In Porter’s Generic Strategy, Porter suggests ways in which it is possible to derive a competitive advantage – here we will look at whether you are cheap or you are different. No matter the criticisms of Porter’s model, it has some valuable applications for e-commerce. I would suggest that if a company is heavily focused on COST, then the likelihood of succeeding with that strategy online is slim. This is because there are fewer barriers to online trade, hence the likelihood of another company being able to provide the same product or service as you are high. For example, if a UK company are producing a cheap product to export, it is likely that both local low cost products, as well as those from production based economies (such as China), will be able to undercut the price. Obviously, a cost centric UK company could always make sales based on differentiation in other markets.
To successfully benefit from online export led growth, differentiation is key. Let’s take the example of Amazon. They are well priced, certainly cheaper than a lot of the high street stores, but they are not the cheapest. With minimum research it is possible to find pretty much all of the products on Amazon cheaper elsewhere. Amazon’s selling point is their phenomenal logistics and range of product offered. Differentiation does not have to come from the product offering, it can come from the experience of delivery and choice. Owning the market for a particular product/service is a key factor for differentiation.
Don’t compete in the way that everyone else is, build your own market and your own niche. Be different!
Unless you have a particular interest in cars you are unlikely to have heard of Christian von Koenigsegg. Christian is a man that had a remarkable dream, to build (by his definition) the best car in the world. The latest car that his brand, Koenigsegg (yes, he named it after himself), is the One:1. This is the perfect power to weight ratio for a car. Even more extraordinary than the specs however, is the price: a whopping $2.8m. Yet, every one of the limited number produced were sold before they were even made. Christian has found his market, he knows who they are and what they want. Even within the hyper car market Christian is unique. Koenigsegg is not about soul or beauty like Pagani, it is about power and speed. That’s what his customers want. Christian knows this, so he produces cars like the One:1.
I am sure that Christian has not spent a single sleepless night worrying about Toyota outselling Koenigsegg. Just like Koenigsegg, you need to find your market. Provide a product or service that is different, selling on cost will ultimately lead you to eroding your profit margin to an unsustainable point.
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