COMPETITION: DON’T BE JUST LIKE EVERYONE ELSE

Every company and every firm has competition. The competition may be direct or indirect, but there is competition. The health club competes with the television, McDonald’s competes with cooking at home, and the design company competes with the do it yourself-er. The moment a firm begins to believe that it does not have competition is the exact moment it becomes vulnerable to competition.

 

Competitive Advantage and the Basis for Competing

Once the firm knows who the competitors are and what they do, it needs to carefully identify and document who it is. This is called creating a competitive advantage. A competitive advantage is creating through differentiation and differentiation is created through branding and imaging. Any time a customer asks for your product by name, you have achieved differentiation. Although theoretically simple, creating differmentation through brand and image is not as simple as it sounds. It is a process of identifying the firm’s strengths, weaknesses, limitations, hurdles, and faulty assumptions, followed by creating a brand that is identified by logos, tag lines, color scheme, and all those additional elements that create a visual or recognizable memory of the firm. The competitive advantage of a product or service also depends heavily on variables such as the level of sophistication of the product, prior experience with that product or service in a certain country or part of a country, and the types of distribution channels available.

 

Costs and Risks

Creating competitive advantage may require a high level of cost and risk to the firm. Often, a firm will create a branding strategy that “pushes the envelope” and increases risk both in time and in money. However, the brand image that is created is so strong that the customer immediately responds positively. It is imperative that the brand or image created be aligned with the firm’s strategic initiatives and goals.

 

Creating a Perceived Value

There are two packages of cheese, both of which are produced at the same factory. One is sold at the supermarket for $3.50 and carries a brand name. The other package of cheese is a generic brand and sells for $2.50 before the store gives a “VIP card” (frequent shopper) discount. It is the exact same cheese with different labels. However, mil- lions of Americans buy Kraft over the store brand because it is a brand they can trust. This is what is referred to as “perceived value.” The customer has no idea that the cheese comes from the same plant, has the same ingredients, and is probably even packaged at the same location.It is even possible that the same truck delivered both cheeses to the grocery store. The value is not in the cheese, but in the trust that the customer places in a company with which he/she can identify.