APPROACHES TO COMPETITIVE POSITIONING IN AN ORGANIZATION

When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rivals. The goal of much of business strategy is to achieve a sustainable competitive advantage.

Michael Porter identified two basic types of competitive advantage:

·         cost advantage

·         differentiation advantage

A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products (differentiation advantage). Thus, a competitive advantage enables the firm to create superior value for its customers and superior profits for itself.

Cost and differentiation advantages are known as positional advantages since they describe the firm’s position in the industry as a leader in either cost or differentiation. (QuickMBA, 2010)

For the case of this article, we will be analyzing the competitive positioning of procter and gamble (P&G).

P&G’s competitive positioning

As a result of the global economic downturn, market rates slowed in 2010 and were expected to be below the range that underpins P&G’s long-term financial growth targets. As a result, P&G aims to focus in three primary areas so as to achieve set targets and competitive advantage. These areas include;

·         Grow their leading, global brands and core categories. P&G’s portfolio includes 22 brands that generate over $I billion in annual sales and 20 brands that generate approximately $500 million or more in annual sales. Combined, these 42 brands account for 85% or more of P&G’s sales and profits. These brands are platforms for future innovations that will drive sales growth, expand categories for retail customers and differentiate brands in the minds of consumers. P&G’s core categories, Baby Care, Blades and Razors, Fabric Care, Family Care, Feminine Care, Home Care, Oral Care, Prestige Fragrances, Retail Hair Care and Skin Care, have opportunities for continued growth. P&G plans to focus on profitable share growth across all of their businesses by leveraging their core strengths in innovation and brand-building. (Procter & Gamble, 2010)

·         Build business with underserved and un-served consumers. P&G is increasing their presence in developing markets, where 86% of the world’s population lives. They will increase the amount of sales from these markets by focusing on affordability, accessibility and awareness of their brands. They are extending their distribution systems to reach more consumers through underserved retail channels such as e-commerce and high frequency stores. And, they are creating a broader and deeper product portfolio. Their initiative pipeline has new and improved products that extend and strengthen their category and brand portfolios vertically and horizontally. (Procter & Gamble, 2010)

·         Continue to grow and develop faster-growing, structurally attractive businesses with global leadership potential. P&G is continually optimizing their portfolio of brands and businesses with an emphasis on opportunities in beauty, health Care and selective portfolio and geographic acquisitions in household Care. They will also identify growth opportunities in services, particularly businesses that can be franchised and expanded rapidly. (Procter & Gamble, 2010)

To achieve their targets, they will also leverage core strengths that create competitive advantages and are critical to winning in the consumer products industry:  consumer knowledge, innovation, brand-building, go-to-market capabilities and scale. They will be placing particular emphasis on execution, simplification and scale as key improvement areas that will enable P&G to create the greatest value and competitive advantage. Finally, they are strengthening the depth, breadth and quality of leadership at all levels of the Company to make P&G a more demand-driven, real-time, future-focused organization. (Procter & Gamble, 2010).

Conclusion

Judging from the above and the current 2012 annual report, it can be seen that the approach of P&G was very effective and efficient and produced the results that were desired. This is seen in the increase in net sales by about $6,113(mil) and gross profit by 764 (mil) (Procter & Gamble, 2012). With a few adjustment and adoptions, a company in need of establishing a competitive advantage would easily achieve it. It should noted that even though P&G is a very large company, their approach was focused on improvement and hence, very much relevant to all companies willing to adopt it.