A meeting was organized by Fanar platform (one of the initiatives of the General Authority for Small and Medium Enterprises) in cooperation with Asharqia Chamber on Wednesday evening (July 25, 2018) under the title of "feasibility studies and competitive advantage."
The meeting was attended by a number of young men and women entrepreneurs.
Professor of Finance at King Fahd University of Petroleum and Minerals, Dr. Naji Al-Shamasi, stressed the importance of the availability of competitive advantage to ensure the success and continuity of small and medium enterprises.
He stressed the need to study the expected risks and the worst-case scenario in the initial feasibility studies.
Al-Shamasi explained that there are many views of the term "competitive advantage," as some define it as "anything that distinguishes the organization or its products from its competitors from the point of view of the end customer," or "the ability of the organization to reduce its total costs and achieve higher returns through the price compared to competitors," or "the ability to deliver superior value to the customer".
Some also define it as "all that makes the organization achieve 'economic profits' higher than the profit rate of competitors in the same industry."
He explained that economic profit is to achieve profits while covering the costs as well as the capital costs.
Al-Shamsi said that the achievement of this advantage is through the application of some or all strategies of competitive advantage, which revolve around three strategies "cost, excellence, and focus."
To be more specific, the advantage that comes from the "cost", which means providing a commodity with a reasonable "value" at an appropriate price, and this is done only by the lower costs that affect the price of the finished product.
It could come from "excellence" that means offering a product of higher value than competitors.
Or it could come from "focus", which is offering the product to a small target group.
There may be three, two, or one strategies that applied to the products.
He explained that the return is not an absolute advantage, but an advantage if it is superior to or equivalent to what the competitors have achieved.
He added that building competitive advantage requires time; it should start from customer's knowledge, competitors' knowledge, market research, and risk reading.
The company may start with a competitive advantage, but over time this feature may be lost and it may have certain problems.
He pointed out that the competitive advantage and its continuation depends on the internal structure of the organization and the competitive environment. The internal construction means the working environment, employment, and the right employees.
As for the competitive environment that creates the advantage, Al-Shamasi reviewed (Porter's model), the five influential forces in competition as they are as follow: threat of new entrants, threat of substitutes, bargaining power of customers, bargaining power of suppliers, and industry rivalry.
He pointed out that any investor that is looking to be a market entry without obstacles, and seeks to be easier. Though, who does not have a competitive advantage and the geographical space in which he is protected does not have to enter the market.
He pointed out that customers and suppliers might impose an opinion on the seller, especially if the availability of the alternative, the impact on the competitive advantage, and the intensity of competition remain influential in any case.
He said that the (feasibility study) revolves around three components (market study, outlook, and risk).
The learner should keep in mind the possibility of changes in inputs, price volatility and the emergence of risk, and should ask whether the project will remain profitable in the short and medium term.
Successful projects are self-sustaining in terms of renewed inputs and changing circumstances, especially since fixed costs at the beginning of any study will become at variable costs in the future.
The worst-case scenario must be put in place to ensure that the competitive advantage is maintained.
