Many of the strategies that were appropriate and effective in the past are no longer above reproach. In fact, we have learned over the years that the global marketplace is a dynamic place, full of turmoil—the growing value of the dollar against the euro and the 50 percent decline in oil prices are only two examples; therefore, rethinking past assumptions and engaging in outside-the-box thinking is always required. Organizations need to address this constant change. They must focus on the state of the world, both as it exists now and as it may be in the future, and raise their performance to new levels of effort and achievement.
YOUR BUSINESS’S COMPETITIVE ADVANTAGE ISN’T WHAT YOU THINK IT IS
Product quality is no longer an issue. It is almost impossible to justify a multilevel pricing structure by offering different levels of product quality. Market segmentation now focuses on differences in features and support. Differences in product performance are acceptable. Differences in performance quality are not. Being the low-cost producer is still valuable, especially when sales are price sensitive. Moore’s Law, which states that in technology every three years the capability of the technology will double while the prices decline by half, still applies. Being vertically integrated is no longer the path to becoming the low-cost producer as supply chain management becomes more and more efficient.
Time is Money
You will gain competitive and profit advantages if you can compress the supply chain from your suppliers to your company to your customers. The amount of time required for this sequence of events has a substantial effect on your inventory, your accounts receivable, your profitability, and ultimately your cash flow. Service levels are affected as well, which may in turn affect your market share and sales growth.
Don't Rely on Pricing for Profit
In many cases, competitive pricing means price reductions. Pricing pressure is not going to end any time soon. Asking our customers to pay for our inefficiencies is not an option. Many industries are experiencing price deflation and will continue to do so. This means that companies must find new ways to maintain their profit margins. The successful ones will become more efficient, find more value-added features to add to the product, and focus on new markets and distribution channels in order to remain competitive.
Differentiation is becoming the new normal. Have you priced out a personal computer lately? Have you even considered purchasing a desktop computer now that there are so many other alternatives? Why buy a GPS for your car when you have the app on your smartphone?
THE NEW BUSINESS REALITY
Companies will need to make a great effort to distinguish themselves from their competition. The new realities include very low interest rates, economic turmoil in Asia and elsewhere, essentially zero inflation, and a single global economy. However, a company’s profitability can be enhanced, even during tough times. These realities can serve as a competitive advantage if you refocus the attention of the organization on the fundamental realities of a successful business. You must find your company’s answers to the following questions:
- Why are we special?
- Why do we deserve to exist?
- Why should customers buy our products?
- Why do we deserve to have our customers’ money?