In building to my previous post on Business Strategy : What is it and why companies formulate it, today I’m focusing on Competitive Advantage.
Companies formulate strategies to gain competitive advantage.
In business, a competitive advantage is the attribute that allows an organization to outperform its competitors. It results from matching core competencies to the opportunities. I am going to share a case study on Starbucks and how they gained competitive advantage in the coffee shop business.
There are many routes to competitive advantage, but they all involve either giving buyers what they perceive as superior value compared to the offerings of rival sellers or giving buyers the same value as others at a lower cost to the company.
Superior value can mean;
1. A good product at a lower price,
2. A superior product that is worth paying more for, or
3.A best-value offering that represents an attractive combination of price, features, quality, service, and other attributes.
Delivering superior value or delivering value more efficiently—whatever form it takes—nearly always requires performing value chain activities differently than rivals and building capabilities that are not readily matched.
Starbucks’ case study
Starbucks has gained a competitive advantage over its rivals in the coffee shop industry through its efforts to create an upscale experience for coffee drinkers by;
1. Catering to individualized tastes,
2. Enhancing the atmosphere and comfort of the shops, and
3. Delivering a premium product produced under environmentally sound fair-trade practices.
By differentiating itself in this manner from other coffee purveyors, Starbucks has been able to charge prices for its coffee that are well above those of its rivals and far exceed the low cost of its inputs.
Its expansion policies have allowed the company to make it easy for customers to find a Starbucks shop almost anywhere, further enhancing the brand and cementing customer loyalty.
A creative distinctive strategy such as that used by Starbucks is a company’s most reliable ticket for developing a competitive advantage over its rivals.
If a strategy is not distinctive, then there can be no competitive advantage, since no company would be meeting customer needs better or operating more efficiently than any other.
If a company’s competitive edge holds promise for being sustainable (as opposed to just temporary), then so much the better for both the strategy and the company’s future profitability.
A competitive advantage must be sustainable and what makes a competitive advantage sustainable (or durable), as opposed to temporary, are elements of the strategy that give buyers lasting reasons to prefer a company’s products or services over those of competitors—reasons that competitors are unable to nullify or overcome despite their best efforts.
In the case of Starbucks, the company’s unparalleled 1.name recognition, its 2.reputation for high-quality specialty coffees served in a comfortable, inviting 3.atmosphere, and the 4.accessibility of the shops make it difficult for competitors to weaken or overcome Starbucks’s competitive advantage. Not only has Starbucks’s strategy provided the company with a sustainable competitive advantage, but it has made Starbucks one of the most admired companies on the planet.
The key elements of Starbucks’s strategy in the coffeehouse industry included:
- Training “baristas” to serve a wide variety of specialty coffee drinks that allow customers to satisfy their individual preferences in a customized way.
- Emphasizing store ambience and elevation of the customer experience at Starbucks stores.
Starbucks’s management views each store as a billboard for the company and as a contributor to building the company’s brand and image. The company went to great lengths to make sure the store fixtures, the merchandise displays, the artwork, the music, and the aromas all blended to create an inviting environment that evoked the romance of coffee and signaled the company’s passion for coffee. Free Wi-Fi drew those who needed a comfortable place to work while they had their coffee.
- Purchasing and roasting only top-quality coffee beans.
The company purchases the highest-quality Arabica beans and carefully roast coffee to exacting standards of quality and flavour.
- Expanding the number of Starbucks stores domestically and internationally
The company’s ability to vary store size and format made it possible to locate stores in settings such as downtown and suburban shopping areas, office buildings, and university campuses.
- Fully exploiting the growing power of the Starbucks name and brand image with out-of-store sales.
In the next post we will share the 5 of the most frequently used and dependable strategic approaches you can use to set your company apart from competitors to build strong customer loyalty and win competitive advantage.
I hope this builds up a momentum for you to start thinking about how you can gain competitive advantage for your business in the industry you are in.