The goal of every business is simple, increase customer satisfaction, generate more revenue and maximize profits and every organization tries to get a competitive advantage.
Competitive advantage is an advantage that an organization has over its competitors, allowing it to generate more sales or margin’s and retain more customers than its competition.
Companies invest their profits in: * Research and development (R & d) to get competitive edge. Research and development plays a very important role in innovation process. In order to introduce a new product or service or to make changes to existing product, investing in R & D is crucial. Needs and expectations of customers change from time to time.
For example, we are not using the same Honda car which our parents used 20 years back. We say simply it is old fashioned, we always look for a change and new ones. Proper research is required to introduce changes, if they do not spend on R & D, they lose their market share. * In more productive issues, for expansion, that is expanding product lines, new products, services and new businesses to gain profits. * And in technology, to be more competitive and also as technology makes work easier and faster, and through this companies can increase their sales and make more money. * Reducing costs is also critical for a business to gain competitive advantage:
Material cost, which includes Direct labor and direct material have to be reduced to gain competitive edge: like 1. Going for an alternative source of material which will cost less than original and have the same quality. 2. Reducing scrap for example in food industry, people will look for expiry date, and there is a chance of items going into scrap. Business must try to reduce percentage of scrap by efficiently planning the production. 3. Redesigning the product say for example changing packaging of the product. 4. Better purchasing, say raw materials or any other requirements, by selecting a supplier through research who offers low price with better quality and who delivers within time zone. 5. Companies must try to produce their products at low cost to gain competitive edge, simple policy of differentiating both company and product from others with low cost and good quality will make them to gain competitive advantage. * Also companies have to maintain consistency in their actions or processes. Inconsistency in business will make company lose its reputation and customers.
Inconsistencies like more waiting time for customers that is delay in delivery. To gain competitive advantage business must try to reduce lead time in processes by employing full time suppliers, try to provide different kind of stuff customer looking for at one place. * Strategic alliance is one more way to gain competitive advantage which means company has to make agreement with parties who are closer and who can deliver in right time at right place with good quality so that there will be no delay in the process of making the product.