Why do so many companies languish and watch as their business turns into a zero profit zone Mark Messier Canada Jersey , while others seem to thrive?
When you look at your business, whether it's a new venture or a company with a long history, can you answer the following questions?
What does my company do better than anyone else?
What unique value do I provide to my customers?
How will I increase that value next year?
Companies that fail to answer these questions, and don't believe they are of paramount importance, relegate themselves to marginal profitability at best and failure at worst. But companies that can answer these questions are able to raise the value bar for their customers and reap the benefits of success.
Of course Mario Lemieux Canada Jersey , being able to answer 3 simple questions does not ensure success, but it is an important step in creating a strategic and focused operation which leads to a successful business. With today's business environment being so competitive, businesses need to re-invent the rules on which they compete in order to be successful. Companies like Wal-Mart have figured this out and have redefined competition in their market by delivering a unique value to a selected customer group. By maintaining a focus and discipline, they make it difficult for other companies to compete under old competitive terms.
Simply, competitive strategy has never been more important to success in today's business environment. It does not matter what type of business you are in or whether you are small Marc-Edouard Vlasic Canada Jersey , big or just starting out, a company can not survive without an adequate and focused strategic plan to best the competition. Yet many companies fail to execute a successful strategy; it is these companies that languish in the zero profit zone.
In simple terms, for a company to achieve success and enter the profit zone it must first decide where it will stake its claim in the marketplace and what kind of value it will offer its customers. A company needs a clear marketing thrust, a precise knowledge of its customer base, and a product or service with a niche or some competitive advantage to be successful. Unfortunately Jonathan Toews Canada Jersey , many entrepreneurs and business owners get stuck in the process of defining their competitive strategy. They often have the idea and the product, but being the technician they are not sure how to define its market. Even worse, many entrepreneurs assume or guess their target market and often glaze over a competitive strategy, usually to the detriment of the business.
So what are the steps to laying out a competitive business strategy? While there are different methods you can follow, I have laid a series of 6 basic steps to help you.
1. Financial perspective
This step may not seem to have much to do with strategy John Tavares Canada Jersey , but it is important to determine the value of success quickly. Why? Because, in simple terms if the venture can't deliver significant returns, it may not be worth the risk, and you have to ask yourself if it is worth continuing with your business. In this scenario you complete a reverse income statement. You start by defining how much profit you want to see at the end of a certain time period, and then determine the amount of revenues needed to generate that profit and the costs to deliver that profit. Do the numbers add up and make sense? The goal here is to be objective Joe Thornton Canada Jersey , if the expected revenue is not sufficient to generate your required profit at the end based on an estimate of costs, don't simply fudge the numbers and assume you can reduce costs or increase revenue. Be diligent in your assessment.
2. Understand the industry and competition
In step 2 you are going to assess your industry and the competition. This basically comes down to assessing 5 factors:
Understanding who your competition is including factors such as competitor strengths and weaknesses, market position, pricing, new product development Jeff Carter Canada Jersey , advertising, marketing and branding. You should determine how you compare to your competitors.
Assessing the threat of new entrants into the industry (which may include you) and any potential reactions from existing companies. There are basically 6 barriers to entry you can evaluate: economies of scale, product differentiation, capital requirements, cost disadvantages Jean Beliveau Canada Jersey , access to distribution channels, government policy.
Assessing the threat of substitute products (existing or future) that can place a ceiling on pricing.
Assessing the bargaining power of suppliers who can increase prices, lower the quality of products or limit the quantity of supplies one can purchase. This all has an impact on profitability.
Assessing the bargaining power of customers who can force down prices or demand better quality, more services and play you off versus a competitor.
3. Understand the Customer Perspective
In step 3 you assess your customer. This is a key step, get it wrong and you may not be able to recover. In fact Jay Bouwmeester Canada Jersey , the customer value proposition and how it translates into growth and profitability for the company is the foundation of strategy.
Start by asking your self a couple basic questions: To achieve my vision, how must my customers look? Who are the target customers that will generate growth and a profitable mix of productsservices?
Next, ask yourself what is the value proposition which defines how the company differentiates itself to attract, retain and deepen relationships with the targeted customers? There are basically 3 value propositions or disciplines that you can choose from:
Cost leadership ? In this discipline you choose to provide the best price with the least inconvenience to your customers.
Product leadership ? In this discipline you offer products that push the performance boundary (i.e. newer and better than competitors).
