competes internationally.

Dispersal of activities. Other industries gain a competitive advantage or neutralize disadvantages from conditions in the home country by dispersing activities. Dispersal requires foreign direct investment. It is preferable in industries in which high transportation, communication or storage costs make concentration unprofitable or where it is risky for various reasons (political reasons, unfavorable exchange rates or risk of supply shortages).

Dispersal is also preferable where local needs for different goods vary greatly. The resulting need to carefully tailor products to local markets reduces the benefits of economies of scale or falling costs along the way that arise from using a single large plant or laboratory to develop new products. Another important reason for dispersal is the desire to improve marketing in a foreign country; In this way, the firm emphasizes its commitment to the interests of clients and/or ensures a faster and more flexible response to changing local conditions. In addition, the dispersal of activities across many countries also gives the company valuable experience and professionalism, obtained through the analysis of information from different parts of the world (however, the company must be able to coordinate the activities of its branches).

In some industries, the government can be very effective in inducing a firm to choose a dispersal strategy through tariffs, non-tariff barriers, and national procurement. Very often, the government wants the company to locate the entire value chain in its country (they say this will give the country additional benefits). Finally, dispersing some activities can sometimes benefit from concentrating others. Thus, by carrying out final assembly in your own country, you can “appease” your government and get more free imports of components from large-scale centralized component plants located abroad.

Ultimately, the choice between focusing and dispersing depends on the type of activity being performed. In the truck industry, leaders such as Daimler-Benz, Volvo and Saab-Scania do most of their R&D at home and assemble in other countries. The best options for concentration and dispersal vary from industry to industry, and may even vary across different segments of the same industry.

Here is an illustration of the above reasoning. Swedish firms in a number of mining-related industries use a highly dispersed strategy as customers in this industry value close cooperation from equipment suppliers providing service and technical assistance. In addition, the mining industry is almost universally state owned or heavily influenced by the public sector. Therefore, for political reasons, the firm needs to have branches abroad, since the governments of other countries prefer to have an equipment supplier in the country rather than import the equipment. Swedish firms, such as SKF (ball bearings) or Electrolux (appliances), tend to adopt a highly dispersed strategy with large foreign direct investments and essentially autonomous subsidiaries; This is the result of existing differences in the needs for certain goods between countries, the need for close interaction with customers in marketing and service, as well as pressure from the governments of the countries where the company operates. Swiss firms also tend to disperse across many industries, including trading, pharmaceuticals, food and dyes.

A global dispersal strategy with large foreign investments also characterizes industries such as consumer packaged goods, health care, telecommunications, and many services.

Placement of activities. In addition to choosing the places where this or that type of activity will be carried out, it is also necessary to select the country (or countries) for this. Typically, all activities are first concentrated in the home country. However, with a global strategy, the company can carry out assembly operations, manufacture components and parts, or even carry out R&D in any country at its discretion - where it is most profitable.

The benefits of location often manifest themselves in strictly defined activities. One of the major advantages that a global firm has is the ability to distribute different activities among countries depending on where it is preferable to produce one or another type of activity. Thus, it is possible, for example, to produce computer components in Taiwan, write programs in India, and carry out basic R&D in Silicon Valley in California.

The classic reason for locating a particular activity in a particular country is the lower cost of factors of production. Thus, assembly operations are carried out in Taiwan or Singapore to benefit from the use of well-trained, motivated, but cheap labor. Capital is accumulated wherever possible, on the most favorable terms. Thus, the Japanese company NEC, in order to necessaryly expand its production capacity for semiconductor devices, financed convertible debt not in Japan, where such a practice is not common, but in Europe. It should be noted that global competition causes increasing dispersion of activities based on precisely such considerations. Many American companies are transferring production to the Far East (for example, almost all disk drives of American companies are manufactured there), and Japanese manufacturers of sewing machines, sporting goods, radio components and some other goods are actively investing in Korea, Hong Kong, Taiwan, and now in Thailand, locating production there.

There has been a recent trend to move operations overseas not only to take advantage of production cost benefits there, but also to conduct R&D, gain access to specialized skills available in those countries, or develop relationships with key customers.

Thus, German companies producing equipment for the production of plastics and Swiss companies producing surveying equipment have located design offices in the United States to develop electronic control units. SKF (Sweden), a world leader in the production of ball bearings, now has a production and design base in Germany in close proximity to many German factories - leaders in various branches of mechanical engineering and the automotive industry, which consume ball bearings on a large scale.

Firms locate their activities abroad even if this is a necessary condition for their business operations in the respective countries. In some industries, a firm's performance of assembly, marketing, or service operations in a given country is essential to the sales of its products and services to consumers in that country. A good example is the high-tech production of industrial air conditioners: industry leaders (American firms such as Carrier and Trane) operate in many countries to best adapt products to local conditions and meet high maintenance requirements.

