Deprecated: mysql_connect(): The mysql extension is deprecated and will be removed in the future: use mysqli or PDO instead in /home/a26f9f83/public_html/articles/includes/config.php on line 159
6 Steps To Laying Out Your Competitive Strategy > NetSparsh - Viral Content you Love & Share

6 Steps To Laying Out Your Competitive Strategy

Why do so many companies languish and watch as their business turns into a zero profit zone, while others seem to thrive?

When you look at your business, whether it's a new venture or a company with a long history, can you answer the following questions?

  • What does my company do better than anyone else?

  • What unique value do I provide to my customers?

  • How will I increase that value next year?

Companies that fail to answer these questions, and don't believe they are of paramount importance, relegate themselves to marginal profitability at best and failure at worst. But companies that can answer these questions are able to raise the value bar for their customers and reap the benefits of success.

Of course, being able to answer 3 simple questions does not ensure success, but it is an important step in creating a strategic and focused operation which leads to a successful business. With today's business environment being so competitive, businesses need to re-invent the rules on which they compete in order to be successful. Companies like Wal-Mart have figured this out and have redefined competition in their market by delivering a unique value to a selected customer group. By maintaining a focus and discipline, they make it difficult for other companies to compete under old competitive terms.

Simply, competitive strategy has never been more important to success in today's business environment. It does not matter what type of business you are in or whether you are small, big or just starting out, a company can not survive without an adequate and focused strategic plan to best the competition. Yet many companies fail to execute a successful strategy; it is these companies that languish in the zero profit zone.

In simple terms, for a company to achieve success and enter the profit zone it must first decide where it will stake its claim in the marketplace and what kind of value it will offer its customers. A company needs a clear marketing thrust, a precise knowledge of its customer base, and a product or service with a niche or some competitive advantage to be successful. Unfortunately, many entrepreneurs and business owners get stuck in the process of defining their competitive strategy. They often have the idea and the product, but being the technician they are not sure how to define its market. Even worse, many entrepreneurs assume or guess their target market and often glaze over a competitive strategy, usually to the detriment of the business.

So what are the steps to laying out a competitive business strategy? While there are different methods you can follow, I have laid a series of 6 basic steps to help you.

1. Financial perspective

This step may not seem to have much to do with strategy, but it is important to determine the value of success quickly. Why? Because, in simple terms if the venture can't deliver significant returns, it may not be worth the risk, and you have to ask yourself if it is worth continuing with your business. In this scenario you complete a reverse income statement. You start by defining how much profit you want to see at the end of a certain time period, and then determine the amount of revenues needed to generate that profit and the costs to deliver that profit. Do the numbers add up and make sense? The goal here is to be objective, if the expected revenue is not sufficient to generate your required profit at the end based on an estimate of costs, don't simply fudge the numbers and assume you can reduce costs or increase revenue. Be diligent in your assessment.

2. Understand the industry and competition

In step 2 you are going to assess your industry and the competition. This basically comes down to assessing 5 factors:

  • Understanding who your competition is including factors such as competitor strengths and weaknesses, market position, pricing, new product development, advertising, marketing and branding. You should determine how you compare to your competitors.

  • Assessing the threat of new entrants into the industry (which may include you) and any potential reactions from existing companies. There are basically 6 barriers to entry you can evaluate: economies of scale, product differentiation, capital requirements, cost disadvantages, access to distribution channels, government policy.

  • Assessing the threat of substitute products (existing or future) that can place a ceiling on pricing.

  • Assessing the bargaining power of suppliers who can increase prices, lower the quality of products or limit the quantity of supplies one can purchase. This all has an impact on profitability.

  • Assessing the bargaining power of customers who can force down prices or demand better quality, more services and play you off versus a competitor.

    3. Understand the Customer Perspective

    In step 3 you assess your customer. This is a key step, get it wrong and you may not be able to recover. In fact, the customer value proposition and how it translates into growth and profitability for the company is the foundation of strategy.

    Start by asking your self a couple basic questions: To achieve my vision, how must my customers look? Who are the target customers that will generate growth and a profitable mix of products/services?

