Imagine yourself helping a friend who has found commercial space at Makoni Shopping Centre. This friend would like to open a new pub at this popular business centre in Chitungwiza.
There are more than 30 bottle stores and pubs at this busy centre. So the question to ask is how are you going to compete with 30 or more competitors selling the same product? Is he going to reduce the price of beer? This is not feasible as the price of beer from the major beer price, Delta is the same. Selling at a lower price in order to attract customers is not feasible at all. So what are the options available to him? In the past a few club owners had DSTV sports that helped them to attract revellers interested in watching their favourite soccer teams in action. This competitive advantage over rivals did not last long as everyone soon followed. So given the few options available to gain a competitive advantage over competitors, what can this friend do to compete against others?
He can spruce up the place so that it looks fresh-one strategy to compete against others maybe service-the quality of service that he gives to clients.
He may consider hosting sporting tournaments such as Pool at his bar, this may help attract
Introduce Mbira Concerts, few pubs host Mbira Music and yet it is popular and does not require a lot of capital to attract bands. A case in mind is that of the hugely Mbira dze Dzimbahwe in Budiriro or the former Beer Engineer Mbira group-Samaita who used to fill the venue before relocation to USA.
If you ask me to go and open a pub at Makoni Shopping Centre, I would think again because there are just too many pubs/bottlestores at the place making profitability a challenge. This has led business people to look elsewhere for entertainment business and one such place is Tanza Centre.
The example above was just giving you an example of the decision making that an Entrepreneur goes through when deciding to set up a business-competition analysis! How you are going to compete will either break or make your business.
In 1985, Harvard Business School professor Michael Porter wrote Competitive Advantage. He outlined the three primary ways companies achieve a sustainable advantage. They are cost leadership, differentiation, and focus.
Cost leadership means you provide reasonable value at a lower price. Companies do this by continuously improving operational efficiency. That means usually pay their workers less. Some compensate by offering intangible benefits such as stock options, benefits, or promotional opportunities. Others take advantage of unskilled labour surpluses.
Differentiation means you deliver benefits better than anyone else. A company can achieve differentiation by providing a unique or high-quality product. Another method is to deliver it faster. A third is to market in a way that reaches customers better. A company with a differentiation strategy can charge a premium price. That means it usually has a higher profit margin.
Focus means you understand and service your target market better than anyone else. You can use either a cost leadership or differentiation strategy. The key is to focus it on one specific target market. Often it’s a tiny niche that larger companies don’t serve. For example, community banks use a focus strategy to gain sustainable competitive advantage. They target local small or high net worth individuals. Their target audience enjoys the personal touch that big banks may not be able to give. They are willing to pay a little more in fees for this service. These banks are using a differentiation form of the focus strategy.
So we have given you 3 strategies for competing, going back to my friend at Makoni Centre, he cannot use the cost strategy because of the reasons I explained before. This leaves him with differentiation or focus. Focus remains a viable option if he focuses on Mbira Music Lovers.
We can also analyse how ZBIN was formed. We realised there was no platform for business discussions on Social Media especially Facebook. All Zimbabwean business pages were formed for adverts. A total of 10 groups existed at the time when we formed ZBIN. We decided to focus on business discussions and business exchange of ideas. This became our focus and identity. We do host a couple of limited adverts but this area is not our key strength, we have concentrated on what we do best-business discussions!
So you too can analyse your current business set up. Remember that you cannot do everything-rather concentrate on what you are good at, what provides you with a competitive advantage sustainably.
