Examples of Competitive AdvantageCompetitive advantages come in many shapes and sizes. They include, but are not limited to, some of the following: Show
Components of Competitive AdvantageFor a competitive advantage to be established, it is important to know the following:
To build a competitive advantage, a company must be able to identify its value proposition that will be sought after by the target market, which cannot be replicated by competitors. Building a Competitive AdvantageMichael Porter, the famous Harvard Business School professor, identified three strategies for establishing a competitive advantage: Cost Leadership, Differentiation, and Focus (which includes both Cost Focus and Differentiation Focus)[1]. 1. Cost LeadershipThe goal of a cost leadership strategy is to become the lowest cost manufacturer or provider of a good or service. This is achieved by producing goods that are of standard quality for consumers, at a price that is lower and more competitive than other comparable product(s). Firms employing this strategy will combine low profit margins per unit with large sales volumes to maximize profit. Companies will seek the best alternatives in manufacturing a good or offering a service and advertise this value proposition to make it impossible for competitors to replicate. 2. DifferentiationA differentiation strategy is one that involves developing unique goods or services that are significantly different from competitors. Companies that employ this strategy must consistently invest in R&D to maintain or improve the key product or service features. By offering a unique product with a totally unique value proposition, businesses can often convince consumers to pay a higher price which results in higher margins. 3. FocusA focus strategy uses an approach to identifying the needs of a niche market and then developing products to align to the specific need area. The focus strategy has two variants:
Competitive Advantage in the MarketplaceThree notable examples are:
Importance of Competitive AdvantageA competitive advantage is what sets a business apart from its competitors. It is essential in order for a business to succeed, whether it’s by ensuring higher margins, attracting more customers, or achieving greater brand loyalty among existing customers. Higher margins, a better growth profile, and lower customer churn tend to also be very popular among both investors and creditors – making capital more readily available (and cheaper) for firms that are able to maintain a strong competitive advantage among their peers. Video Explanation of Competitive AdvantageWatch this short video to quickly understand the main concepts covered in this guide, including the definition of competitive advantage and how companies create it using various business strategies. Other ResourcesThank you for reading CFI’s guide to Competitive Advantage. To keep learning and advancing your career, the following resources will be helpful:
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Abstract Effective quality improvement has become a potentially valuable way of securing competitive advantage and improving organizational performance. This research conceptualizes and develops a framework that links quality, competitive advantage, and organizational performance. Data for the study were collected from 74 organizations and the relationships proposed in the framework were tested using structural equation modelling. The results indicate that quality improvement can lead to enhanced competitive advantage and improved organizational performance. The contribution of the paper is that it provides empirical support for direct and indirect effects of quality on organizational performance and competitive advantage in Tunisia.
According to Total Quality Management (TQM), every employee works to enhance the work culture, services, systems, procedures, and so on to ensure an organization's long-term success. TQM is a management method for an organization that relies on the participation of all members (including employees) and aims for long-term success through customer satisfaction. This strategy benefits all members of the organization as well as society as a whole. It is a continuous process of detecting and decreasing or eliminating manufacturing faults, optimizing supply chains, enhancing customer feedback through improved experience, and assuring properly trained staff. TQM or Total Quality Management is a management technique to achieve long-term profitability through customer satisfaction. All members of an organization participate in this by working to improve processes, products, services, and culture. TQM is defined as a customer-focused process that strives to continuously enhance business processes. It assures that all associated works (especially employee work) are directed toward the common aim of improving product or service quality. Furthermore, TQM helps improve the manufacturing process or the process of rendering services. However, the emphasis is on fact-based decision making, with performance indicators used to monitor performance. Though TQM originated in the process industry (manufacturing), other industries, such as banking, financial services, healthcare, etc. employ TQM to achieve sustainable, long-term change. OriginWalter A. Shewhart invented TQM in the form of statistical quality control. It was first used at Western Electric Company in the version developed by Joseph Juran. TQM was demonstrated on a grand scale by Japanese industry through the intervention of W. Edwards Deming, who is now considered the father of quality control, quality circles, and the quality movement in general as a result of his missionary labors in the United States and around the world. The goal of TQM is to:
Aspects of TQM
Characteristics of TQMThere are some very important characteristics of TQM.