    Next, ask yourself what is the value proposition which defines how the company differentiates itself to attract, retain and deepen relationships with the targeted customers? There are basically 3 value propositions or disciplines that you can choose from:

  • Cost leadership ? In this discipline you choose to provide the best price with the least inconvenience to your customers.

  • Product leadership ? In this discipline you offer products that push the performance boundary (i.e. newer and better than competitors).

  • Best total solution ? In this discipline you deliver what the customer wants, cultivate relationships and satisfy unique needs. In this case, you may not be the cheapest or the newest, but the total package you deliver to the customer cannot be matched.

    In order to help you determine which of these value propositions you decide on, you may want to work through a value chain: 1. Determine your customer priorities 2. Determine the channels needed to satisfy those priorities 3. Determine the offering (products) that are best suited to flow through those channels 4. Determine the inputs (materials/knowledge etc) required to create the product 5. Determine the assets/core competencies essential to the inputs (ask yourself, in order to satisfy my customer at which processes must I excel? For example, product design, brand and market development, sales, service and operations and/or logistics).

    4. Finish the business model

    The business model shows how all the elements and activities of a business work together as a whole by outlining how the business generates revenue, how cash flows through the business and how the product flows through the business. By this time, you should understand the revenue capability of the business, how the industry works and your competition, who you customer is, what you are going to offer them and how you are going to offer it. By drawing a flow chart that shows how these activities are linked together you will understand how the business activities flow to generate projected profit, which you determined in step 1. This is also a good step to see if something is missing in your analysis.

    5. Construct the business plan

    By the time you get to this step most of your work is done. If you are looking for financing, a formalized plan will have to be completed. If you do not need financing, simply make sure the preceding tasks are documented so that they can be reviewed and changed as time progresses (strategy is an ongoing process, not a one time task).

    6. Learning and growth perspective

    In this last step, you ask yourself how/where the organization must learn and improve in order to become and remain successful. For example, determine the skills, capabilities and knowledge of employees needed, the technology needed and the climate and culture in which they work.

    About The Author

    Jeff Schein is a CGA and offers consulting and advice in the areas of business planning, business modeling, strategic planning, business analysis and financial management for new ventures and growing small businesses. Visit www.companyworkshop.com or mailto:jeff@companyworkshop.com

    You have permission to publish this article electronically or in print, free of charge, as long as the bylines are included. A courtesy copy of your publication would be appreciated. Send to:jeff@companyworkshop.com

    In The News:

    This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news

    WCRP's New Strategic Plan for Climate Research Highlights the Importance of HPC
    HPCwire
    As climate modeling increasingly leverages exascale computing and researchers warn of an impending computing gap in climate research, the World Climate Research Programme (WCRP) is developing its new Strategic Plan – and high-performance ...


    Automotive Buy Sell Report (blog)

    Prepare for the future with strategic planning
    Automotive Buy Sell Report (blog)
    The one thing with change is that it is constant. Knowing this, are you prepared for the future and what change is going to occur? A rhetorical question, but one that begs us to consider the importance of strategic planning, as it can prepare you for ...


    Starkville Daily News

    SOCSD Board OKs strategic plan
    Starkville Daily News
    Starkville-Oktibbeha Consolidated School District Board of Trustees members Debra Prince, left, and Sumner Davis work during the school board meeting Tuesday night. The board approved the district's new five-year strategic plan. (Photo by Charlie ...


    Communique

    UCCS kicks off 2030 strategic planning process
    Communique
    UCCS will utilize the experience and services of JERA Partnerships in facilitating and developing the 2030 strategic plan in collaboration with the many university stakeholders. Diane Zile, JERA CEO and founder, and her team engaged the Chancellor's ...


    EastCountyToday (press release) (blog)

    Thursday: East Contra Costa Fire to Host Strategic Planning Session
    EastCountyToday (press release) (blog)
    After a hosting a series of Town Hall Meetings, the East Contra Costa Fire Protection District will host a strategic planning session on Thursday, July 9 from 6:00 pm to 8:00 pm. While the Town Halls focused on education to residents about the District ...

    and more »

    Forbes

    The Impact Of Talent On Strategic Planning
    Forbes
    Is your organization planning its current and future talent needs with the same level of energy devoted to its strategic plan? Your human capital plan must fit hand-in-glove with your strategic plan. A disciplined approach to your talent planning is a ...


