Businesses succeed because their customers perceive that they receive value from dealing with a specific provider. This perception becomes the basis for the compny's competitive advantage. It becomes their vlaue porpostion.
In developing their business plan an organization needs to focus on their competitive advantage as viewed by the customers. What is the value proposition that you will be delivering to your customers. You must clearly articulate your competitive advantage and use that to understand your potential customers and how they value the goods or services that you will deliver.
Once you clearly understand your value proposition you can use that to determine the price that your customer will be willing to pay to receive the value you are delivering. During my career I have successfully utilized some sage advice I got from a mentor “price is set in the market place, it bears no relationship to cost, the only thing costs tell you is if you want to be in that business”. If the price you customers are willing to pay does not provide solid margin then you cannot have a profitable business.
Sustainability relates to your ability to maintain your competitive advantage over time. If you are wildly successful will your competitors be able to easily provide the same perceived advantage. That does not mean that your competitive advantage cannot change and be enhanced over time. It clearly must adapt to changing market conditions and customer needs. In dealing with start up companies I frequently see them say their competitive advantage is price. My question will always be "are you be the low cost supplier"? If not and you become successful what will the low cost supplier do----lower their price to meet your competitive threat and take the market back. Not a sustainable advantage!!
I hope that you now see how important it is to clearly define your sustainable competitive advantage in order to successfully grow your business.
