Businesses Filipinos should be into---those with competitive advantage

Despite its human, natural and agricultural resources, the Philippines cannot boast of global brands which can compete in the world’s marketplace except for one or two which are known internationally --- San Miguel beer, and perhaps Jollibee.


Our country has been known to be a major producer in the 1900s of agricultural products and ranked among the top in the world. We had abaca, then known as Manila hemp, sugarcane, coconut in the form of copra, and lumber from our then abundant forest resources. 


But the competition, technology and the unsustainable exploitation of these resources enabled the world’s markets to find cheaper and better substitutes. These commodities eventually lost their appeal and were overtaken by other commodities far better and cheaper from other countries in the export market.

It will be noted that our top exports then were in the form of raw materials or semi-processed produce which had little value added. Contrast this to the other economies in the world that developed new technology to produce finished products which gave them the competitive advantage.
Our exports then lost, or did not have, competitive advantage so other countries outpaced and outgrew them in the market.

Today, the competition to sell in international markets is as intense and is more difficult. But competitive advantage remains to be a necessary ingredient for any successful entrepreneur to break into and maintain a strong foothold in the export market.

Yes, if you cannot compete well, you are doomed to failure especially in an environment of high risk and constant and fast paced changes. An understanding therefore of the concept of competitive advantage will help the entrepreneur focus on what is important and to build on a business with innate and developed competitive advantages.

As defined by Michael Porter, Harvard University Professor and leading authority in competitive strategy, competitive advantage is the position the firm occupies against its competitors in terms of a superior product and service, and cost leadership.

According to Porter, this position of sustainable competitive advantage is created through cost leadership, differentiation or focus. Cost advantage occurs when a firm delivers the same services as its competitors but at a lower cost. Differentiation advantage occurs when a firm delivers greater services for the same price of its competitors. They are collectively known as positional advantages because they denote the firm's position in its industry as a leader in either superior services or cost.

To further simplify the definition, your business has competitive advantage when you are able to do something different than your competitors in such a way as to make it difficult to imitate. When your ability as a business to create value added products for your customers cannot be duplicated or imitated by your competitors, then you have competitive advantage.

This means that the higher the value delivered to your customers and the lower the cost it takes to produce that value, the stronger the firm’s market position.

However, it is difficult to sustain competitive advantage because the competition will always try to copy your technology and strategy, and steal your customers from you. To be sustainable, the entrepreneur must do two things: set an objective to attain superior market position through value added products and services and put in place a strong defense to protect the market position.

Value added products and services can be developed by using firm-specific resources that cannot be easily imitated or acquired. Examples of these resources are: patents, trademarks, proprietary rights to technology, reputation, customer base and brand equity.

Another valuable input to value added products and services are the capabilities of the firm in the way it does its work. An example of a capability is the ability to bring a product to market faster than competitors. Or the ability to create unique design concepts. Such capabilities are embedded in the routines of the organization and are not easily documented as procedures and thus are difficult for competitors to replicate.

Taken together, resources and capabilities make up the firm’s distinctive competencies. These competencies enable innovation, efficiency, quality, and customer responsiveness, all of which can be leveraged to create a cost advantage or a differentiation advantage.

Knowing all these, we go back to the most important question, what is the competitive advantage we need to develop as a country to create competitive global brands?

For the Filipino entrepreneur this is an important point to ponder. Indeed knowing one’s competitive advantage will increase his chances of success in competing globally. His efforts would be better used if focused on an enterprise with inherent competitive advantages.

Venturing a conjecture at this point, as a country consisting of numerous tropical islands, populated with a diverse species of flora and fauna, with a climate making possible all-year-round agriculture, and with a robust young and literate population, our best bet would be in agriculture related enterprises specifically agri-businesses, aquamarine, biotechnology, pharmaceuticals, and in the services related enterprises such as Business Process Outsourcing (BPOs), Information Technology, Medical and Entertainment services.

In tandem with these resources, SMEs must develop their capabilities so that taken together (resources + capabilities) they will have competencies that would be difficult to copy.

Once the Filipino entrepreneur consciously identifies and exploits his competitive advantages, then we will see more Philippine-made products and services competing in global markets.