Government guidelines also influence the location of activities. Thus, many Japanese investments in the United States and Europe (in industries such as the production of automobiles and spare parts for them, consumer electronics, etc.) are caused by current or possible restrictions on imports into Japan. Similarly, many Swedish, Swiss and American firms moved their operations overseas before World War II because trade restrictions were more important and transport costs were higher (which is why their operations are often more dispersed than Japanese or German firms in those days). same industry). Once dispersed, the firm is difficult to bring together under unified control as branch managers in different countries try to maintain the power and autonomy of their affiliates. The resulting failure of a firm to adopt the more focused and coordinated strategies needed to gain competitive advantage is one of the reasons for the loss of competitive advantage in some industries.

However, this is not all the discussion about the best placement of a particular type of activity. After all, choosing the best location to locate the activities that determine a firm's home country (primarily strategy, R&D, and the most complex production processes) is one of the central issues addressed in this book. Suffice it to say that the motivations for choosing countries to carry out a particular activity are by no means limited to the classical explanations given here.

Global coordination

Another important means of achieving competitive advantage through global strategy is the coordination of the firm's activities in different countries. Coordination (harmonization) of activities includes the exchange of information, distribution of responsibilities and coordination of the efforts of the company. It may provide some benefits; one of them is the accumulation of knowledge and experience gained in different places. If a company learns to better organize production in Germany, the transfer of this experience may be useful at the company's factories in the USA and Japan. Conditions in different countries are always different, and this provides a basis for comparison and the ability to evaluate knowledge acquired in different countries.

Data from different countries provides information not only about the product or its production technology, but also about customer requests and marketing methods. By coordinating the marketing activities of all its divisions, a firm with a truly global strategy can get early warning of expected changes in industry structure, seeing industry trends pinpointed before they become apparent to everyone. Coordination of activities while dispersing them can provide economies of scale by dividing the task into separate tasks for branches that determine their specialization. For example, the company SKF (Sweden) produces different sets of ball bearings at each of its foreign factories and, by organizing mutual supplies between countries, ensures the availability of the entire range of products in each of them.

The dispersal of activities, if agreed upon, may allow the firm to respond quickly to changes in exchange rates or factor costs. Thus, gradually increasing production in a country with a favorable exchange rate can reduce overall costs; This tactic was used by Japanese firms in a number of industries in the late 1980s because the Japanese yen was then highly valued.

In addition, coordination can enhance product differentiation for a firm whose customers are mobile or multinational buyers. Consistency in the location of production of a particular product and in the approach to doing business on a global scale strengthens the reputation of the brand. The ability to serve multinational or mobile clients where they want is often critical. Coordinating the activities of subsidiaries in different countries can make it easier for a firm to influence the governments of those countries if the firm is able to expand or contract activities in one country at the expense of others.

Finally, coordinating activities in different countries allows you to respond flexibly to the actions of competitors. A global firm can choose where and how to fight a competitor. It could, for example, give it a decisive battle where it has the largest output or cash flow, and thereby reduce the resources the rival needs to compete in other countries. IBM and Caterpillar used precisely these defensive tactics in Japan. A company focusing only on the domestic market does not have such flexibility.

Consumer needs and local conditions vary dramatically from country to country, making it difficult to harmonize activities across countries, making experience gained in one country inapplicable to others. In such conditions, the industry becomes multinational.

However, although coordination provides significant benefits, achieving it in the pursuit of a global strategy is an organizational challenge due to its scale, language barriers, cultural differences and the need to share open and reliable information at a high level. Another serious difficulty is reconciling the interests of the managers of the company's branches with the interests of the company as a whole. Let's say a company's subsidiary in Germany does not want to inform its US subsidiary about its latest advances in technology for fear that the American subsidiary will bypass it in the annual summing up. In other words, a company's branches in different countries often see each other not as allies, but as competitors. Such vexing organizational problems mean that full coordination in global firms is the exception rather than the rule.

Advantages due to location and due to the company structure

The competitive advantage of a global firm can be usefully divided into two types: location-derived (in which country is it located) and location-independent (based on the firm's pattern of operations around the world). Advantages based on locating operations in a particular country derive either from the firm's home country or from other countries in which the firm operates. A global firm tries to use advantages obtained in the home country to penetrate foreign markets, and may also use advantages obtained from performing certain activities abroad to enhance advantages or offset disadvantages in the home country.

Advantages based on the firm's structure arise from the firm's total volume of trade, the speed of product development in all of the firm's plants around the world, and the firm's ability to coordinate activities at home and abroad. Economies of scale in production or R&D are not in themselves tied to a country - a large plant or research center can be located anywhere.

