How companies build competitive advantage


The key to getting ahead of other players in a sector or industry is to have a competitive advantage. This is the advantage that gives one an edge. But this advantage doesn’t just pop up, it must be created by those who seek it. Organisations that deliberately create competitive advantage tend to become industry leaders while those that do not understand the concept or practice are made to follow the pace set by the former. So, creating a competitive advantage for your organization is fundamental to coasting to the crest of the industry.


Get answers to the why question

The starting point to creating a competitive advantage is to find answers to the question of why customers buy your products or services. Customers buy products for varying reasons; some may be regarded as reasonable while others may not be so regarded. But every reason is important because this enables you to know why customers buy your product or go for your service at the expense of similar ones. Is your product their primary preference or is it an alternative? What is the appeal your product holds for the customer? Why does a customer part with his money to sustain your business? Why does a customer buy your product when there is a plethora of others he can opt for? Why does a prospect spurn your product in spite of all its assumed good qualities? Finding out the rationale behind the sales you make positions you to increase your sales because you will be able to do more of what the customers want. Similarly, knowing why some people turn down your product will help you to improve on it and enable you to attract more sales. Customers pay for the value a product offers, whatever maximizes this value is an asset to the business, every other thing is a liability.

It is important to get this right because great sales attract more sales. Customers want to buy from successful companies. That is why companies that are doing well seem to climb the ladder of success faster than those that either stagnate or retrogress. This is called the cumulative effect; some people believe that the majority cannot be wrong. So, the more sales a company makes, the better positioned it is to have new customers pick more of its products. As this continues, the gap between it and others gets wider because advantage begets advantage. This eventually results in the Matthew Effect coined by Robert K. Merton in 1968.  The Matthew Effect states that the rich get richer while the poor get poorer. So, answering the why question with a view to improving the competitive edge is critical to the survival of any business entity.


How organizations create competitive advantage

Organizations can leverage on several factors to create their competitive advantage. Here are some of them.



In this age, nothing sets market leaders apart from the rest of the crowd like innovation. As observed by Steve Jobs, “Innovation distinguishes between a leader and a follower.” Innovation is identifying market needs before the market becomes conscious of those needs. It is going ahead of the market to proffer a solution to a problem that is yet to manifest. So, innovation will always give the innovative an edge over others for the simple reason that everyone is looking for solutions to the challenge that they have and it is anyone who provides the solution that they flock to.

Guaranty Trust Bank (GTB) is neither the biggest bank in the country nor the most profitable but it is easily the most respected because of its innovativeness. The bank has a reputation as the most versatile when it comes to innovation. This is because of the many ways in which the bank has brought ease to its customers. The bank’s innovativeness is not just about its products but also about the architecture of its offices. It pioneered fenceless bank building frontage, creating a friendly banking atmosphere. It also pioneered creativity in bank building designs. Then, with respect to bank products, GTB is almost always one of the first lenders in the country to introduce innovative products. So, in spite of others coming up with similar products, the bank has carved a niche for itself as a genius in banking innovation. Consequent upon this, it has created for itself a competitive advantage because when banking innovation comes up, the name that readily comes to mind is GTB. Therefore, despite the crowd that fills the banking halls all day long, its customer profile has continued to grow longer.



Many organizations love to copy others. While there is room for imitation in business, the truth is that similarity does not give any organization any edge; the edge of an organisation is in its difference from competition, not its similarity to it. If an organisation does what others do, how does that confer any advantage on it? That means the customer will not be able to distinguish between two similar organisations or products.

For many years, Pepsi had to struggle with being second best because of the ‘cola’ attached to its name. That was when it was known as Pepsi Cola. By that time, the market leader was Coca Cola. Because of the similarity in the name of the products and the shape of the bottles, Pepsi Cola was considered the poor cousin of Coca Cola. So, most of those who wanted a cola fizzle drink opted for Coca Cola, the better known brand. But since Pepsi dropped the cola tag and changed its bottle shape, it has been giving Coca Cola a serious challenge. At a point in the United States of America, Pepsi worsted Coke in sales.

Product or name similarity is to the advantage of the market leader, not the upstart. But the thinking among new organisations is that they can climb on the back of an established name to prominence. While that may pay off initially, the organisation pays dearly for it eventually because those who matter will always prefer the better known of the similar products. So, distinguishing your organisation and products from other is a competitive advantage.


Fill a vacuum

To create a competitive edge, a business must fill a vacuum. Businesses that are established whimsically are wont to go into oblivion involuntarily because they will gasp for breath and struggle for space, especially if the market is saturated. Every business must fill a void. If there is no void to fill, there is no need for a new business and the implication is that there won’t be sales to make.

In Nigeria, competition in the table water industry is keen and the market is saturated because even multinationals are engaged in the business. But if only the companies would engage in some reflections it would be clear to them that the keen competition is unnecessary as there is a vacuum in another segment of the industry. About 60 per cent of the intravenous fluids used in the country is imported. This means that there is a huge gap that Nigerian companies can fill in that segment of the market. Therefore, the multinationals that are struggling for a slice in the already saturated table water market would have done themselves, as well as the economy, a world of good had they chosen to invest in the production of intravenous fluid. The technology is similar and the market is waiting. In addition to that, the country would have been able to save a lot of resources and generate thousands of employment opportunities had they opted for this instead of treading the beaten path of table water production.


Do more for the customer

Peter Drucker, the legendary business management consultant, posited that a business exists to create customers. But it goes beyond that, a business must not only create customers, it must also keep customers. This is what leads to repeat purchase. The way to keep customers is to keep dazzling them with great products and unparalleled services. To dazzle its customers with great products, a business must continuously improve its technology and operations to ensure that every customer has a wonderful experience. This is because the continued success of a business is a function of the level of customer satisfaction with the products or services.

To leave every customer satisfied and happy, a company must maintain personal touch with the customer. Employees should be encouraged to build one on one relationship with as many of the customers as possible. Customers do not want to be treated as statistics; each one wants to believe that he is unique to the service provider and important to him. Nothing should be done to deny or deprive him of this feeling.

One other important step is after sales service. To ensure that a customer repeats a purchase, it is important to offer him after sales service or after sales calls just to find out about the product. Apart from making the customer feel good, it also serves as a platform for getting feedbacks from him.


Capitalise on competitor’s weakness

A company’s weakness is to the competitor’s advantage. So, getting ahead of your competitors will involve making capital of their weaknesses. This means that you have to know the competition, what it is doing and what it fails to do. Having this knowledge and deploying it will enable you to position yourself to profit from the weakness of the competition.

After the collapse of the Business Times, there emerged the Financial Standards as the leading business and financial newspaper in Nigeria. It was making serious waves and became quite influential in the nation’s business community. It operated as a weekly newspaper and at a point it had a weekend edition. But the market yearned for more than a weekly business newspaper; the market wanted a daily business newspaper. Business Day saw this yawning gap and moved in to fill it. Within a very short time, it took over the business newspaper segments of the newspaper industry. Financial Standards could not survive the onslaught, it eventually went under.


A little hype does not hurt

The major challenge of many organizations, especially new ones, is the indifference of the market to their distinction. Despite the great values they bring on board, nobody seems to bother about them. The reason is that their distinction has not been distinctly distilled by the market. The market is oblivious to their difference. So, the way out is to draw the attention of the market to the distinction through advertisement and publicity. But advertisement should not just be about your brand, it should be more about the solution you can offer because that is what interests the market. So, a little hype about what your organization has done and what it can still do could help in building a competitive advantage.


Last line

Those who get the competitive advantage right are never in want of patronage.

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