Define competitiveness

Competitiveness in business refers to a company’s ability to balance the price and the quality of its products and services in order to provide customers with the optimal experience. Further, competitiveness in business refers to a company’s ability to achieve more sales or customer loyalty than its competitors due to the quality of its products and services, its low prices or a combination of both factors.

Competitiveness in business can be divided into two areas:

• Price competitiveness. Price competitiveness refers to the situation where a business can maintain the quality of its goods or services while still pricing them lower than its competitors.
• Structural competitiveness. Structural competitiveness refers to the situation where a business can maintain better sales or customer loyalty over competitors regardless of the prices it offers. This can be because it has a stronger brand identity, better quality products and services or additional products or services that its competitors don’t offer.

Why is it important to be competitive in business?

Some major reasons why it’s important to be competitive in business include the following:

• Inspires businesses to improve and evolve. Competitiveness is important in business because it can inspire you and your competitors to continue evolving within your industry and beyond. This can help your business stay current and able to adapt to changing consumer needs.
• Contributes to the creation of new products and technologies. Competitiveness in business can lead to the creation of innovative new products and technologies that benefit the consumer. For example, two medical supply companies competing to offer better machinery and tools might create a new device that helps detect cancer. Through their competitiveness, they create something that helps quicken cancer diagnoses so patients can receive treatment faster.
• Helps competitors contribute to philanthropic causes. Another positive element of competitiveness in business is the effect that one business’s philanthropic initiatives can have on its competitors. If you own an office supplies store and create an ad campaign that aims to donate free school supplies to inner-city schools, your competitors may do similar acts to create a benevolent brand identity.

Comparative advantage vs. differential advantage

When considering profit margins and determining whether you can be more efficient than your competitors, you are looking at a comparative advantage. That is, you are comparing the costs and pricing strategies of products. The more of a comparative advantage you have over rival businesses, the more likely you are to have a higher percentage of the market seeking out your products.

On the other hand, a differential advantage takes into consideration the quality and uniqueness of a product. Customers are looking at the difference between your products and those of your competitors. One may be of a higher quality or come with additional features or perks. It may simply be a case of one business or one product having a better reputation than the other. Differential advantages are much harder to quantify than comparative advantages, though they often have a stronger effect on a customer’s ultimate buying decision.

Ways your business can stay competitive

You can’t simply decide your business has a competitive advantage and celebrate it. Once you have figured out how you rank against others, take some time for analysis. Are you ahead or behind them? How did you get here? What can you do to keep this advantage? There are many strategies businesses use to stay competitive in their market.

Create a value proposition

A value proposition is a list of factors that you believe your company does well and that further distinguish your company from competitors. Start by reviewing the size of your company and what you have to offer in terms of products or customer service. Then review the main components of a few competitors’ businesses. From this information, you can determine what you do better within your market. For example, maybe you have better pricing, more retail locations or additional products and services they don’t offer. Use these components as a foundation to build on even further.

Develop customer relationships

Another great way to stay competitive within your industry is to consistently find new and innovative ways to engage with customers, improve their experience and grow your customer base. To stay competitive, make sure your existing customers have a reason to keep coming back to you rather than trying out a competitor. You can do this through loyalty or rewards programs, as well as by simply staying reliable and front of mind.

Review internal organization

The way your company communicates across departments and locations can have an impact on your productivity and overall success. Review the internal organization of your company to determine which departments need additional staffing, which departments don’t contribute significant benefit and which communication channels you could implement to improve the spreading of information among company employees.

Invest in new technology

New machinery to make products, IT software and other technologies can be helpful in creating cost-effective and quick results for your business. It could be something as simple as using a business messaging app to connect with employees on a more personal level than email allows or adding fabric-spreading machines to your clothing factory.

Strengthen your employee onboarding process

To stay competitive, you also need to recruit top-tier employees. By creating an extensive onboarding and training program, you can instill important values in your employees and build from there.

Frequently asked questions about competitiveness in business

How do you measure business competitiveness?

A competitive analysis is an evaluation performed to help understand the current and potential competitiveness of a given business. You begin by identifying your top competitors. Next, gather information about each of them, including things such as their products, pricing, reputation, market position and partnerships. Determine each competitor’s strengths and weaknesses. Then, compare this data to the same information in your own business. Once you find areas in which you have a competitive advantage, you can determine how to use that advantage to continue making your business more competitive. 

What are some types of business competition?

One way to define competitiveness in business is by example. For instance, companies that offer similar products are considered direct competitors. They are often competing for the same share of the market. 

Indirect competitors do not sell the same products, but their products meet the same needs of the customer. They share the same industry and audience. 

The final type is replacement competition. These businesses are offering products or services that will eventually replace other organizations by offering something new that better meets the needs of their customers. An example of replacement competitors is manufacturers of landline phones that have essentially been erased by mobile phone companies.