Understanding TQMOverall, TQM is a collaborative use of strategy, data and effective communication to integrate discipline into the culture of the organization. It consists of 8 major principles: Customer focusSpecifically, TQM puts the focus back on the people buying any product or service. Customers determine the quality of the product. If the product fulfills the need and lasts as long or longer than expected, customers know that they have spent their money on a quality product. Therefore, when an organization understands what its customer wants or needs, it has a better chance of figuring out how to get the right materials, people, and processes in place to meet and exceed their expectations. Implementation
Benefits
Total employee commitmentOne can’t increase productivity, processes, or sales without total commitment of all employees. They need to understand the vision, mission and goals of the organisation. They must be sufficiently trained and proper resources must be provided to complete tasks in order to be committed towards reaching the set goals on time. Implementation
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Process approachAdhering to processes is critical in quality management. Processes ensure that proper steps are taken at the right time in order to ensure consistency and speedy production. Implementation
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Integrated SystemUsually, a business has many different departments, each with their specific functions and purposes. These departments and functions should be interconnected with horizontal processes that should be the focus of TQM. But sometimes these departments and functions operate in silos. In an integrated system, every employee in every department should have a thorough understanding of policies, standards, objectives, and processes. Integrated systems help the company to look for continual improvement in order to achieve an edge over its competitors. Implementation
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Strategic ApproachInternational Organization for Standardization, ISO defines this principle as:
Consequently, a strategic and systematic approach to achieve an organization’s vision, mission, and goals is needed to ensure quality improvement through the formulation of a strategic plan that integrates quality as a core component. In this, to maximize efficiency, many processes within a development or manufacturing cycle are controlled as a system of processes. Implementation
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Continual ImprovementContinual improvement drives an organization to be both analytical and creative in finding ways to become more competitive and more effective at meeting stakeholder expectations. Implementation
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Fact based Decision MakingTo understand the performance of an organization, TQM requires that an organization continually collect and analyze data in order to improve decision making accuracy, achieve consensus, and allow prediction based on past history. Implementation
Benefits TQM offers the ability to:
CommunicationDuring times of organizational change, as well as part of day-to-day operation, effective communications plays a large part in maintaining morale and in motivating employees at all levels. Communications involve strategies, method, and timeliness. Implementation
Benefits
Related TQM frameworks and thought leaders
Benefits of TQMSome important benefits of TQM:
Shortcomings of TQMSome drawbacks of TQM are:
Quality management(QM) ensures superior quality services and products. The quality of any service or product can be measured in terms of its durability, reliability, and performance. QM tools ensure changes in the processes and systems, resulting in superior quality services and products. The methods of quality management, like Six Sigma or TQM, have a common goal - to deliver a high-quality product. Customers need to be satisfied with your brand. Business marketers are successful only when they emphasize quality rather than quantity. Quality products or services ensure that you survive the cut-throat competition. Therefore, TQM implements close coordination between employers and employees in organization. It also fixes a strong feeling of teamwork among the employees. APAMLAHarvardVancouverChicagoIEEE Think Insights (September 16, 2022) TQM – How to gain competitive advantage through quality?. Retrieved from https://thinkinsights.net/strategy/tqm-framework/. "TQM – How to gain competitive advantage through quality?." Think Insights - September 16, 2022, https://thinkinsights.net/strategy/tqm-framework/ Think Insights January 4, 2022 TQM – How to gain competitive advantage through quality?., viewed September 16, 2022,<https://thinkinsights.net/strategy/tqm-framework/> Think Insights - TQM – How to gain competitive advantage through quality?. [Internet]. [Accessed September 16, 2022]. Available from: https://thinkinsights.net/strategy/tqm-framework/ "TQM – How to gain competitive advantage through quality?." Think Insights - Accessed September 16, 2022. https://thinkinsights.net/strategy/tqm-framework/ "TQM – How to gain competitive advantage through quality?." Think Insights [Online]. Available: https://thinkinsights.net/strategy/tqm-framework/. [Accessed: September 16, 2022] Yes No
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