    Chattanooga Times Free Press

    Chattanooga developing strategic plan for public art [photos]
    Chattanooga Times Free Press
    This week Chattanooga's public art program is launching its first phase of community engagement to develop a strategic plan that will guide the future of public art in the city. With the input from community organizations and individuals, the plan aims ...


    MyAJC

    Strategic planning helping metro Atlanta schools keep teachers
    MyAJC
    Today's afternoon job fair at DeKalb County Schools' Stone Mountain headquarters is targeting special education teachers and nurses. The new human resources chief, Bernice Gregory, said recent strategies targeting specific groups have worked well to ...


    CIO

    How to develop a PMO strategic plan
    CIO
    Strategic-level (PMOs), also known as enterprise project management offices, are essential in developing, maintaining and communicating effective project, program and portfolio practices. Having a solid company-wide strategic plan provides the ...

    and more »

    Forbes

    How To Get Started With The Legacy Planning Process
    Forbes
    Strategic planning aligns your values and goals with your overall investment strategy and wealth plan. Sometimes starting with a simplified picture of your wealth—in other words, understanding what's already in place—can help identify what changes ...

    and more »
    Google News

  • Legal Strategies in Business Plans

    Writing a Business Plan these days is tough, venture capitalists... Read More

    Vision Getting Dim?

    A recent conversation started with a typical question, "How's business?"... Read More

    Consolidation in the Software Industry is Hardly New: Obsess About It or Risk Losing it All

    Some analysts credit [Larry] Ellison with anticipating the consolidation in... Read More

    Business Plan: Planning the Operations

    Writing a business plan is no easy task, sure you... Read More

    Six Key Areas For Evaluating A Strategic Alliance

    Strategic alliances are increasing at a rapid rate. It is... Read More

    Building a Better Brick-and-Mortar with the Billion-Dollar Web

    More than $117 billion passed hands from Internet shoppers to... Read More

    Questions to Ask Yourself When Starting a New Home Business

    I love the excitement of starting up a new home... Read More

    Will and Vision

    Remember Chux? The disposable diaper that took the market by... Read More

    Own Your Niche by Building a Niche Community

    In 1997, David Steele was making the transition from a... Read More

    How to Write a Business Plan in Five Steps

    People often ask "What makes a good business plan? Or,... Read More

    Titanic Precautions

    Many movies have been made about the tragic story of... Read More

    The Tables Have Turned - Its Officially a Sellers Market

    Private equity firms have raised so much capital over the... Read More

    Content Management: Wise Investment for Business Prosperity

    The time when a website was just a simple set... Read More

    Is Your Company Growing Fast Enough for You?

    Are you frustrated by the lack of growth in your... Read More

    Abstract thought on Business Strategy and Nature

    Here is an abstract thought on studying nature and the... Read More

    How to Grow Your Business by Clearing the Way to Growth

    Is your business growing as fast and effectively as it... Read More

    Getting Started with Succession Planning: Part II

    Succession planning requires the owner of a small or medium-sized... Read More

    How To Kick Start Your Business And Double Your Profits

    This will make some people angry as hell, but it's... Read More

    Describing Intellectual Property in Your Business Plan

    Most companies that are worthy of raising venture capital have... Read More

    Online Promotion: 10 Ways To Use Focus Groups To Ignite Your Profits

    A focus group is a group of employees or current... Read More

    A Backup To The Internet Is Vital & Now Cost Effective

    It doesn't take a Terrorist Act, Tsunami or Earthquake to... Read More

    Business Problem Solving

    Is there really anything as a problem? Does chaos or... Read More

    Why Do a Business Plan?

    To Grow (Catapult) Your Business That's Why.When it's in your... Read More

    Don?t Allow Yourself to Get Burned

    I am not a big fisherman, but I do enjoy... Read More

    10 Ways To Make Your Business Unique

    1. Largest Selection -One way that you can make your... Read More