When you have got an excellent product and great customer service but want to gain market share, it is probably time to think about how to get ahead of the competition and stand out from the crowd. The relationship between strategic management and competitive advantage can help to produce exceptional success for your business. Think about strategic management as being a vehicle that helps drive you to your goal of gaining a competitive advantage in the marketplace. That competitive advantage then creates a growing customer base, improved customer loyalty and an increasing bottom line.
Understanding Strategic Management
In its simplest form, strategic management is the process of managing a business with the goal of fulfilling its mission, vision and objectives. The strategic management process includes the following:
- Goal setting: Goal setting involves looking at where the organization is and deciding where you want it to be, then communicating these goals with everyone in your organization. It is easier for individuals, teams, departments and your entire company to excel when they know what they ought to be aiming for.
- External and internal analysis: Once you know what your goals are, gathering data is vital to your success. Analyze what is happening inside of your company, outside your company and with the competition. This information will inform how you proceed and help you make wise choices.
- Creating strategies: Use your goals and data to come up with a strategy for meeting your organization's goals. For instance, your strategy for increasing the sales of home fragrance might involve new scents, new packaging, intentional marketing and more. Your strategy will outline all of this in detail, as well as how and when you will fund each piece.
- Implementation: Implementation is when each person involved in your strategy walks out their own part in helping your business succeed. Excellent communication and a team that is on board with the vision is key to successfully implementing strategies.
- Evaluation: Strategies often need to be adjusted as you go, so keep tabs on how all the moving parts of your strategy are performing. It is okay to tweak things in order to reach your projections. Evaluation after project completion can help you see what went well and what you might change next time.
Benefits of Strategic Management
In business, like in basketball, we miss 100% of the shots we do not take. Strategic management practices help us take aim and shoot for our goals and projections. Some of the benefits of strategic management are:
- Increased profit.
- Clarity of direction.
- More accurate projections.
- Informed decision-making .
- Increased competitor awareness.
- Increased productivity.
- Improved resilience.
Understanding Competitive Advantage
The relationship between strategic management and competitive advantage lies in your management's strategies being vehicles that increase your edge over the competition. Competitive advantage is when one company produces a product or service that meets the customer's needs in a way that their competitors cannot. Consider the following:
- Price: When two companies offer comparable products but one company can sell it at a lower price and still make a profit, they might gain a competitive advantage. When faced with two nearly identical products, customers are likely to choose the lower-priced option. For instance, if superstore A and superstore B sell the same quality paper plates for your next big cookout, customers might choose to purchase from superstore A, which consistently offers a lower price on most things.
- Differentiation: Sometimes, a company can charge more for a product than their competition and still get more business, resulting in a competitive advantage. This is because something about their brand, product or service is more attractive to their target audience. For instance, iPhones are not the least expensive smartphones on the market, but the brand is known for being innovative, sleek and user-friendly, so they have gained a competitive advantage that is hard to beat.
Benefits of Competitive Advantage
Competitive advantage is more than a business buzzword or a pie-in-the-sky dream. The benefits that come from securing competitive advantage will help your company in the long haul and include things like:
- Widened profit margins.
- Increased bottom line.
- More customers.
- Increased customer loyalty.
- Improved reputation.
- Increased recognition.
Strategic Management and Competitive Advantage
To make the relationship between strategic management and competitive advantage truly shine, let them work as a team. Use your strategic management plan to get you to your competitive advantage. For instance, Apple's strategic management approach has been to cultivate a valued brand and invest heavily in research and development. This strategic management move involves a lot of sweat and work on the inside, but results in Apple's significant competitive advantage in the marketplace.
Managing for Competitive Advantage: Staying Ahead of Rivals
If you want to know how to strategically manage in order to gain a competitive advantage, start by examining what you do best and what your competition does better than you do. You can strengthen your strong areas, out-think the competition in their strong areas or even turn your weaknesses into your biggest strengths. The magical formula for competitive advantage is different for every business and industry, but here are eight things to consider as you strategize:
- Persuasive language: How you communicate is just as important as who you communicate with and when. Positive and negative messages can be used on every level of communication within your organization and outside of it. Negative persuasive words are best used in situations where people are likely to dismiss risk, as in anti-smoking advertisements. Positive persuasive words are best used in situations where risks are not as high, like in the instance of staying hydrated with water for better health.
- Productivity: Make your decisions with productivity in mind. Make sure you have got the right people in the right place, at the right time. It is more productive to have a trained engineer do your CAD drawings than to train an intern to do the same.
- Quality: Buckle down on your quality systems to ensure that your integrity and reputation go before you and that you do not needlessly waste money on reproducing products that were made incorrectly.
- Innovation: 3M is famous for allowing its employees to spend 15% of their time on innovation. You could also consider rewarding experimentation, brainstorming and research, and ensure your employees are utilizing their vacation time.
- Marketing: Marketing is how we communicate who we are as businesses to the world around us. For something this important, find the most creative and gifted people you can to help you tell your story and meet your customers where they are effectively.
- Differentiation: You are not the same as your competition. Something about your business is unique, special, different or better. Make sure you are communicating that through marketing, packaging and every interaction with others outside of your organization.
- Know your competition: Just like you are unique, so is your competition. Learn from what they do better than you, whether that be customer service, quality control or shipping times.
- Become a desirable employer: Sometimes becoming the best is about attracting the best. Some of the best employers in the U.S. offer things like generous pay, onsite childcare, pets in the workplace, time to be creative, community service opportunities and more.
- Harvard Business Review: Strategic Management for Competitive Advantage
- Investopedia: Competitive Advantage
- Investopedia: Strategic Management
- The Training Associates: The Five Stages of the Strategic Management Process
- ResearchGate: Wiley Encyclopedia of Management: Strategic Management
- Corporate Finance Institute: Competitive Advantage
- Smart Company: Five Steps to Get a Sustainable Competitive Advantage
- Marketing Donut: 10 Ways to Keep Ahead of the Competition
- Forbes: My Top Four Ways to Stay Ahead in the World of Business
- Forbes: Five Subtle Ways to Persuade and Influence Others
- The Persuasion Revolution: 380 High Emotion Words Guaranteed to Make You More Persuasive
- Skillset: Positive or Negative: Which is More Persuasive?
- Entrepreneur: Nine Ways Your Company Can Encourage Innovation
- Business Insider: The Best Places to Work in 2019, According to Employees