Our marketing teacher is weirdly interesting. He talks a lot. He can talk for 30 minutes without break. He is an old man, but he is aware of the current business world. Maybe because of his big experience in business consulting, his words affect me, remaining in my memory, making me think deep about his lessons.
One thing that stuck in my mind from his last class is this sentence:
“COMPETITIVE ADVANTAGE flows from value-chain activities.”
I know, it sounds complicated. So let me share with you my thoughts on this topic. Maybe I will manage to simplify it for you.
The central “heart” of any business is CUSTOMERS.
The more customers you have, the bigger is your business. The more loyal they are to you, the more they pay you [=more money]. Are you following me so far? Bear with me.
Any business has COMPETITORS in its respective industry that constantly fight with each other to “win” customers, right?
Now the best way [maybe the only way] your business wins a competition is that you have something UNIQUE that your competitors don’t have [that’s the reason why your customers choose you over your competitors]. It may be lower price, extraordinary product, or simply a great customer service. This is called “competitive advantage”.
It turns out that your single most important job as CEO of your company is to maintain your competitive advantage. Because if you lose it, you will eventually lose your company. In other words, competitive advantage is arguably everything.
Now the question arises: how to maintain this competitive advantage of your company? The answer is: VALUE-CHAIN ACTIVITIES!
I can see your face saying: What on God’s green Earth is “value-chain activities”?
It is basically a unique MIX of processes at your business that brings value to your end-customer [sales channels, supply chain management, customer service, product development, etc]. That unique “mix” is the ultimate formula for creating a competitive advantage.
Your job as CEO of your business is to constantly improve those value-chain activities to match the NEEDS of your customer [not everybody is actually able to do this]. That is how you win competition. That is how you keep your company, how you grow your customer base.
“Competitive advantage flows from value-chain activities.”
Good one. I need to write this down.