The market deals with quick charging forces that pressure businesses to change how they function in this day and age. Only the most innovative and unique ideas prosper in these scenarios. Therefore, it is essential for businesses to be responsive to the dynamic environment they operate in and develop sustainable competitive advantage. This should be accompanied with incorporating sustainability in other aspects of the business as well as fulfilling their social obligations. This article talks about competitive advantage of businesses while shining light on the importance of integrating sustainability in the same.
The ever trending Climate Change Crisis and the Covid19 pandemic are the two significant phenomena that made companies reconsider their value propositions and innovate further. Only a few large companies could meet with these sudden changes as they had enough resources and loyal consumer bases looking forward to these changes. The many other growing firms and startups had to mine deep to generate new ideas to meet their niche markets. This led many businesses to try and outperform one another. But what made one stand out was their competitive advantage.
It refers to an attribute that a business builds to outperform its competitors. A competitive advantage allows a company to gain value for itself and its shareholders and achieve superior margins faster than its competitors. It defines what product or service a business can provide that no other competitor can. The following are the ways in which a company can build competitive advantage:
- Cost Leadership occurs when a business offers products or services of reasonable quality but at a lower cost. The firm tries to become the lowest lowest-cost producer, through large-scale production, where economies of scale are possible.
- Differentiation about the features, quality, distribution, or any number of other attributes, allows a company’s products or services to be differentiated from its competitors. Producing high-quality products or services and innovating new product creation or service commencement ideas would help differentiation.
- Effective marketing strategies and efficient use of a business’s promotional mix helps in maintaining its status quo. Undertaking adequate market research, sales tactics, and innovative advertising techniques would help companies gain a competitive advantage.
- Building a brand with a strong positioning strategy can shoot up customer loyalty. A brand can be created with the help of social media, visual design web pages, blogs etc.
- The Network Effect allows a product or service to become more valuable as people use it. Users hesitate to turn to other alternatives because it’s a hassle.
- Focus Strategies allows businesses to focus on niche target markets. Customers are often underserved in niche markets and become insensitive to price variations.
Demonstrating Competitive Advantage
Businesses use these barriers to make it harder for other competitors to entre or thrive in the market. The following are examples of how many renowned companies have taken over the competitor advantage scenario:
a. McDonald’s uses the cost leadership strategy by using economies of scale and producing food at a low cost. This helps them have a competitive advantage over their competitors.
b. Airbnb’s strategy revolves around creating something no one else was offering by an intermediary between homeowners who want to earn a little extra cash and travellers who want a safe and cosy stay. They benefit from the network effect and use it to achieve their competitive advantage.
c. Pinterest is a platform that allows a niche segment of users to view pins and boards curated by other users.
d. Apple caters to tech-savvy consumers willing to pay any price for their products due to its success. The company is innovative, focuses on product quality and has excellent customer service.
Dealing with a business’s competitive advantage helps them earn a first-mover advantage or maintain their status quo. There have been many changes in the consumer’s mind about the image company in recent times rather than the products or services. This has led many companies to recognise their Corporate Social Responsibility (CSR) and do their part in becoming more sustainable to maintain their market share in the long run.
ESG (Environmental, Social and Governance) Criteria
The ESG Criteria encases the relationships a business concern holds with stakeholders and how transparent it is while disclosing management practices while being ethical. The world is now aware of its issues and would want to depend on companies to make sustainable choices. Companies now focus on eco-friendly techniques, maintaining ethical facilities and activities while minimising their harmful effects on the environment. This futuristic trend has caught the eyes of global lending and investing companies. Despite generating high profits, a company could lose importance in the investment opportunities and decisions related to their capital if they have low ESG scores.
Exemplifying Sustainability Leaders
A few examples of leading companies that have caught up with this trend are as follows:
a. Havells India and Godrej Consumer Products are prime examples for assessing their (ESG) performances. Havells stopped the usage of Kr-8, a radioactive isotope, from their lighting range. Now there aren’t any products made by Havells that have radioactive components. The company has taken adequate steps towards beating waste management issues by introducing four zero water discharge facilities, two renewable energy initiatives, biomass and solar systems and multiple resource conservation systems.
b. TGM Finance has kept up with their renewable energy to 30%, 37% of their greenhouse gas emissions have been reduced, 99.5% of waste from the landfill have been reduced, and their water consumption has been reduced by 32%. The company now has recyclable packages.
c. P&G took the initiative to start the Fairy Ocean Plastic bottles, made of 10% ocean plastic and 90% recycled plastic from consumers.
d. Asian Paints, New launched their Natural Resource Conservation project and Energy and Emission reduction policy. They focus on non-hazardous ways of production and manufacturing to minimise the operations and take care of the biodiversity.
Changing Consumer Behavior and Sustainability
There has been a significant shift in customer buying behaviors as they’re willing to pay for many other products that are eco-friendly, and this has driven companies to shape their brands in such a way that they are quoted as sustainable.
The Challenges and Rewards of Sustainability
It may seem to be a very tiring and costly affair to change all the existing production activities, packaging, waste management methods, etc. Still, there are many benefits toward becoming more sustainable too. Increased demand for eco-friendly goods translates into more profits. There are multiple grants, financial benefits, and tax concessions available for companies that want to go green. The Environmental Protection Agency provides classes, educational activities, seminars, etc., to educate entrepreneurs on efficiently making a shift. Green companies are seen as more appealing to clients, customers, and employees, financial institutions, investors, etc. Like the world-leading Oil company, Chevron stated, “Our company’s foundation is built on our values, which distinguish us and guide our actions. We conduct our business in a socially responsible and ethical manner. We respect the law, support universal human rights, protect the environment and benefit the communities where we work”.
In conclusion, companies should now focus on giving back to society to gain acceptance. This era’s dire need to look forward to protecting resources for future generations and sustaining their companies for the many years to come. Many companies have multiple false claims of sustainability and eco-friendly products. Experts have called out for their inaccuracies and have received a bad name from their consumers. It is crucial to truthfully curate changes in business models to keep up with the dynamic changes that are about to come.