No one starts a business believing it can’t compete in the marketplace. Making a business competitive, however, is not as easy as many people think. Even well-established businesses constantly struggle to remain competitive in an ever-changing business environment. There are a multitude of factors that must be addressed in order to be competitive. And, despite challenges presented by governmental regulations and red tape, local, state, and national economies depend on successful businesses. As a group of international academics, Cem Gucel, Suat Begec, and Strele Iveta, observe, “Whatever the size, enterprises are the driving force of economic growth in general. … This is why competitiveness should be taken into account as one of the key aspects of business viability when assessing the overall quality of business environment.”[1] The Toronto Region Board of Trade agrees with that sentiment. It states, “Economies thrive when businesses can achieve their full competitive potential.”[2]
Know Thyself
A variety of ancient Greek philosophers have been given credit for the offering the advice “know thyself.” At the business level, this means companies need to understand fully their competitive advantage. Sean Ross, founder of Free Lances Ltd., explains, “Most companies are either founded on a competitive advantage or can apply certain criteria toward finding their competitive advantage. Much of this can be performed through deduction and a process of elimination. After all, your competitive advantage is, by definition, something your competitors do not have. To find a lasting competitive advantage, look for something that your competitors cannot easily replicate or imitate.”[3] Kyle Peterdy, Vice President for Commercial Banking & Credit at the Corporate Finance Institute, agrees. He states, “A competitive advantage is something that cannot be easily replicated and is exclusive to a company or business. This value is created internally and is what sets the business apart from its competition.”[4]
The staff at Harvard Business School’s Institute for Strategy and Competitiveness insists that knowing your competitive advantage is only the beginning of becoming truly competitive. They observe, “Achieving real and sustainable competitive advantage requires a clear understanding of what ‘competitiveness’ means and how to analyze it effectively. Such clarity is the key to creating economic environments that boost innovation, efficiency and prosperity.”[5] According to the Institute’s staff, competitiveness and productivity are traveling companions. They explain, “Competitiveness is determined by the productivity with which a location uses its human, capital, and natural endowments to create value. Productivity ultimately depends on improving the microeconomic capability of the economy. It is not what a location competes in that determines its prosperity, but how productively it competes.”
Competitiveness Factors
Gucel, Begec, and Iveta suggest there are several factors that determine how competitive a business becomes. Those factors include:
Factor 1. Markets, competitors, and customers. This factor takes into account a company’s market share, the size of the market, the make-up of its customers, the number of competitors in the space, and the risks a company is willing to take to gain market share.
Factor 2. Human and physical capital. This factor takes into account a company’s talent pool, turnover rates, productivity, corporate culture, access to the right equipment and software, and the efficient use of physical capital.
Factor 3. External environment. This factor takes into account all business conditions (e.g., taxes, legislation, shadow economies, etc.) as well as the quality of control institutions.
Factor 4. Financial stability. This factor takes into account access to internal and external funds, income and expenditures, fixed to variable costs ratio, cash flow, access to current assets, etc.
Factor 5. Performance. This factor takes into account profits and growth when compared to competitors.
Factor 6. Optimistic and realistic growth plans. This factor means taking a realistic look at the market rather than painting a rosy picture of an improbable future. Unrealistic plans encourage the growth of economic bubbles and bubbles can burst.
Factor 7. Strategies for products and services. This factor takes into account diversification efforts, uniqueness of products and services, business processes, operational processes, pricing strategies, promotion strategies, and quality assurance management.
Factor 8. Use of communication networks. This factor ensures a business can compete in the Information Age. It addresses activities like data supply chains, omnichannel operations, connectivity with suppliers and other important stakeholders.
Gucel, Begec, and Iveta conclude, “A sign of business vitality is, undoubtedly, the willingness to adapt and change. Nowadays, when everything can be copied, [an enterprise] must constantly seek for its own distinguishing mark and be one step ahead [with] their ideas, innovations, and with service.
Concluding Thoughts
The staff at IGI Global defines competitiveness as “the ability of a firm to offer, in relation to its competitors, products of higher value at equal or lower-cost and to build competitive positions that enable superior economic performance.” In order to do that, business writer Sean Peek suggests four areas on which to focus.[6] They are:
1. Attracting new clients. Peek writes, “Start by thinking about simple ways to bring accessibility and convenience to your customers.” While attracting new customers is important, keeping current customers is even more important since maintaining customers is cheaper than trying to win new customers.
2. Predicting the future. According to Peek, “You don’t need a crystal ball to predict (or at least try to anticipate) the future, but it requires thinking outside the box. Having a long-term vision is hardly the biggest secret on the block.” Predicting is often a fool’s errand; however, cognitive technologies, like the Enterra Global Insights and Decision Superiority System™ (EGIDS™), can help companies perform important “what-if” exercises to help them anticipate and plan for the future. As Peek notes, “A long-term vision for your business is vital.
3. Respond to changing markets. Peek observes, “The market can be unpredictable and constantly evolves over time, so pay attention to what your customers are buying and actively saying they need, despite whatever your company is currently delivering.” The Enterra Global Insights and Decision Superiority System can help keep you abreast of the changing business environment as well as provide prescriptive insights to help companies adapt to those circumstances.
4. Be open to new opportunities. Peek writes, “The most successful businesses continually develop to meet changing market demands and are therefore open to new opportunities. It isn’t always easy to keep your business competitive in a cutthroat world. But if you focus on opening up new markets, adapting your product or service to meet changing tastes, and being aware of new opportunities, you’re less likely to be blindsided by sudden paradigm shifts or overnight crashes, and more likely to run a successful business.”
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Footnotes
[1] Cem Gucel, Suat Begec, and Strele Iveta, “Competitiveness – A Key to Business Viability,” Turbia Business School, 2013.
[2] Staff, “Business Competitiveness Resources,” Toronto Region Board of Trade.
[3] Sean Ross, “How Do I Determine My Company’s Competitive Advantage?” Investopedia, 19 October 2020.
[4] Kyle Peterdy, “What is Competitive Advantage?” Corporate Finance Institute, 26 November 2022.
[5] Staff, “Drivers of Competitiveness,” Harvard Business School Institute for Strategy and Competitiveness.
[6] Sean Peek, “Ahead of the Pack: 4 Ways to Keep Your Business Competitive,” Business.com, 14 November 2022.