For global competition to begin, it is necessary for some firms to achieve an advantage in their countries that allows them to enter foreign markets. A competitive advantage achieved solely in the firm's home country is sufficient to initiate global competition. Over time, however, successful global firms begin to combine the advantages achieved at home with the advantages of locating certain activities in other countries and of the firm's system of operations around the world. These additional advantages, combined with those achieved at home, make the latter more resilient, and at the same time compensate for the disadvantages of the situation in the home country. Thus, the advantages of different sources are mutually reinforcing. The overall economies of scale from being located around the world have enabled, for example, the German firms Zeiss (optics) and Schott (glass) to devote more resources to R&D and take fuller advantage of technology and demand in their home country.

Practice shows that firms that do not use and develop the advantages of their home country through a global strategy are vulnerable to competitors. It is the combination of advantages from conditions in the home country, from the location of certain activities abroad and from the system of the firm's global activities, and not each separately, that creates international success.

Now that the globalization of competition has become a generally accepted fact, the benefits of firm structure and of locating operations in other countries have come into focus. In fact, the benefits of home country conditions are usually more important than others (a topic we will return to in later chapters).

Choosing a global strategy

There is no single type of global strategy. There are many ways to compete, and each requires choices about where to locate activities and how to coordinate them. Each industry has its own optimal combination. Most global strategies are an inextricable combination of trade and foreign direct investment. Finished products are exported from countries that import components, and vice versa. Foreign investment reflects the location of production and marketing activities. Trade and foreign investment are complementary rather than substitutes.

The degree of globalization often varies across industry segments, and the optimal global strategy varies accordingly. For example, in the lubricating oil industry there are two distinct strategies. In the production of automobile motor oils, competition is multinational in nature, that is, it is carried out separately in each country. Traffic patterns, climatic conditions and local legislation are different everywhere. During production, different brands of base oils and additives are mixed. Economies of scale are small and transport costs are high. Distribution and marketing channels, which are very important for competitive success, vary greatly from country to country. In most countries, the leaders are firms operating on the domestic market (for example, Quaker State and Pennzoil in the USA) or MNCs with autonomous branches (for example, Castrol in the UK). In the production of oils for marine engines, everything is different: here there is a global strategy; ships move freely from country to country, and it is necessary that the correct brand of oil be available at each port they call at. Therefore, the brand’s reputation has become global, and successful companies producing oils for marine engines (Shell, Exxon, British Petroleum, etc.) are global companies.

Another example is the hotel industry: competition in many segments is multinational, since most parts of the value chain are tied to customer location, and differences in needs and conditions between countries reduce the benefits of coordination. However, if we consider hotels of the highest class or those designed primarily for businessmen, then the competition here is more global in nature. Global competitors such as Hilton, Marriott or Sheraton have properties dispersed throughout the world, but use a single brand, a single look, a single standard of service and a system for booking rooms from anywhere in the world, which gives them an advantage in serving business travelers, constantly traveling around the world.

When the production process is broken down into stages, different degrees and patterns of globalization are also often observed. Thus, in aluminum production, the initial stages (beneficiation and smelting of the metal) are global industries. The further stage (production of semi-finished products, for example castings or stampings from aluminum) is already a number of industries with multinational competition. The need for different products varies from country to country, transportation costs are high, and so are the requirements for on-site customer service. Economies of scale throughout the value chain are quite modest. In general, the production of raw materials and components tends to be more global than the production of finished products.

Differences in the types of globalization of different industry segments, stages of the production process and groups of countries create the possibility of drawing up focused global strategies aimed at a specific segment of the industry on a global scale. Thus, the companies Daimler-Benz and BMW, having chosen such a strategy, focused on premium and business-class cars with high technical performance, and the Japanese companies Toyota, Isuzu, Hino, etc. - on light trucks.

A firm pursuing a focused global strategy focuses on some segment of the industry that has been neglected by firms with broad specializations. Global competition can give rise to entirely new industry segments because a firm operating in a sector of its industry around the world can benefit from economies of scale. The reasons for this strategy may be different. For example, working in this industry segment in only one country is unprofitable due to high costs. In some industries, this is the only correct strategy, since the benefits of globalization are achievable only in one segment (for example, luxury hotels for businessmen).

A global focus can be the first step towards a broader global strategy. A firm enters into global competition in a given segment when its home country offers unique advantages. For example, in industries such as automobiles, forklifts, and televisions, Japanese firms initially gained footholds by focusing on an overlooked market sector—the most compact products in each industry. They then expanded their product range and became world leaders in their respective industries.

