| In order to have high profitability, it is necessary to | | | | elements that the situation requires. |
| differentiate yourself as well as what resources utilize | | | | Moreover, as business circumstances change, |
| that allow the organization to operate at lower costs. | | | | strategies must be adaptable to such changes. |
| The challenge for today's business managers is to | | | | Otherwise, the organization may not be able to |
| assess and choose business strategies based on core | | | | respond quickly to unpredictable events. |
| competencies and value chain activities that sustain | | | | When facing competition, there are three main |
| both types of competitive advantage simultaneously. | | | | strategies that aim to achieve high profits. |
| A strategy consists of defining the different ways an | | | | Low-cost strategy. This strategy is very common, |
| organization can reach its objectives. A strategy is | | | | especially in sectors that aim at achieving leadership |
| basically comprised of the following aspects: (1) how | | | | through the direction of all efforts towards cost |
| the organization intends to compete, that is, how it | | | | reduction. Achieving cost leadership usually requires a |
| will create a competitive advantage, (2) how the | | | | large market share or achieving other benefits, such |
| various people or departments within the company | | | | as favorable access to infrastructure or human |
| will contribute to achieve this competitive advantage, | | | | resources, greater financial strength, a better |
| and (3) how the different resources need to be | | | | understanding of the processes, etc. Having a |
| allocated among the many activities of the | | | | low-cost position allows an organization to obtain |
| organization. | | | | higher profits than the competition or bear price |
| A strategy usually consists of external and internal | | | | reductions that affect the entire industry. |
| elements. The external factors refer to what means | | | | Differentiation. This second strategy consists of |
| will ensure that the company is effective and | | | | differentiating the product or service offered by the |
| competitive in the market, what kind of competitive | | | | company, creating something that the customer |
| advantage will be pursued, what needs are to be | | | | perceives as unique or different. How to create |
| met or what groups or segments of customers are | | | | something unique or different can take many forms. |
| to be targeted, how the organization will compare | | | | It may be through the design or branding of different |
| itself to or distinguish itself from the competition, | | | | technologies, through customer service, distribution, |
| what products or services will be highlighted in order | | | | quality, and so on. By definition, differentiation does |
| to attract customers, how it will defend itself against | | | | not allow, most of the time, reaching a large market |
| the competitive moves of rivals, and what actions will | | | | share; it often requires a perception of exclusivity |
| be taken depending on industry trends, changes in | | | | that is incompatible with a large market share. |
| the economy, and political and social movements. | | | | However, differentiation provides insulation from |
| The internal elements relate to how the different | | | | competition, and generally provides higher profit |
| elements that make up the business (people, | | | | margins. |
| departments, activities) will organize to achieve and | | | | Market Focus. This last strategy consists of focusing |
| maintain a competitive edge, that is, what kind of | | | | on a particular group of customers, on a segment of |
| distinctive features will the organization need to | | | | a product line, or on a specific geographic market, |
| develop. These distinctive features refer to those | | | | and implementing in that group, segment or particular |
| unique characteristics (e.g., internal factors such as | | | | area a leadership strategy in cost or differentiation. |
| resources, structure, skills) that the company has and | | | | Usually, an organization that applies this strategy |
| make it particularly "better" than its competitors. | | | | achieves high yields. However, it also experiences |
| Being truly "good" in some important aspect of the | | | | limitations in market share. |
| creation, production or marketing of a product or | | | | What strategy should you organization follow? The |
| service usually becomes the vehicle for obtaining | | | | answer lies in the mission and the distinctive qualities |
| competitive advantage. | | | | of your business. That is, focus on what your |
| The most important features of strategies are that | | | | company's mission is. The worst mistake we make in |
| they be customized to the particular needs of the | | | | our business is to compete based on the same |
| organization and adaptable. Since each business | | | | features offered by our competitors. If competing |
| situation is unique, strategies must be customized by | | | | on the same basis as our competitors, competition |
| managers. This ensures, that there is alignment | | | | over the course of time will always gravitate toward |
| between the strategies and the internal and external | | | | price. |