Why are there companies that earn a lot of money in their businesses while others, equally motivated, barely get ahead? This is the big question that many entrepreneurs ask themselves and that we try to solve in this article.
To determine the "type of company we want to be", as a first step it is necessary to review the structural characteristics of the different economic sectors, since not all businesses have the same chances of success.
And it is not enough to choose attractive businesses: in all sectors there are companies that are doing well and others that are doing poorly. It is necessary to know how to use the structural characteristics of the sector to create an advantageous competitive position that protects the profits of the company from the attacks of its competitors.
The creation of a "sustainable competitive advantage" over the competition is understood as a plan that configures the company on three dimensions that will determine its strength:
- what you want to produce, what parts of the product to manufacture (or service to provide) and what parts to subcontract, and in which geographic area to compete.
By configuring the company in these three dimensions, the company is in a position to define its competitive advantage.
But… What is the Competitive Advantage?
A competitive advantage is any characteristic of a company that differentiates it from direct competition within its sector. Every company that obtains profits in a sustained way has “something” that its competitors cannot match, although in many cases they imitate it. And it not only has a competitive advantage, but it is “sustainable” in the medium or long term.
Within these characteristics that make companies different from each other, there are certain structural factors that make it possible to carry out a differentiation strategy. Among them, we can find:
- The importance of product quality for buyers; The possibility of applying different technologies; The use of the product to differentiate itself; The impossibility of appreciating the quality of the product a priori; and, The possibility of improving a product with complex technology.
A differentiated company, or one that sells a differentiated product, can be very profitable, it has a shield that protects it from direct competition from competitors that could take away its market, and this shield is precisely its differentiation, which offers it the opportunity to generate “extra margins”.
And… How do we differentiate ourselves?
Whoever decides to start studying the company to differentiate itself, must resign themselves to knowing the company of yesterday. The company evolves and with it, business action. Knowledge, on the other hand, is subject to the inertia of learning, sometimes aggravated by the laziness and ignorance of those who teach.
Although it may seem like a controversy, there are numerous "fields of ignorance" of business action.
A company that aspires to compete and survive in the current context, must dialogue with its customers, must be able to interpret the demands it receives and respond to them.
But to be able to dialogue with the market, a company must be able to maintain its own internal dialogue.
In a turbulent context like the current one, no one can feel strong for what they are: the only possible strength is the one that comes from being able to respond, from being able to stop being what one is to be what is necessary.
Remember that there is always the possibility of making your own choice: you can try to become a proactive entrepreneur, with a clear projection to the future, or join the current of inertia of firefighters, "putting out fires" as difficulties arise.
The decision is yours.