Relatively small firms, not just large ones, can compete globally. Small and medium-sized firms account for a significant share of international trade volume, especially in countries such as Germany, Italy and Switzerland. They often focus on narrow segments of an industry or operate in relatively small-scale industries. A focused global strategy is also characteristic of MNEs from small countries such as Finland or Switzerland, and of small and medium-sized firms from all countries. Thus, the company Montblanc (Germany) pursues such a policy in the production of expensive writing instruments, and most Italian companies producing shoes, clothing and furniture also compete around the world in a narrow segment of their industries.

Small and medium-sized firms tend to build their strategy mainly on exports - foreign direct investment is of a modest scale. However, the number of mid-market MNEs is growing. For example, Denmark, Switzerland and Germany have many relatively modest-sized MNEs that focus on specific segments of their industries. With limited resources, small firms have difficulty entering foreign markets, identifying needs in those markets, and providing after-sales service. Different industries solve these problems in different ways. One way is to sell goods through sales agents or their importers (typical of Italian firms), the other is to act through distributors or trading companies (typical of Japanese and Korean firms). Another way is to use industry associations to create a common distribution infrastructure, organize sales exhibitions and fairs and conduct market research. Thus, without cooperatives, the success of agricultural industries in Denmark would not be possible. Recently, small firms have been forming alliances with foreign firms to be able to compete globally.

Industry globalization process

The globalization of industries occurs because changes in technology, customer demands, government policies, or infrastructure within a country enable firms in some countries to differentiate themselves from competitors in other countries or increase the importance of advantages stemming from a global strategy. Thus, in the automotive industry, globalization began when Japanese firms achieved a significant competitive advantage through quality and productivity, the needs for cars in different countries became more similar (in no small part due to rising fuel prices in the United States), and transport costs for international transport fell ( and these are just some of the reasons).

The strategic innovation itself often opens up opportunities for industry globalization. International industry leadership is often the result of a firm discovering a way to make a global strategy viable. For example, it may find a way to cheaper adapt a product developed and produced in one place to the conditions of different countries (for example, modifying a standard product for a different voltage on the local electrical grid). Thus, in the production of intercom systems, computers and other systems used in telecommunications, Northern Telecom, NEC and Ericsson won thanks to the design of their equipment, which allows the use of modular software and requires only minor modifications to combine with the local telephone network. In addition, a firm may develop a new product that is widely popular or a marketing method that makes the product popular. Finally, innovative solutions can be found to remove barriers to global strategy. For example, American firms were not only the first to produce plastic disposable syringes, which immediately gained wide popularity, but also reduced transportation costs compared to glass syringes and gained economies of scale by producing products in one global plant.

Emerging leaders in global industries always start with some advantage achieved at home, be it a more advanced design, higher quality workmanship, a new marketing method, or a factor cost advantage. But as a rule, to maintain an advantage, a company must go further: the advantage achieved “at home” must become a tool for entering a foreign market. And once established there, successful firms complement their initial advantages with new ones based on economies of scale or brand reputation gained from operating around the world. Over time, competitive advantage is enhanced (or disadvantages are offset) by locating certain activities abroad.

Although home country gains are difficult to maintain, a global strategy can complement and enhance them. A good example is consumer electronics. Matsushita, Sanyo, Sharp and other Japanese firms initially focused on low cost by producing simple portable televisions. By entering the foreign market, they gained economies of scale and further reduced costs by cutting costs when introducing new models. By trading around the world, they were then able to invest heavily in marketing, new equipment and R&D, and ownership of the technology. Japanese firms moved away from a cost-focused strategy a long time ago and now produce a wide range of increasingly differentiated televisions, VCRs, etc., using the highest quality materials and technology. And today the strategy of focusing on costs has been adopted by their Korean competitors - Samsung, Gold Star, etc. - and produce simpler, standard models, using cheap labor.

The cost of factors is a low-order advantage and, moreover, very variable, both for a firm competing in the domestic market and for one competing internationally. This can be seen in industries such as clothing or construction. By moving operations abroad, a firm with a global strategy can neutralize or even exploit changes in the cost of factors that harm the interests of its country. Thus, Swedish companies producing heavy trucks (Volvo and Saab-Scania) have long transferred part of their production to countries such as Brazil and Argentina. Moreover, firms whose only advantage is gain in factor costs rarely become new industry leaders. It is too easy for a leadership role model strategy to be rendered ineffective by offshoring or offshoring. Firms with low factor costs can become leaders only if they combine this advantage with a focus on some segment of the industry that has been ignored or neglected by the leaders, and/or with investment in large plants equipped with the latest technology at the moment. And they will be able to maintain their advantage only by competing globally and constantly strengthening this advantage. The influence of national conditions on firms' initial advantages, the latter's ability to develop these advantages through global strategy, and the ability and will of firms to achieve new advantages over time are the main topics of subsequent chapters.

