Translating an inspired idea into a robust business plan
007 Resource Based View of Competitive Advantage
The objective of strategic planning is to achieve, sustain and enhance the competitive advantage. Within an industry some businesses are more successful than others because they have resources that are inherently different from those of their competitors, who furthermore cannot easily acquire these resources. Businesses should therefore try to acquire or develop such unique resources in order to attain competitive advantage. This framework looks rather conceptual, but it provides a useful structure to develop your thinking, even for a small business. For example, if a coffee shop occupies a particular space where many of people pass each day, no competing coffee shop can occupy exactly the same space. Indeed, where to site an outlet is great skill.
Each business is likely to have some unique attributes that differentiate it from its rivals. Although the concept of a unique selling point (USP) is more related to marketing tactics, it can be associated with a fundamental difference that cannot be easily replicated by competitors. To achieve competitive advantage, a business should leverage its key differentiators. A key differentiator does not have to be a financial asset. For example, a name such as Air France gives the airline an advantage when competing in the air-transport market to and from France but not when competing for traffic between Amsterdam and London. This is an important consideration in the context of the consolidation of the European airline industry. Another example is a company with rights to a brand or patent which it might be able to exploit.
When developing your strategy, start by making a list of your key differentiators. Then analyse them and decide whether they can be a basis for competitive advantage. Clearly, a resource must be of value to the customers in your target market in order to contribute to better market performance. In this context a resource that lowers your cost relative to competitors is ultimately of value to customers because it allows you to lower prices while maintaining margins and thus obtain a greater market share.