Chapter 18
Creating Competitive Advantage
Introduction
Creating competitive advantage involves understanding competitors and customers to
develop strategies that deliver superior value. This chapter covers competitor analysis,
competitive strategies, and balancing customer and competitor orientations.
Competitor Analysis
Identifying Competitors
Competitors can be identified from both an industry point of view (similar
products/services) and a market point of view (satisfying the same customer needs).
Local Example (Pakistan): Telenor views other telecom providers like Jazz and Zong as
direct competitors, while also considering indirect competitors like internet-based
communication services (e.g., WhatsApp).
International Example: Coca-Cola competes directly with PepsiCo but also considers
indirect competitors such as local beverage producers and health drinks.
Assessing Competitors
Analyze competitors' objectives (profitability, market share), strategies (product features,
pricing), strengths and weaknesses, and potential reactions.
Local Example: Engro benchmarks its agricultural solutions against competitors like Fauji
Fertilizer, focusing on innovation and customer service.
International Example: Apple continuously assesses Samsung’s product innovations and
market strategies to anticipate and react accordingly.
Competitive Strategies
Michael Porter’s Competitive Strategies
Overall Cost Leadership: Achieving the lowest cost production to offer lower prices.
Local Example: Daraz employs cost leadership by optimizing logistics and sourcing to offer
competitive prices.
International Example: Walmart uses its scale to maintain low prices.
Differentiation: Offering unique products/services to stand out.
Local Example: Khaadi differentiates with its unique ethnic wear designs.
International Example: Tesla differentiates with innovative electric vehicles and self-
driving technology.
Focus: Targeting a specific market segment.
Local Example: Careem targets ride-hailing in urban Pakistan, offering localized features.
International Example: Ryanair focuses on budget travelers within Europe.
Treacy and Wiersema’s Value Disciplines
Operational Excellence: Leading in price and convenience.
Local Example: TCS excels in logistics efficiency in Pakistan.
International Example: Amazon is renowned for its operational excellence and delivery
speed.
Customer Intimacy: Customizing offerings to meet specific customer needs.
Local Example: UBL tailors banking solutions to individual customers.
International Example: Ritz-Carlton personalizes guest experiences to build loyalty.
Product Leadership: Offering continuous innovation.
Local Example: JazzCash leads in mobile financial services innovation.
International Example: Google leads with innovations in technology and services.
Competitive Positions
Market Leader Strategy: Dominates market share and innovation.
Local Example: Nestle in Pakistan's dairy industry.
International Example: Microsoft in software solutions.
Market Challenger Strategy: Aggressively tries to increase market share.
Local Example: Airblue challenging PIA.
International Example: Huawei challenging smartphone leaders.
Market Follower Strategy: Maintains current market share.
Local Example: Habib Bank Limited (HBL) focusing on traditional banking services.
International Example: LG maintaining its presence in consumer electronics.
Market Nicher Strategy: Specializes in serving niche markets.
Local Example: PakWheels focuses on automotive enthusiasts.
International Example: Patagonia targets environmentally conscious consumers.
Balancing Customer and Competitor Orientations
Competitor-Centered: Focuses on tracking competitors.
Advantage: Proactive in defense.
Disadvantage: Reactive rather than innovative.
Customer-Centered: Focuses on customer needs and developments.
Provides better positioning for opportunity identification and relationship building.
Market-Centered: Balances focus on both customers and competitors for a comprehensive
strategy.
Conclusion
Achieving competitive advantage requires a balance between understanding competitors
and focusing on customer needs. By applying strategic insights and adapting to market
changes, companies can maintain a strong competitive position. Examples like Telenor in
Pakistan and Coca-Cola globally demonstrate the importance of integrating these strategies
to succeed in diverse markets.