Friday, April 1, 2011

Q: How do you know what your "competitive advantage" is if you are a start-up?

A: Competitive advantage is defined as that function, service, or other strategic offering that sets you apart from and above your competitors. 

If you are just beginning, you will not know what actually sets you apart from your competitors since you have no "actual". However, entrepreneurs start companies because they think they can do something better. They have a more refreshing methodology, offer quicker service, or have a more enticing product. The founders are better at marketing and PR, know how to build partnerships, have excellent relationships with the soon-to-be customers. Initially, one or more of these will be your competitive advantage. If you cannot think of a way that you'll stand out from your competitors, cannot think of a way to differentiate yourself, then you probably should not start a business. Or at least don't do so until you can. If you can, then build your business around that which differentiates you and make sure you communicate your advantages in all your marketing efforts.

Beware: If your only competitive advantage is low prices, unless you have the low operational overhead and infrastructure to continually drive your own costs lower, your company is at risk. Many of the businesses that failed during the recession competed solely on pricing. When things get bad, customers look for value. And value means much more than just low prices.

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