As we have seen in previous blog posts, importing products from China may bring many benefits to our business, in order to strengthen its competitive advantage.
In fact, most companies, when they decide to import products from Asia for the first time, tend to do so with the principal objective of increasing their sales margins, thanks to lower unit cost price, allowing them to improve their position in the market and to beat their competition.
Nevertheless, our experience as sourcing professionals has shown us that not all companies apply the right theoretical concepts, thereby not being able to get the most out of the inherent advantages of import operations. This is, in most cases, due to a lack of analysis, which doesn’t allow companies to strengthen the competitive advantage of their brands.
But… what exactly is the competitive advantage of a company?
Before moving on, it is crucial to understand what is the concept of competitive advantage and how it influences a company.
In reality, the concept is pretty simple: the competitive advantage is what makes the company unique and makes it better when facing its competitors, whether that is price, customer service, an extended warranty or a well-developed online community, just to give some examples.
To find the competitive advantage of our company is in essence fairly easy. In fact, many companies have already been created with a focus on a specific competitive advantage. Nevertheless, we often forget the most important part: communication.
Do our customers know what is our competitive advantage? Or, formulated in a different way, does our target audience know what makes us better than our competition? If the answer is no (and that is often the case) it is very likely that those prospects will never become customers.
Categories of competitive advantage
The competitive advantage is one of those important theoretical concepts that are being studied in any business and/or marketing course. One of the main drivers behind the idea was the American professor Michael Porter, who already in 1982 insisted on the fact that “the essence of the formulation of a competitive strategy consists in linking the company to its environment”.
Precisely according to Porter’s competitive advantage theory, there are two categories of competitive advantage: leadership based on low cost or differentiation. The latter is the one that, in most cases, causes substantial communication difficulties for companies.
Why does the import of products allow us to improve our competitive advantage?
Now that we have clearly understood what is the concept and the different categories, some businesses might conclude, incorrectly, that the only way for imports to strengthen our competitive advantage is linked to low prices, but that is not entirely true.
Sure, if the main difference between our business and the competition is price, it is fairly obvious that implementing international purchases at a better unit price will help us to become better positioned in the market.
Yet, importing goods from Asia can also help us when our competitive advantage is based on differentiation. A good example could be when our differentiation from the competition is based on the personalisation of our product, because our packaging may offer exclusive access to certain services, a fairly simple (and economical) feature we can obtain when importing products from Asia.
Last but not least, we should remember that imports will allow us to reduce costs, a fact that will give us the chance to invest those savings in other parts of our business (like communication and marketing), that will also allow us to strengthen our competitive advantage and help us to lead the market.