Staying ahead of others in global strategy

Immediate response to any change in industry structure is just as important in global competition as in domestic competition, if not more so. Ultimately, the leaders in many global industries are those firms that are the first to recognize a new strategy and apply it on a global scale. Thus, Boeing was the first to apply a global strategy in the production of aircraft, Honda - motorcycles, IBM - computers, and Kodak - photographic film. American and British firms producing a wide range of packaged consumer goods maintain leadership in no small part due to the fact that they were the first to apply a global strategy.

Global competition enhances the benefits of responding quickly to change. Early Birds are the first to spread their activities around the world; this additional advantage, in turn, leads to advantages in reputation, scale and speed of product adoption. And positions won on the basis of such advantages can be maintained for decades or even longer. Thus, English firms have been leaders in the production of tobacco products, whiskey and high-quality porcelain for more than a century, despite the decline in the British economy as a whole. Similar examples of long-term leadership can be found in Germany (printing presses, chemicals), the United States (soft drinks, movies, computers) and almost every other developed country.

The reasons for changes in the positions of countries in the competitive race are the same as in the more general cases discussed above. Established international leaders lose ground if they do not respond to changes in industry structure that give other firms the opportunity to overtake them by quickly moving to new technologies or products. Thus, economies of scale, reputation and connections with the distribution channels of established leaders are lost. Thus, the traditional leaders of some industries gave way to Japanese firms in those industries that were greatly changed by the advent of electronics (for example, the production of machine tools and tools) or where mass production replaced traditional small-scale production (the production of cameras, forklifts, etc.). Existing leaders also fail if other firms discover new market segments that have been ignored by the leaders. Thus, Italian firms producing household electrical equipment saw an opportunity to produce compact, standardized models using mass production, and sell them to newly emerging retail chains, so that they would sell them under their own brand. By actively developing this rapidly growing new segment, Italian manufacturers of electrical household appliances have become European leaders. Firms that are the first to exploit changes in industry structure often become the new leaders because they benefit from the next change in industry structure. Home country has a significant impact on firms' ability to respond to these changes, and, as previously discussed, firms in one or two countries often become global leaders in an industry.

The ability of firms to maintain the advantages gained from a previous strategy is often the result of simple luck, namely, that there are no major changes in the industry. But still, more often it is the result of constant updating in order to adapt to changing conditions. Subsequent chapters explore in detail the country characteristics that explain this adaptability. The forces that allow a country's firms to maintain a competitive advantage once achieved are the main pillars of a country's prosperity.

Alliances and global strategy

Strategic alliances, which can also be called coalitions, are an important means of pursuing global strategies. These are long-term agreements between firms that go beyond ordinary trading operations, but do not lead to a merger of firms. The term “alliance” refers to a number of types of cooperation, including joint ventures, sales of licenses, long-term supply agreements and other types of intercompany relationships24. They are found in many industries, but are especially common in the automotive industry, aircraft manufacturing, aircraft engine manufacturing, industrial robots, consumer electronics, semiconductor devices and pharmaceuticals.

International alliances (firms in the same industry based in different countries) are one of the means of global competition. In an alliance, the activities involved in the value chain are shared across the world between the partners. Alliances have been around for quite some time, but their nature has changed over time. Previously, firms from developed countries entered into alliances with firms from less developed countries to conduct marketing (often such a maneuver was required to gain market access). Now, more and more firms from highly developed countries are entering into alliances in order to act together in large regions or throughout the world. In addition, alliances are now concluded not only for marketing, but also for other activities. Thus, all American automobile companies have alliances with Japanese (and in some cases Korean) firms to produce cars sold in the United States.

Companies enter into alliances to gain advantages. One of them is economies of scale, or reductions in time and costs for product development, achieved by joint efforts in marketing, the production of components, or the assembly of certain models of finished products. Another advantage is access to local markets, necessary technologies, or satisfying the requirements of the government of the country in which the company operates that the firm operating in the country be owned by that country. For example, the alliance between General Motors Corporation and Toyota - NUMMI - was conceived by General Motors in order to adopt Toyota's production experience. Another advantage of alliances is risk sharing. For example, some pharmaceutical companies have entered into cross-licensing agreements when developing new drugs to reduce the risk that each individual company's research will fail. Finally, firms with complex and advanced technologies often resort to alliances to influence the nature of competition in an industry (for example, by licensing a technology in high demand to achieve standardization). Alliances can compensate for competitive disadvantages, be it high cost factors of production or outdated technology, while maintaining the independence of companies and eliminating the need for costly mergers.

However, alliances come at a cost, strategically and organizationally. Take, for starters, the very real problems of coordinating the activities of independent partners who have significantly different and even contradictory goals. Coordination difficulties jeopardize the benefits of a global strategy. In addition, today's partners may well turn out to be tomorrow's competitors; This is especially true for partners with more enduring or faster-growing competitive advantages. Japanese companies have confirmed this idea many times. To top it all off, the partner gets a share of the company's profits, sometimes quite substantial. Alliances are fragile things and can fall apart or fail. Often everything starts out great, but soon the alliance breaks up or ends with a merger of companies.

