There are no secrets to success. It is the result of preparation, hard work, and learning from failure. – Colin Powell
A competitive advantage is the unique ability of a business to utilise its resources effectively, improve customer value and position itself ahead of the competition. In other words, it is something that a company does better than its competitors because of some proprietary process, service, or brand. A business gains a competitive advantage through lower cost offerings (cost advantage), product differentiation (differentiation advantage) or customer satisfaction.
Competitive advantage is an attribute that allows a company to outperform its competitors by achieving superior margins compared to similar businesses, which generates value for the company. It results from identifying, understanding and effectively utilising a company’s resources to create opportunities and meet its stakeholders’ needs and expectations.
Thus, it is imperative for companies to constantly communicate with and manage the expectations of their stakeholders in order to build trust, loyalty, input and feedback that is needed to ensure that they maintain good relationship and promote business profitability and sustainability. A strategy that can be used to foster continuous communication with stakeholders at all levels in order to drive competitive advantage is through active stakeholder engagement.
To understand the term ‘stakeholder engagement’, lets first take a look at who a stakeholder is.
A stakeholder generally refers to any individual or group that positively or negatively impacts or is impacted by the decisions and actions of an organisation. The impact could be direct or indirect. So, stakeholder engagement refers to the process by which a company communicates or interacts with its stakeholders in order to achieve a desired outcome and enhance accountability and profitability.
Stakeholder engagement is a key part of corporate social responsibility (CSR) and achieving the triple bottom line. In order to improve decision-making, accountability and gain a competitive advantage, companies engage their stakeholders in dialogue to:
- drive innovation
- learn emerging trends
- improve risk management
- learn about new opportunities
- know the company’s performance
- learn about what social and environmental issues matter most to them
- gain insights that can help to develop new business strategy, amongst others.
Much of the strategic value of sustainability comes from the need to continually talk with and learn from key stakeholders. Through regular dialogue with stakeholders and continual iteration, a company with a sustainability agenda is better positioned to anticipate and react to economic, social, environmental, and regulatory changes as they arise; which positions such company as being responsible and accountable, thereby creating brand equity and loyalty which results in increased market share.
Stakeholder engagement is beyond just having a conversation. It should be strategic and must somewhat align with the interest of the stakeholders being engaged. Some tips for an effective and meaningful stakeholder engagement are:
- Understand who your stakeholder is and engage accordingly.
- Be clear on what you want or expect from your stakeholders and communicate this through your engagement.
- Be specific about what you want to learn from your stakeholders and who will have the best input. Have a key question you want answers for or a key aim you want to achieve through your engagement.
- Be proactive and lead the conversations, don’t wait until there is an absolute need to engage your stakeholders. By being proactive in your engagement you will remain one step ahead of your peers and competitors and be more likely to build greater respect from your stakeholders and earn their confidence.
- Have something to give back – An organisation’s aim shouldn’t be just to gather vital information from its stakeholders. It should offer something in return (could be financial or non-financial depending on the stakeholder being engaged). This might also be in the form of providing timely feedbacks.
- Know who your critical stakeholders are, and have open and continuous communication system with them.
A major challenge for business today is how to capture and retain large market share whilst remaining sustainable over a long term. The solution is to devise business strategy that enhances its competitive advantage, which can solely be achieved through deep and meaningful stakeholder engagement.
Reference
- Competitive Advantage: The ability of a company to outperform its competitors- CFI
- GIIRS Emerging Market Assessment Resource Guide: Stakeholder Engagement
- Stakeholder Engagement – What does it mean and are we getting it right?- Georgina Shiplee 12th September, 2016
- What is a Competitive Advantage?- My Accounting Course