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Shootin’ the Breeze
November 4, 2015
Distributed weekly to Pincher Creek, Crowsnest Pass and surrounding communities
Strategies for sustainable competitive advantage By Kirk Clements Strategic thinking is about creating, protecting and exploiting competitive advantages. Your business is your castle that must be defended against competitors. Moats are defensive barriers to entry, typically built to surround castles and protect them. In order to even get to the castle, first you have to get past the moat. You want a moat filled with water and in that water you want sharks and crocodiles, and each year you want to widen your moat and add more sharks and crocodiles. You need to identify the competitive advantages your business possesses and do what you can to expand those advantages, year after year. The more barriers to entry faced by potential competitors, the more pricing power you will have in your business. That translates into a more profitable business. There are really only three sustainable competitive advantages: Supply — These are cost advantages that allow you to produce and
deliver products or services more cheaply than competitors. Sometimes the lower costs stem from privileged access to crucial inputs. Most cost advantages are due to proprietary technology that is protected by patents or by experience — know-how — or some combination of both. Demand — Some companies have access to market demand that their competitors cannot match. This access is not simply a matter of product differentiation or branding, since competitors may be equally able to differentiate or brand their products. These demand advantages arise because of customer captivity that is based on habit, on the costs of switching, or on the difficulties and expenses of searching for a substitute provider. Economies of scale — If costs per unit decline as volume increases, because fixed costs make up a large share of total costs, then even with the same basic technology, an incumbent firm operating at large scale will enjoy lower costs than its competitors. So does your business have a moat
— a strategic competitive advantage? Lots of competitors have similar access to customers, technologies and other cost advantages. When each company is in more or less the same competitive position, anything that one company does to improve its position can and will be immediately copied. This process of innovation and imitation repeats itself continually. In these markets it is best not to try to outmanoeuvre the competitors, but to outrun them by operating as efficiently as possible. But all is not lost. Business differentiation allows you to position your products or services so that consumers can distinguish between those that are offered by your business and those offered by the competition. You always differentiate your business based on what customers value as important when making purchasing decisions. Learn what your customers want. Analyze your competition — who they are, how they communicate to the customer, what they do to compete. Create product differentiation with
simple techniques: — superior service — greater product availability — higher quality — better performance — greater durability — respected image; prestige — technology leadership — customer support; satisfaction guarantee Let’s look at a pizza restaurant. There might be a couple of the national pizza chains already in the community, so how do you differentiate your pizza shop from them? How about installing a volcano that erupts what looks like pizza sauce every 15 minutes. The kids would drag Mom and Dad to that pizza shop. I’ll leave it to you to work out the details for differentiating your business, but try to have some fun with it. Kirk Clements is a business analyst with Community Futures Alberta Southwest, based in Pincher Creek. He invites you to visit southwest.albertacf. com.
Photos courtesy of Robert Plante
Willow Valley youth have a pleasant pheasant shoot Willow Valley Trophy Club held a youth pheasant shoot for young hunters in October. The day featured safety lessons, clay pigeon shooting and the release of pheasants to hunt, for the benefit of 14 youth who participated. At left, Clayton Taylor is hunting in the field. At right, the group meets, with members bringing their trophies.