Alliances are often temporary measures and are common in industries that are undergoing structural changes or intensifying competition and firm managers fear they cannot cope alone. Alliances are the result of firms’ lack of confidence in their abilities and are most often found among “second-tier” firms trying to catch up with the leaders; At first, they give weak competitors hope of maintaining independence, but in the end it may well come to the sale of the company or its merger with another.

As can be seen from the above, the alliance is not a panacea. And to stay ahead in the competitive race, a firm must develop internal capabilities in the areas most critical to achieving competitive advantage. As a result, global leaders rarely, if at all, rely on partners when they need the funds and skills needed to gain a competitive advantage in their industry.

The most successful alliances are very specific. Alliances formed by global leaders such as IBM, Novo Industry (an insulin maker) and Canon are narrowly focused, aiming to enter certain markets or gain access to certain technologies. Alliances in general are a means of enhancing competitive advantage, but they are rarely an effective means of creating it.

The influence of national conditions on success in competition

The principles of competitive strategy outlined above show how much needs to be taken into account when highlighting the role of the home country in international competition. Different strategies are more suitable for different industries, since the structure of industries and the sources of competitive advantage in them are not the same. And within the same industry, firms may choose different strategies (and implement them successfully) if they seek different types of competitive advantage or target different segments of the industry.

A country succeeds when conditions in the country are conducive to pursuing the best strategy for an industry or its segment. A strategy that works well in that country should lead to a competitive advantage. Many of the country's characteristics make it easier or, conversely, more difficult to implement a particular strategy. These features are heterogeneous - from behavioral norms that determine the methods of managing firms, to the presence or absence of certain types of skilled labor in the country, the nature of demand in the domestic market and the goals that local investors set for themselves.

Gaining a competitive advantage in complex industries requires improvement and innovation—finding new and better ways to compete and applying those ways across the board—and continually improving products and technologies. A country is successful in these industries if its conditions are conducive to such activities. Gaining an advantage requires the anticipation of new ways to compete and a willingness to take risks (and invest in risky ventures). And the countries that succeed are those whose conditions provide firms with a unique opportunity to recognize new competitive strategies and an incentive to immediately implement those strategies. Those countries whose firms do not respond properly to changes in the environment or do not have the necessary capabilities are the losers.

Maintaining competitive advantage over the long term requires improving its sources. Improving the advantage, in turn, requires more sophisticated technologies, skills and production methods and constant capital investment. Countries succeed in industries that have the skills and resources needed to change strategy. Firms that rest on their laurels, using a once and for all established concept of competitive advantage, quickly lose ground as competitors copy the techniques that once allowed these firms to get ahead.

The constant change required to maintain a competitive advantage is organizationally awkward and difficult. Countries succeed in industries where firms are under pressure to overcome inertia and engage in continuous improvement and innovation rather than sit idly by. And in those industries where firms stop improving, the country loses.

A country succeeds in those industries where its advantages as a national base carry weight in other countries and where improvements and innovations anticipate international needs. To achieve international success, firms must transform domestic leadership into international leadership. This allows you to leverage the benefits gained at home with a global strategy. Countries succeed in industries where domestic firms compete globally, either through government encouragement or pressure. In searching for the determinants of countries' competitive advantage in different industries, it is necessary to identify the conditions in the country that are conducive to success in competition.

Honestly, competitive advantages- This is a topic to which I have an ambivalent attitude. On the one hand, rebuilding a company from competitors in the market is a very interesting task. Especially when the company, at first glance, is like everyone else and does not stand out in anything special. On this issue I have a principled position. I am convinced that any business can be rebuilt, even if it is one of a thousand and trades at prices above the market average.

Types of competitive advantages

Conventionally, all competitive advantages of any organization can be divided into two large groups.

1. Natural (price, terms, delivery conditions, authority, clients, etc.)
2. Artificial (personal approach, guarantees, promotions, etc.)

Natural benefits carry more weight because they represent factual information. Artificial advantages are more of a manipulation, which, if used correctly, can greatly strengthen the first group. We will return to both groups below.

Now comes the fun part. Even if a company considers itself to be the same as everyone else, inferior to competitors in terms of prices and believes that it does not stand out in any way, it still has natural advantages, plus, it can be made artificial. You just need to spend a little time finding them and formulating them correctly. And this is where it all starts with competitive analysis.

