Question

What are some strategies for creating and sustaining a competitive advantage? Should you choose offensive or defensive strategies? What are the reasons you would choose one over the other?

Answer 1

Competitive advantage takes place for any business owner or a country as a whole, when we are capable of manufacturing a product or service at a better quantity or a better price point than others in the market place. This was first described by the economist Adam Smith and has readily been used since then by countries and firms alike.

The core strategies are of various kinds which may be used by firms or countries as an overall to dominate the existing markets, however as a strategy we are selecting cost advantage strategy which is being followed by numerous brands such as Walmart, and is widely popular in its approach towards being able to render the best possible services at the least cost to mass population thus adding up profits over a period of time.

This is an aggressive strategy which can be used by a producer, wherein the profit margins are kept lower, however the abundance of supply and the price befit to the customer is such that it allows them to make repurchase of products as the cost of acquiring the same is relatively lower.

The consumer at large wants to consume the maximum quantity possible at the lowest possible price, which is a concept which can be facilitated using this mode of business. Here, the company can focus on keeping its cost of production minimum by doing so in increased volumes, thereby the per unit cost for business owners remains minimum.

The end result of such strategies is that consumer confidence remains very high. A defensive strategy usually involves additional benefits as compared to competition and is usually seen as a negative move in the industry. An aggressive mode comes at an additional risk as if the company is unable to sell the products it produces it would lead to huge inventory management costs, still the concept is economically sound enough to keep prices lowest and attract consumers to the maximum.

As the demand for goods remains the highest at lower prices, competition has a tough time in managing us and in the meanwhile we are able to capture a large market share and extend our distribution capacity. The example of Walmart is a clear indication that it is accepted by the society and is an overall profitable strategy for a producer to choose from.

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