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WEMC FS#5-08
Strategies for Competitive Advantage
Cole Ehmke, M.S.
Extension Educator, Department of Agricultural and Applied Economics University of Wyoming
Overview A competitive advantage is an advantage gained over competitors by offering customers greater value, either through lower prices or by providing additional benefits and service that justify similar, or possibly higher, prices. For growers and producers involved in niche marketing, finding and nurturing a competitive advantage can mean increased profit and a venture that is sustainable and successful over the long term. This fact sheet looks at what defines competitive advantage and discusses strategies to consider when building a competitive advantage, as well as ways to assess the competitive advantage of a venture. The Essence of Competitive Advantage To begin, it may be helpful to take a more in-depth look at what it means to have a competitive advantage: an edge over the competition. Essentially a competitive advantage answers the question, “Why should the customer purchase from this operation rather than the competition?” For some ventures, particularly those in markets where the products or services are less differentiated, answering this question can be difficult. A key point to understand is that a venture that has customers has customers for a reason. Successfully growing a business is often dependent upon a strong competitive edge that gradually builds a core of loyal customers, which can be expanded over time. Producers and suppliers familiar with farming and ranching may know that successful ventures in the agriculture industry have typically operated in a commoditized, price-driven market, where all parties produce essentially the same product. Such conditions imply that the ultimate “winners” are the most cost-efficient producers, meaning that agricultural producers have historically relied on strategies that focused on lower costs and higher volumes (i.e. a bushel of hard red
Strategies for Competitive Advantage
Cole Ehmke, M.S.
Extension Educator, Department of Agricultural and Applied Economics University of Wyoming
Overview A competitive advantage is an advantage gained over competitors by offering customers greater value, either through lower prices or by providing additional benefits and service that justify similar, or possibly higher, prices. For growers and producers involved in niche marketing, finding and nurturing a competitive advantage can mean increased profit and a venture that is sustainable and successful over the long term. This fact sheet looks at what defines competitive advantage and discusses strategies to consider when building a competitive advantage, as well as ways to assess the competitive advantage of a venture. The Essence of Competitive Advantage To begin, it may be helpful to take a more in-depth look at what it means to have a competitive advantage: an edge over the competition. Essentially a competitive advantage answers the question, “Why should the customer purchase from this operation rather than the competition?” For some ventures, particularly those in markets where the products or services are less differentiated, answering this question can be difficult. A key point to understand is that a venture that has customers has customers for a reason. Successfully growing a business is often dependent upon a strong competitive edge that gradually builds a core of loyal customers, which can be expanded over time. Producers and suppliers familiar with farming and ranching may know that successful ventures in the agriculture industry have typically operated in a commoditized, price-driven market, where all parties produce essentially the same product. Such conditions imply that the ultimate “winners” are the most cost-efficient producers, meaning that agricultural producers have historically relied on strategies that focused on lower costs and higher volumes (i.e. a bushel of hard red
References: Barone, M.J. and T.E. DeCarlo (2003). “Emerging Forms of Competitive Advantage: Implications for Agricultural Producers.” Midwest Agribusiness Trade Research and Information Center Research Paper 03-MRP 5. King, J.B. (2005). "The Top 10 Reasons Businesses Succeed." EzineArticles. Retrieved May 2008 from http://ezinearticles.com/?The-Top-10-Reasons-Businesses-Succeed&id=12514. Southern Maryland Resource Conservation and Development Board (2004). “Taking the First Step: Farm and Ranch Alternative Enterprise and Agritourism Resource Evaluation Guide.” Retrieved May 2008 from ftp://ftpfc.sc.egov.usda.gov/Economics/AltEnterprise/FirstSteps.pdf. 5-8