Competitive analysis that doesn't exist

Do you know what is the most amazing thing about Runet? 80-90% of businesses do not conduct competitive analysis and do not highlight the company’s advantages based on its results. That’s all, but what you have enough time and energy in most cases to do is look at your competitors and rip off some elements from them. That's the whole setup. And it is here that clichés grow by leaps and bounds. Who do you think was the first to coin the phrase “Young and dynamically developing company”? It doesn't matter. Many took it and... Quietly adopted it. On the quiet. In the same way, clichés appeared:

• Individual approach
• Highly qualified professionalism
• High quality
• First class service
• Competitive prices

And many others, which in fact are not competitive advantages. If only because no company in its right mind would say that its employees are amateurs, and the quality is a little worse than none.

I am generally surprised by the attitude of some businessmen. If you talk to them, everything “somehow” works for them, orders “somehow” go through, there is a profit - and okay. Why invent, describe and count something? But as soon as things start to get tough, that’s when everyone remembers marketing, differentiation from competitors, and the company’s advantages. It is noteworthy that no one is counting the money that was lost due to such a frivolous approach. But this is also profit. Could be...

In 80-90% of cases, Runet businesses do not conduct competitive analysis and do not show the company’s advantages to their clients.

However, there is a positive side to all this. When no one shows their advantages, it’s easier to rebuild. This means it’s easier to attract new customers who are searching and comparing.

Competitive advantages of products (products)

There is another serious mistake that many businesses make when formulating benefits. But here it is worth mentioning right away that this does not apply to monopolists. The essence of the mistake is that the client is shown the advantages of the product or service, but not the company. In practice it looks like this.

That is why it is very important to correctly place emphasis and bring to the fore the benefits and emotions that a person receives and experiences when working with the organization, and not from purchasing the product itself. I repeat, this does not apply to monopolists who produce a product that is inextricably linked with them.

Main competitive advantages: natural and artificial

It's time to return to the varieties of benefits. As I already said, they can be divided into two large groups. Here they are.

Group No. 1: natural (actual) benefits

Representatives of this group exist on their own, as a fact. Only many people don’t write about them. Some think it’s obvious, others because they hide behind corporate clichés. The group includes:

Price- one of the strongest competitive advantages (especially when there are no others). If your prices are lower than those of your competitors, write how much. Those. not “low prices”, but “prices 20% below market prices”. Or “Wholesale prices to retail”. Numbers play a key role, especially when you work in the corporate segment (B2B).

Timing (time). If you are delivering goods from today to today, say so. If you deliver to remote regions of the country in 2-3 days, tell us about it. Very often the issue of delivery times is very acute, and if you have thoroughly worked out logistics, then write specifically where and for how much you can deliver the goods. Again, avoid abstract clichés like “fast/prompt delivery.”

Experience. If your employees love what you sell and know all the ins and outs of your business, write about it. Buyers love working with professionals they can consult with. In addition, when purchasing a product or service from an experienced seller, customers feel more secure, which brings them closer to purchasing from you.

Special conditions. If you have any special delivery conditions (deferred payment, postpayment, discounts, presence of a showroom, geographic location, wide warehouse program or assortment, etc.). Anything that competitors don’t have will do.

Authority. Certificates, diplomas, diplomas, major clients or suppliers, participation in exhibitions and other evidence that increase the significance of your company. The status of a recognized expert is a great help. This is when company employees speak at conferences, have a well-promoted YouTube channel, or give interviews in specialized media.

Narrow specialization. Imagine that you have a Mercedes car. And in front of you are two workshops: a specialized service that deals only with Mercs, and a multidisciplinary one that repairs everything from UAZs to tractors. Which service will you contact? I bet the first one, even if it has higher prices. This is one of the types of unique selling proposition (USP) - see below.

Other actual benefits. For example, you may have a wider range of products than your competitors. Or a special technology that others do not have (or that everyone has, but which competitors do not write about). Anything can happen here. The main thing is that you have something that others don’t have. As a fact. This also constitutes your USP.

Group No. 2: artificial advantages

I especially love this group because it helps a lot in situations where the customer’s company does not have any advantages as such. This is especially true in the following cases:

1. A young company, just entering the market, has no clients, no cases, no reviews. As an option, specialists leave a larger company and organize their own.
2. The company occupies a niche somewhere in the middle: it does not have a wide range, like large retail chains, and does not have a narrow specialization. Those. sells goods, like everyone else, at prices slightly above the market average.
3. The company has some adjustments, but it is the same as its competitors. Those. everyone in the niche uses the same actual advantages: discounts, experience, etc.

In all three cases, introducing artificial advantages helps. These include:

Added value. For example, you sell laptops. But you can't compete on price with a larger seller. Then you use a trick: install an operating system and a basic set of programs on your laptop, selling it a little more. In other words, you create added value. This also includes various promotions a la “Buy and Win...”, “When buying an apartment - a T-shirt as a gift”, etc.

