We previously discussed competitive advantage; its meaning, how firms can achieve it, and most importantly how it can be sustained. Today, we will examine the key areas in which a firm can achieve a competitive advantage, as well as the importance of aligning these advantageous strategies to its mission statement.
What is a mission statement?
A mission statement simply defines what a business is all about, namely, its reason for existing, its goals, its objectives and the strategies which will be used to achieve those objectives. It is not to be interchanged with a vision statement which basically refers to the future of the firm. A good mission statement should:
Clearly identify the purpose of your business to both internal and external stakeholders.
Promote your organisation culture, philosophies, values and strategies.
Communicate the goals and objectives of the organisation.
Be simple and concise.
A mission statement is therefore the concise statement of the firm’s purpose and direction. Usually accompanied by the firm’s vision statement for the future, both statements have also the added value of inspiring and motivating staff.
Similarly, it is key for a firm to decide on a set of strategies to adopt to achieve a sustainable competitive advantage which will conform with its mission statement. According to Economist and Business Strategist Michael Porter, there are three main strategies in which an organisation can choose to develop its competitive advantage. They include:
Cost leadership strategy
Differentiation strategy
Focus strategy
Cost leadership strategy
When a firm decides to provide products/services at a low cost compared to its competitors in the industry, it is referred to as a cost leader. A firm adopting a cost leadership strategy is able to sell at a low cost thanks to its ability to access raw materials at a low cost; economies of scale; exclusive access to a type of technology or regulatory permission. For a firm to maintain its position as a cost leader, it needs to:
Reduce the cost of production while offering quality products and services.
Draw the attention of customers to the lower prices in order to gain a huge share of the market. This is one of the major benefits of adopting a cost leadership strategy.
Differentiated strategy
When a firm decides to sell or offer unique products and services that are perceived as valuable by its targeted customers, it is said to be a differentiator. Firms that embrace this strategy are often rewarded if their products/services are unique or not readily available.
To maintain the position of a differentiator, a firm needs to:
Constantly create a distinctive feature for its brand
Heavily invest in marketing activities
Create a direct connection with its targeted audience. This might be in form of designs, logos, tagline and even the product itself that customers will resonate with.
Focus strategy
A firm can adopt a focus strategy when it decides to concentrate on a particular market niche (or segment) and offers products/services that meet the needs of that market. A firm can operate as a focused cost leader if it decides to compete on the basis of low price in a narrow market compared to other firms in the targeted market.
However, a firm can also operate as a focused differentiator if it decides to offer unique services/products that meets the demand of a narrow market niche or segment.
In summary, irrespective of the strategy a firm chooses, it is critical that such strategy aligns with the firm’s mission statement, and this should be clearly understood by all executives and employees to ensure efficient execution of its chosen competitive strategy.
Please email us at: enquries@ovacgroup.com for a free consultation on how to align your competitive strategy to your mission statement.