Session 4: Competitive Advantages

Competitive Advantages

The four Ps of marketing – product, place, promotion, and price – certainly present many compelling ways to differentiate your firm’s product or services from those of your competition, and it is often where new entrepreneurs start. However, as you plan to get your business off the ground, you need to consider more than just marketing strategies to achieve a sustainable competitive advantage, no matter which market your firm is in. One of the most important aspects of your business is what is known as your HR strategy and your human capital – you, your team, and your employees.

Let’s explore the ways human resources can help you enhance your competitive advantage, or even help you create a new one:

• You may choose to compete by offering the lowest prices on the market. To do so, you must ensure that your operating expenses are as low as possible to maximize profit. By deriving your human capital from a pool independent contractors and/or offshore, for example, you may be able to minimize HR expenses, which, when combined with other methods of reducing business expenses, may help you achieve significant profits. While many Fortune 500 firms have received significant criticism for the use of offshore vendors, they have leveraged this strategy to achieve tremendous profits.
• A variety of perspectives can yield lucrative ideas about how to differentiate your product or service, or even create new ones. These ideas can come from anywhere, but equity partners, advisory board members, and full- or part-time employees are often the richest source of innovation. 3M’s internal culture is renowned for nurturing employee innovation, by allowing employees a certain amount of time each week to work on projects in which they are interested, even if there is no immediate application. Often, these kinds of projects have led to some of 3M’s most popular products, such as the Post-It note.
• Highly skilled employees may allow you to offer a superior product for which you can charge a premium. Such is the case with luxury products/services, as well as most firms that are competing based on the quality of their products/services. While it may cost you more to recruit and/or train and retain highly skilled employees who can add value to your offerings, that cost can be passed to the consumer in the form of premium pricing.
• Maybe your source of competitive advantage is operational effectiveness. Skilled employees, who find ways to reduce internal costs, can increase operating margins. A strong internal culture – one marked by high employee morale and engagement, can increase productivity, and ultimately, increase profits.

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