CSS Solved Business Administration 2021 Past Paper | Describe competitive advantages and the competitive strategies the organization use to achieve it with practical examples.
The following question is attempted by Miss Nimra Masood, the top scorer in CSS Business Administration papers. Moreover, the answer is written on the same pattern, taught by Sir to his students, scoring the highest marks in compulsory subjects for years. This solved past paper question is uploaded to help aspirants understand how to crack a topic or question, how to write relevantly, what coherence is, and how to include and connect ideas, opinions, and suggestions to score the maximum.
Topic: Competitive Advantage
To gain maximum marks in this subject, students need to be clear, concise and to the point. Competition handling is one core part of a successful business strategy; thus, asked repeatedly by the CSS examiner.
When a company decides to offer a product or service, the first thing it looks into is its unique selling proposition. To create space in the market company must offer something that is different from what is already being offered. For this purpose, the company has to decide among the various competitive strategies such as cost leadership, differentiation and niche.
It is an advantage over the competitor by offering something greater in value. To develop a competitive advantage, companies are required to conduct a detailed competitor analysis and develop a marketing strategy in alignment with that analysis. This marketing strategy, in turn, places the company in a stronger position against the competitor; hence, giving a strategic advantage.
Competitor analysis is the process of identifying key competitors, their objectives, strengths and weaknesses. It can be divided into three steps
- ✓ Identifying Competitors:
The first step in a competitor analysis is to identify key competitors in the market. They are either a threat to your customer base, or the company itself has to capture the market share from them. For example, in the fast food industry, strong competition has emerged with multinationals like Macdonald’s and Burger king competing.
- ✓ Assessing Competition:
The next phase is to assess competitors for their objectives, strengths and weaknesses. In addition, the company needs to evaluate the value being offered by the competitors. After this company needs to compare its standing with that of competitors, this will help develop a benchmark of the market. The last point is to assess the level and sort of reaction expected from competitors when the company will enter the market.
- ✓ Selecting which competitors to attack and avoid:
In the last step company should narrow down further to identify companies that are in direct competition or could be a threat in future. To attain a long-lasting competitive advantage company must assess the company offerings in each segment and then compare it with that of competitors.
To have a sustainable competitive advantage and comprehensive competitive strategy, the company must first analyze the Environment in which the company will operate.
Porter’s five forces:
- ✓Competition in the industry:
The lesser the competition, the easier it is to penetrate for the new company.
- ✓ Threat of New Entrants:
The less time and cost it takes for others to become potential competitors, the weaker the company’s position.
- ✓ Supplier Power:
The lesser the suppliers available more is their power hence monopoly to drive up the cost
- ✓ Buyer Power:
The smaller the customer pool more powerful they are; hence giving more bargaining power.
- ✓ Threat of Substitutes:
The more options of closer substitutes available, the higher the customer power weakening the company’s power.
When the analysis and evaluation of competitors is complete, the next step is to formulate a competitive strategy. This strategy will vary for every company as it core competencies are different. Michel Porter has identified three major competitive strategies:
- ✓Cost Leadership:
This type of strategy is only possible when the company has low production costs. It only suits companies that produce in large quantities to attain economies of scale. For example, a company like Walmart adopts such a strategy as they are in the retail business. Their key competency is to offer the same product at a lower price. In Pakistan, clothing brand like Khadi, to some extent, adopts the strategy of cost leadership by producing at a lower cost as compared to other competitors. It does this by producing in bulk and having a strong distribution channel based on its own outlets.
- ✓ Differentiation:
This is the killer strategy. It means creating space in the market by offering a new product. This not only adds to the customer value but also increases the market size. With strategy, the company is given an edge over the competitor; consequently, allowing it to charge a higher price in the market. International brands like star bucks and apple follow this strategy. In Pakistan, clothing brands like Bareeze follow this strategy of differentiation for years.
- ✓ Focus:
Also known as Niche Strategy. With this strategy, the company focuses only on a small portion of the segment. This is only possible when the company offers something unique or valued targeted only to a group of customers. While other strategies are focused on gaining a small share in different segments, this strategy is targeted at gaining a large chunk of the small segment in focus. A retailer like Harold’s follows this strategy by targeting a small niche of customers.
The whole effort of marketing revolves around the concept of competitive advantage and competition. A marketing strategy is incomplete if it does not take into account the competitors. Every successful company has a clearly defined and assessed competitive strategy, even for the future. The real test for the company is to ensure that the competitive advantage is sustained for a maximum period of time.
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