Strategies for Competitive Advantage

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Table of Contents

Introduction
Competitive Advantage Strategies and a Small Business
Cost Leadership
Differentiation
Focus
Conclusion
References

Introduction

Establishing a competitive advantage is one of the primary goals of any company. In today’s highly competitive environment, businesses without such a benefit find it very hard to increase the profitability ratio or even survive. Large retailer chains, such as Target or Walmart, give their customers the possibility to order online and pick up at a nearby store. However, such an option has not been applied by any smaller discount chains until recently. Currently, Dollar General allows its customers to total up items they wish to buy in-store through the app. Dollar General Corp. decided to broaden its digital strategy, offering its customers “the buy-online, pick-up-in-store feature” (Castellanos, 2019, para. 6). It is projected that the new initiative will attract a younger stratum of customers.

Competitive Advantage Strategies and a Small Business

Cost leadership, Differentiation, and Focus are the business competitive advantage strategies Dollar General Corp. utilizes to stand out from the extreme competition. Some of these tactics can be applied even to smaller-scale businesses, such as a family convenience store in a neighborhood. A company or a business must be able to establish the benefit it wishes to provide to the target audience that would differentiate it from the competitors to develop a competitive advantage.

Cost Leadership

Cost Leadership strategy allows a company to offer its customers products at a lower price. Dollar General already applies this method successfully; however, it doesn’t distinguish it from its competitors such as Dollar Tree or Five Below. Besides, this tactic is unlikely to be used by a smaller business (for example, a family-owned convenience store Giordano’s) since its buying power is much lower than that of a chain grocery store. Hence, suppliers are unlikely to offer it a more attractive acquisition price.

Differentiation

Dollar General’s example shows that only offering low-cost products is not enough to outperform competitors since they apply the same strategy. However, digitalizing the purchasing process allows it to stand out since this benefit offers “real value” which is time-saving and convenient (Amadeo, 2019, para. 3). The strategy of differentiation is the one that can be successfully applied to Giordano’s mentioned earlier. This store already has a small webpage that allows buyers to see the available products and prices. Enhancing the webpage features outlined above would increase the store’s profitability in the future, given no other stores in the neighborhood offer this option. Lee and Yoo (2019) refer to it as “seizing capability – an ability to seize sensed opportunities” (p. 5). According to the research, “a company with a strong seizing capability can select the most suitable opportunity at the right moment and create innovative results” (Lee and Yoo, 2019, p. 5). In this sense, concentrating on service differentiation by expanding online ordering options for customers as Dollar General does, Giordano’s can distinguish itself from other local convenience stores.

Focus

Another strategy used by Dollar General is focus, which is concentrating on a specific target group. By enhancing its online purchasing options, Dollar General targets a younger group of buyers who are “digitally savvy and all about convenience” (Castellanos, 2019, para. 15). Miller (2020) justly notes that “without recurring sales, a business slowly dies” (para. 12). In analogy with Dollar General, it would be reasonable for Giordano’s to target the younger stratum of people in the neighborhood by offering the order pick-up option since it already has the advantage of being geographically closer than other larger grocery stores.

Conclusion

Facing today’s intense competition, businesses, big and small alike, must strive to construct a competitive advantage that would allow them to surpass fellow market players. Even though such strategies as Cost Leadership maybe not be applicable to small businesses, they can differentiate themselves from competitors by using other channels, such as technological innovations, targeting a specific group of customers, or using a unique geographical location. By applying such strategies, a small business may offer its target customer group certain benefits or service options that no other competitor can.

References

Amadeo, K. (2019). What is competitive advantage? Three strategies that work. The Balance.

Castellanos, S. (2019). Dollar General boosts digital strategy. Wall Street Journal.

Lee, K., & Yoo, J. (2019). How does open innovation lead competitive advantage?PLOS ONE, 14(11), p. 1–18.

Miller, L. (2020). 3 ways to differentiate your business in a competitive market. Entrepreneur.

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