What makes firm perform well

Firms do this by continuously improving operational efficiency. That usually means paying their workers less. Some compensate for lower wages by offering intangible benefits such as stock options, benefits, or promotional opportunities. Others take advantage of unskilled labor surpluses. As these businesses grow, they can benefit from economies of scale and buy in bulk. Walmart and Costco are good examples of cost leadership. This is because they sometimes pay their workers less than the cost of living, but higher minimum wage laws threaten their advantage.

Differentiation means companies deliver better benefits than anyone else. A firm 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, which means it usually has a higher profit margin. Innovation means they meet the same needs in a new way. An excellent example of this is Apple. The iPod was innovative because it allowed users to play whatever music they wanted, in any order. Quality means the firm provides the best product or service.

Tiffany's can charge more because patrons see it as far superior to other jewelry stores. In short, customer service means going out of the way to delight shoppers, like Nordstrom's that was the first to allow returns with no questions asked. Focus means the company's leaders understand and service their target market better than anyone else. They either use cost leadership or differentiation to do that. The key to a successful focus strategy is to choose a very 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 businesses or high net worth individuals. Their target audience enjoys the personal touch that big banks may not be able to give, and customers are willing to pay a little more in fees for this service.

These banks are using a differentiation form of the focus strategy. A country can also create competitive advantage, a practice that's called national competitive advantage or comparative advantage. For example, China uses cost leadership by exporting low-cost products at a reasonable quality level. China can do this because its standard of living is lower, meaning it can pay its workers less.

India started as a cost leader but is moving toward differentiation. It provides skilled, technical, English-speaking workers at a reasonable wage. Japan also changed its competitive advantage.

In the s, it was a cost leader that excelled at cheap electronics. By the s, it had shifted up to differentiation in quality brands, such as Lexus. America's competitive advantage stems from its innovative practices as a nation. For example, U. While innovation is driven by many factors, it's clear that the U. In fact, there's scientific evidence, which shows that diversity, and maintaining a diverse workplace, helps to drive innovation and market growth forward.

That's just one of the ways natural resources boost America's advantage. You can use the theory of competitive advantage to advance your career. When you create a quality product, people are going to copy you. Think about why so few people leave their Apple products once they switch over. Apple consistently manufactures the leading laptops, smartphones, and tablets.

Every time another company catches up, Apple zooms ahead again. Innovating at the small business level looks a little different, but still impacts the business. Improving a product, finding a way to offer a lower price, or discovering new ways to show customers you appreciate them are all powerful innovations. Never stop pursuing great ideas. Successful companies have both short- and long-term goals. Instead of jumping from small success to small success, a long-term goal puts those smaller successes together into a bigger picture.

At the same time, companies have to be willing to change and adapt if a long-term goal is no longer serving the mission or the customers. Privately held companies with big successes often pursue strategies that other businesses might deem too risky. Once you go public, you lose some of these opportunities. Even on your first day of business, you should already be working toward those extended goals. As new technology develops that will help you run your business, use it.

Successful companies are quick to embrace new technology. For one thing, customers certainly are embracing that technology, so being on the bandwagon is part of what makes a company successful.

Plus, as you add new technology, you build the infrastructure to continue advancing. If you wait several years, then you have to implement something completely new and complex, instead of adapting as new editions and formats come out.

New technology gives businesses the chance to lower costs or improve the customer experience. Automating a system or using software to analyze customer data will enhance how the company runs. The best companies are always adapting to new technology and making it work for them. Every business has a unique approach to these elements of success. One business may get more mileage out of investing in new technology, while another might find that increasing quality customer service is the best way to go.

If you want to emulate successful businesses, always keep learning. Follow your favorite business leaders and track the companies you admire.

By keeping a few basic tips in mind, you can identify and secure the ideal commercial space for your company. When a firm brings to market a new technology its competitors have yet to offer, consumers wishing to own the technology buy it from that company, even if they previously did business with a competitor. Many of those consumers become loyal customers, which adds to the company's market share and decreases market share for the company from which they switched.

By strengthening customer relationships, companies protect their existing market share by preventing current customers from jumping ship when a competitor rolls out a hot new offer. Better still, companies can grow market share using the same simple tactic, as satisfied customers frequently speak of their positive experience to friends and relatives who then become new customers. Gaining market share via word of mouth increases a company's revenues without concomitant increases in marketing expenses.

Companies with the highest market share in their industries often have particularly skilled and dedicated employees. Bringing the best employees on board reduces expenses related to turnover and training, and enables companies to devote more resources to focusing on their core competencies. Offering competitive salaries and benefits is one proven way to attract the best employees; however, employees in the 21st century also seek intangible benefits such as flexible schedules and casual work environments.

Lastly, one of the surest methods to increase market share is acquiring a competitor. By doing so, a company accomplishes two things. It taps into the newly acquired firm's existing customer base, and it reduces the number of firms fighting for a slice of the same pie by one. A shrewd executive, whether in charge of a small business or a large corporation, always has their eye out for a good acquisition deal when their company is in a growth mode.

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