Category: #tips

Jack Ma’s Alibaba overcame giants eBay to become the leading e-commerce website company in China. Back in 2003, eBay paid $150 million to buy EachNet, which was China’s top e-commerce site at the time. Their CEO was Meg Whitman, a Harvard Graduate with a distinguished resume which included being the former Vice President of The Walt Disney Company. The American behemoth entered the Chinese market backed with an abundance of resources, a talented workforce, and a strong brand reputation. On the other hand, Alibaba’s CEO was Jack Ma, a 10-time Harvard reject whose resume included 2 failed businesses and being an English school teacher. The odds were stacked against the local Chinese company.

So what was Jack Ma’s solution to eBay’s competitive threat? Taobao, a Chinese online shopping website that offered free listings to sellers, introduced website features designed to act in local consumers’ best interests, such as instant messaging to facilitate buyer-seller communication and an escrow-based payment tool, Alipay. As a result, Taobao became a mainland China’s undisputed market leader within two years. Its market share surged from 8% to 59% between 2003 and 2005, while eBay China plunged from 79% to 36%.

eBay on the other hand, suffered from a combination of poor management which included, for example, not giving enough power to local executives, which in turn crippled the business. “It’s very hard to compete with free,” said Jay Lee, eBay’s senior vice-president and managing director for the Asia Pacific. eBay shut down its operations in China in 2006, 3 years after entering the Chinese market. After this astounding victory, Jack Ma famously said, “eBay is a shark in the ocean. We are a crocodile in the Yangtze River. If we fight in the ocean, we will lose. But if we fight in the river, we will win.” Today, Alibaba is the world’s largest retailer and e-commerce company with online sales and profits surpassing all US retailers (including Walmart, Amazon, and eBay) combined since 2015.

How to create your competitive edge

Many say size does matters, but when it comes to business, it’s all about how you position yourself. Warren Buffett has been fairly successful in picking winners and he says the key to investing is not assessing how much an industry is going to affect society or how much it will grow, but rather determining the competitive advantage of any given company as well as the durability of that advantage.

The term competitive advantage refers to a unique advantage a company has over companies offering similar goods or services that allow it to generate higher sales volumes or attract more customers. Jim Collins, in his book, ‘From Good to Great: Why Some Companies Make the Leap…and Others Don’t’, asked these three questions to unravel one’s competitive advantage:

1. What can your business be the first at?
2. What is that unique thing only your business can offer?
3. What can your business be the best at?

Any of the above will give you an idea of your competitive advantage. Once you can identify it you must be able to communicate it to your employees and your customers.

Here are three steps that will help you discover your competitive advantage:

1. Make a brag list.
   

   This means you make a list of the positive claims you can make through your marketing messages, advertisements or sales pitches. Here is where a true in-depth understanding of your business process is important. As you compile a list of all key activities that your business is good at, brainstorm as many as possible and list down every single one. For example, you might make claims like, we offer overnight shipping like Amazon Prime, or we have highly skilled service staff with a decade of experience behind or emphasise your excellent customer reviews online, or that your pricing is very attractive.

2. List the things that your competitors do well to differentiate yourself from the competition.
   

   You must understand the strengths and weaknesses of your competitors. Review your competitors and make a list of all the things they do well. As you build the list, you may also notice some commonality and claims that your competitor might also do just as well as you. After building the list, cross out any activity that you and your competitors do well. This does not mean that you stop doing them, but helps to clarify that it can’t be your exclusive claim anymore. Jack Ma says, “you should learn from your competitor, but never copy them. Copy and you die.”

3. Create a fresh list of advantages only your company can do exceptionally well.
   

   You can also interact with your customers and find out why they choose you over your competitor. This might lead to big revelations you might not have thought of before. At the end of this stage, you should only be left with two or three possible competitive advantages and choose the best one from them. You can consider the following reasons to choose your real competitive advantage. Cross out anything that can easily be copied by a competitor or any new entrants to the industry, things that cannot be marketed or advertised, or if the advantage could be turned against you by a competitor. The activity that you do excel in (that your competitor is not good at) and is valued by your customers becomes your competitive advantage.

Once you have selected your competitive advantages make sure that you quantify them. For example, instead of claiming that you have the fastest service, say you have one hour response time that is five times faster than your immediate competitors. Instead of saying only “customer satisfaction,” quantify it with specifications like we have a 98.8% customer satisfaction rating which is the highest in the industry. Make sure that your unique claims are validated by quantifiable data to call them your competitive advantages and remember that it comes from what your people do and not from what they know. Performance and resolve are the key to measuring your competitive advantage. Always remember that most advantages can be duplicated within a certain period. Approximately 70% of all new products can be duplicated within one year 60-90% of process improvements eventually spread to your competitors.

Capitalise on your advantage