Achieving a competitive advantage by a company is aimed at increasing its size. The greater the advantage, the greater the independence in the operation of the instruments that promote greater effects on the market. The sustainability of a competitive advantage depends on the type and size of the advantage achieved. To maintain and increase the degree of sustainability of a competitive advantage, a company must use an integrated set of marketing instruments. Their proper use contributes to increasing and maintaining the competitive advantage.
The goal of any company is to gain a competitive advantage, which can manifest itself through profits above the industry average or a significant market share. To achieve this, a company must hire competent employees who can effectively exploit the competitive advantage in the market.
In 1998, Michael E. Porter presented three business strategies for achieving competitive advantage. They are: cost leadership, diversification and concentration. Let's look at their characteristics and the opportunities they present.
Cost leadership
The cost leadership strategy is based on lowering the price of the product while maintaining its quality at a similar level. This can be achieved mainly by reducing production costs or cutting marketing expenses. Such a strategy makes it more likely that consumers will choose our product over other products of similar quality offered at a higher price.
An important advantage of this strategy is the increased demand for our product or service, in line with the free market, which can lead to a significant increase in profits. However, on the other hand, this concept carries the risk of incurring high costs to upgrade equipment and introduce innovations that reduce the price of the product. Similarly, cutting marketing expenses can reduce potential customers' awareness of low prices. These risks mean that only large and stable companies can afford to pursue a cost leadership strategy.