Personal adjustment. It works great when everyone around is hiding behind corporate clichés. Its essence is that you show the face of the company (for example, the director) and involve. It works great in almost any niche: from selling children's toys to armored doors.

Responsibility. A very strong advantage that I actively use on my laboratory’s website. Combines perfectly with the previous point. People love to work with people who are not afraid to take responsibility for the products and/or services they sell.

Reviews. Provided they are real. The more authoritative the person who gives you feedback, the stronger the impact on the audience (see trigger “”). Reviews on letterhead with a stamp and signature work better.

Demonstration. The best presentation is a demonstration. Let's say you have no other advantages. Or there are, but implicit. Make a clear presentation of what you are selling. If these are services, show how you provide them, make a video. At the same time, it is important to place the accents correctly. For example, if you check each product for functionality, tell us about it. And this will be an advantage for your company.

Cases. This is a kind of visual demonstration of solved problems (completed projects). I always recommend describing them because they work great for sales. But there are situations when there are no cases. This is especially true for young companies. Then you can make so-called artificial cases. The idea is simple: do yourself or a hypothetical client a favor. As an option - to a real client on a mutual basis (depending on the type of services, if possible). This way you will have a case that you can show and demonstrate your expertise.

Unique selling proposition. We have already talked about it a little higher. Its essence is that you enter some detail or disclose information that sets you apart from your competitors. Take me, for example. I provide copywriting services. But many specialists provide a wide range of copywriting services. And my USP is that I guarantee results expressed in numbers. Those. I work with numbers as an objective indicator of performance. And it's catchy. You can find out more about the USP in.

How to find and correctly describe the company's advantages

As I already said, I firmly believe that every company has its own advantages (and disadvantages, but that doesn’t matter now :)). Even if she is a strong middle peasant and sells everything like everyone else. And even if it seems to you that your company does not stand out in any way, the easiest way to understand the situation is to ask directly the clients who are already working with you. Be prepared that the answers may surprise you.

The easiest way to find out the strengths of your company is to ask your clients why they chose you.

Someone will say that they work with you because you are closer (geographically). Some will say that you inspire confidence, while others simply liked you. Collect and analyze this information and it will increase your profits.

But that is not all. Take a piece of paper and write down the strengths and weaknesses of your company. Objectively. Like in spirit. In other words, what you have and what you don’t have (or don’t have yet). At the same time, try to avoid abstractions, replacing them with specifics. Check out the examples.

Not all advantages can and should be written about on the same website. However, at this stage the task is to write down as many strengths and weaknesses of the enterprise as possible. This is an important starting point.

Take a pen and paper. Divide the sheet into two columns and write down the advantages of the company in one and the disadvantages of the company in the second. Maybe with a cup of coffee. Don’t look at the rowan tree, it’s just there for the ambiance.

Yes, we have, but this

Look at the examples:

Flaw	Turning into an advantage
Office on the outskirts	Yes, but the office and warehouse are in one place. You can see the product right away. Free parking even for trucks.
Price higher than competitors	Yes, but it comes with a rich package: a computer + an installed operating system + a set of basic programs + a gift.
Long delivery on order	Yes, but there are not only standard components, but also rare spare parts for individual orders.
Young and inexperienced company	Yes, but there is mobility, high efficiency, flexibility and the absence of bureaucratic delays (these points need to be discussed in detail).
Small assortment	Yes, but there is a specialization on the brand. Deeper knowledge of it. The ability to advise better than competitors.

You get the idea. This gives you several types of competitive advantages:

1. Natural (factual information that you have that sets you apart from your competitors)
2. Artificial (amplifiers that also set you apart from competitors - guarantees, personal approach, etc.)
3. “Shifters” are disadvantages that are turned into advantages. They complement the first two points.

Little trick

I use this trick from time to time, when it is not possible to fully show off my strengths, as well as in a number of other cases when I need something more “weighty”. Then I don’t just write the company’s advantages, but combine them with the benefits that the client receives from the product or service. It turns out to be a kind of “explosive mixture”.

See what this looks like in practice.

• Was: Experience 10 years
• Became: Budget savings of up to 80% due to 10 years of experience

Or another example.

• Was: Low prices
• Became: The price is 15% lower, plus a reduction in transport costs by 10% due to our own fleet of vehicles.

You can learn in detail about how to correctly form benefits from.

Summary

Today we looked at the types of main competitive advantages of a company and, using examples, we looked at how to formulate them correctly. At the same time, it is important to understand that everything that we did today should by default be part of the competitive strategy (if it is being developed). In other words, everything will work better when linked into a single system.

I really hope that the information in this article will expand your capabilities and allow you to conduct competitive analysis more effectively. In turn, if you have any questions, ask them in the comments.

I'm sure you will succeed!