Strategy Accelerator

The strategy accelerator Strategies for sustainable competitive advantage Alfred Griffioen Abstract: There is only a limited number of models that give direction on how to make a profit, these models focus on differentiators or on portfolio management. However, the increasing availability of all kinds of knowledge through the internet and the globalisation of the financial markets are not taken into account in these models. This article investigates how a company can make a profit in the current market. It proposes a directive framework based on market relevancy and whether the company has a unique product. Based on these parameters, a company should either consolidate its position, aim to excel more and more in its products, effectively combine products or ally with another company to differentiate or profile itself more. Introduction The question of ‘how to make a profit’ is one of the most relevant for business economics, but only few researchers and authors have formulated directive rather than descriptive answers. A better direction can be found in basic economy teachings: If you can differentiate yourself from your competitors, you have a sort of monopoly. In a monopoly you can choose your own optimum of price and quantity on the demand curve. As soon as you get competitors, the power shifts to the customer: the price is set by the market and you can only follow. Only by differentiation can you outperform your competitors. Especially in the early life cycle phases of a new product or business model the profitability will be higher due to the fact that there are few competitors. In the development phase the turnover will be limited and clients have to be convinced of the usefulness of the model. In the acceptance phase the turnover increases, but it is still possible to sell the product at a premium price. Later on this price premium will erode. Profitability market average 0 Development Acceptance Generalisation Decline figure 1, Profitability in the different life cycle phases of a product or business model Alfred Griffioen – The strategy accelerator 1 Companies need to develop and adapt new products and business models in order to differentiate themselves from their competitors and to outperform them. These new opportunities can be found by evaluating the needs and competences of the companies in your value chain, or rather, the value network around you. Hardly any company has one single supplier and one single customer group (see figure 2). On basis of a needs analysis you can find completely other ways in servicing your direct customers or their customers. Or by integrating activities from one of your suppliers, customers or the other suppliers of your customers you can change your business model. Supplier Supplier Supplier Supplier Consumer Customer Company Consumer Customer Consumer Customer Consumer