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Pick one, and only one, competitive strategy

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Don’t try to be all things to all people. Pick one of these strategies, and only one, and run with it:

 Be the cheapest. With a cost leadership strategy, you’re not necessarily the cheapest across all products you offer, or the cheapest for every service but, in general, you’re aiming to compete on price. Price leadership can be a tempting strategy — after all, customers are always looking for a bargain — but is risky over the long term. Unless you have a strategic advantage that enables you to deliver your product or service more cheaply than your competitors, competing on price can mean weak profitability. (On the other hand, if you’re just getting started, choosing to be cheapest may be a good strategy for gaining clients and building up experience.)

 Create a point of difference. With a differentiation strategy, you set out to differentiate yourself in some way other than price. For example, an electrician could seek to make response time and punctuality a point of difference (‘We’ll arrive within 30 minutes of the agreed time or the first hour is free’), or could make availability a point of difference (‘24-hour call-out service, 7 days a week’.) Ideally, if you choose differentiation as your competitive strategy, you want to find a synergy between this differentiation and the strategic advantage you identified earlier in this chapter. For example, maybe a strategic advantage for this electrician is that his partner also has a trade license. Between them, they can offer a 24-hour service without worrying about leaving the kids unattended at home, and they don’t have to pay the penalty rates that other businesses would normally have to pay if sending an employee out on a job in the middle of the night on a Sunday.

 Find a particular focus or niche: With a niche strategy, your aim is to serve a specific market segment rather than deal with the whole market. In We Are All Weird, written by Seth Godin and published by Brilliance Corporation, Godin argues that people are seeking choices more than ever, and that this competitive strategy is an increasingly smart pathway for business.

Always try to pursue a clear strategy. If you choose to muddle along not doing anything that’s clearly different from others, you will find it difficult to both compete and establish a clear strategic advantage in the market.

Small Business for Dummies

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