(Or: the difference between two nearly identical businesses, one that survives and one that closes)
Two clothing stores open on the same street, selling practically the same thing, at the same price. A few months later, one is packed and the other is closing down. The difference is almost never “good or bad luck”: it’s strategy.
What exactly is business strategy?
It’s the plan that defines how you’re going to compete sustainably: what you’re going to offer that others don’t (or offer better), and why customers should choose you over the competition, again and again.
It’s not just “selling more.” Anyone can sell more by cutting the price until they lose money — pointless if it doesn’t even cover your costs. Real strategy looks for an advantage that can be sustained over time, not a one-time trick.
The three classic ways to compete
- Cost leadership: being able to produce cheaper than anyone else, and winning by selling large volumes at low prices (think big fast-food chains).
- Differentiation: offering something unique that customers value so much they’re willing to pay more for it (think luxury brands, or a product with clearly superior quality or design).
- Focus (niche): instead of competing against everyone for the whole market, specializing in a very specific customer segment and serving it better than anyone else (think a store specialized in only one very particular type of product).
“The most common mistake new businesses make is trying to compete in all three ways at once, and ending up not really good at any of them.”
The case of the two clothing stores
Let’s go back to the opening example. The store that survived probably chose a clear strategy: maybe it specialized in a very specific style nobody else offered in that area (differentiation), or focused on a very particular type of customer it served exceptionally well (focus). The one that closed probably tried to “be like the other one but a bit cheaper” — with no real, sustainable reason for customers to prefer it.
Competitive advantage: what the competition can’t easily copy
Having a good idea for a while isn’t enough — if it’s easy to copy, the advantage disappears fast. A sustainable competitive advantage usually comes from things that are hard to imitate: a strong brand built over years, a trusted relationship with customers, exclusive access to certain suppliers or technology, or simply being so cost-efficient that nobody else can match the price without losing money.
Why does this matter for analyzing business cases?
When you have to analyze a business case (at the Olympiad or in real life), one of the first questions you should ask is: what is this company’s strategy, and is it actually sustainable? If a company is winning only through temporary low prices, with no real advantage behind it, it’s just a matter of time before the competition catches up or overtakes it.
- Does it compete on cost, differentiation, or focus?
- Is its advantage easy or hard to copy?
- What would happen if a big competitor decided to attack it directly?
Final thought
“It’s not about being the biggest. It’s about having a clear, hard-to-copy reason why customers choose you.”
Next time you see two businesses that look almost identical, look closer: they’re almost never the same. One has a clear strategy. The other is probably improvising and hoping for the best.
Discover more from OLEEC
Subscribe to get the latest posts sent to your email.
