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Below you will find excerpts from a memo to farmers and ranchers in Wyoming, from the agricultural
extension service in Wyoming. Although the author does not use the term “elasticity” in the document,
much of his advice is aimed at changing the elasticity of demand of a farm or ranch product. Analyze
this memo in light of what you have learned about elasticity. No more than one page. (Note: there is a
lot here; you do not have to identify an exhaustive list of elasticity references).
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Overview
A competitive advantage is an advantage gained over competitors by offering customers greater value,
either through lower prices or by providing additional benefits and service that justify similar, or
possibly higher, prices. For growers and producers involved in niche marketing, finding and nurturing a
competitive advantage can mean increased profit and a venture that is sustainable and successful over
the long term. This fact sheet looks at what defines competitive advantage and discusses strategies to
consider when building a competitive advantage, as well as ways to assess the competitive advantage
of a venture.
The Essence of Competitive Advantage
To begin, it may be helpful to take a more in-depth look at what it means to have a competitive
advantage: an edge over the competition. Essentially a competitive advantage answers the question,
“Why should the customer purchase from this operation rather than the competition?” For some
ventures, particularly those in markets where the products or services are less differentiated, answering
this question can be difficult. A key point to understand is that a venture that has customers has
customers for a reason. Successfully growing a business is often dependent upon a strong competitive
edge that gradually builds a core of loyal customers, which can be expanded over time.
Producers and suppliers familiar with farming and ranching may know that successful ventures in the
agriculture industry have typically operated in a commoditized, price-driven market, where all parties
produce essentially the same product. Such conditions imply that the ultimate “winners” are the most
cost-efficient producers, meaning that agricultural producers have historically relied on strategies that
focused on lower costs and higher volumes (i.e. a bushel of hard red winter wheat is assumed to be of
similar quality across the entire high plains region, meaning each bushel is assumed to be of the same
value; so there is an incentive for producers to keep prices low and volume high).
With the advent of product differentiation and niche and direct marketing, that reality has changed,
and now there are niche markets in which both individual and wholesale buyers are looking for
products with very specific characteristics or special services. These characteristics often use strategies
that don’t focus on costs and volumes exclusively; rather the product or service may be of premium
quality, be differentiated from other products and services available in the market (such as organic,
natural, or humane production), or have a value-added component (i.e. flavored meats, pre-washed
salad mixes, etc.).
Successful ventures perform a combination of business activities well, including marketing, production,
distribution, finance, customer service, and/or other activities important to the enterprise. However, a
competitive advantage is often a single key element that gives an edge to a business beyond what the competition has or does.
Ten Reasons Businesses Succeed
1. The experience and skills of the top managers. Over half of business failures are directly related to
managerial incompetence.
2. Energy, persistence and resourcefulness (the will to make the business succeed) of the top
managers. Many business owners have failed or come close several times before their “instant”
success. Don’t give up.
3. A product that is at least a cut above the competition and service that doesn’t get in the way of
people buying. There must be a compelling reason to buy; the product is great, the people love to
provide service, the buying experience is easy and fun, etc.
4. The ability to create a “buzz” around the product with aggressive and strategic marketing. Make
scarce marketing resources count. Do as much homework about your customers and their choices as
you can before investing your marketing dollars.
5. Deal-making skills to sell the product at the highest possible price given your market. It comes down
to your customers’ perception of the value of your product and sometimes the power of your
personality.
6. The ability to keep developing new products to retain and build a customer base. Consider gradual
product development based on improvements to the current product line and sold to the current
customer base.
7. Deal-making skills to work with resource suppliers to keep costs low. Keeping costs lower than
competitors’ and continuing to look for cost reductions even when the business is profitable is key.
8. The maturity to treat employees, suppliers and partners fairly and respectfully. Trust and respect
result in productivity increases in ways that may be difficult to see and quantify.
9. Superior location and/or promotion creating a connection between your product and where it can be
obtained. Studies have shown it can take seeing your product or name seven times before a customer
is ready to buy.
10. A steady source of business during both good economic times and downturns. Over the long term,
develop a product mix that will include winners during good economic times and other winners when
times are tough.
Mastery of that single key element often provides marketers with a distinct niche in the marketplace
and may lead to the creation of a competitive advantage that serves to establish or preserve success.
To be successful in this environment, a manager needs to identify those activities at which the
management and the venture excel, not just activities in which they perform equally well with the
competition.
Potential Strategies for Differentiation
The following strategies may be helpful in differentiating a product or service from those of the
competition. It is important to keep in mind that a venture’s most effective differentiation-the one that
will bring the venture the most success-will likely come from just one or two strategies.
Product Features and Benefits
What makes the product unique and desired? Consider product characteristics such as style, handling,
taste, quality ingredients, comfort, production methods (such as natural or organic), certification and
so on. Are the product characteristics significantly different from those of currently available products?
Can the venture provide these features or benefits effectively?
Location(s)
What about the venture’s location is a draw to customers? The office or store location is often a very
important factor, particularly for ventures selling directly to the public. Location should be chosen with
care, preferably in an area near customer traffic. For example, in a farmer’s market setting, is the
booth located in a visible, convenient, and accessible place? Being tied to an existing location will
directly influence other decisions, such as marketing, product distribution (such as mail order/Internet
versus roadside stand), and even product selection. If this is the case, would it be possible for the
venture to partner with someone who has a better location, if the one provided is not as attractive?
Staff
Consider the factors which ensure that front and managerial staff produce a good product and provide
a positive customer experience. Does the venture’s personnel follow these factors? Do they act
professionally? Do they have expertise with the product, on which customers can rely?
Operating Procedures
What policies, processes, and standards could be employed to smooth operations, create value, and
offer a positive customer experience?
Price
What fundamental cost advantage does the venture have which would justify permanently low prices?
Most ventures operating in the same industry in a location will tend to have pretty much the same cost
structure, meaning that when one competitor cuts price, others usually follow, thus erasing whatever
advantage the first competitor gained by reducing prices. Ways to achieve a fundamental cost
advantage might be through lower overhead or shipping costs (perhaps through geographic closeness
to markets), cheaper labor, and/or low-priced raw materials (perhaps through long-term purchase agreements).
Customer Incentive Programs
Does the venture employ programs to attract new and repeat customers through efforts such as
giveaways, coupons, sales, promotions, and/or volume discounts?
Guarantees and Warranties
If the venture is conveying to customers that it provides a quality product, is that perception reinforced
with guarantees and warranties?
Brand Name Recognition
A carefully conceived and executed marketing plan with a focus on the customer is a major
contribution to business success. A good marketing strategy can be enough to differentiate one
business from the rest, all other things being equal. Brand name recognition is reliant upon a good
marketing strategy and a consistent, reliable product and venture. Ventures who do not have the
resources available to market themselves as their own brand may want to consider joining an alliance
or cooperative to market their product under a recognizable brand name.
Goodwill
Is the business venture recognized within the community as a contributor and a valuable member?
Value-Added Products/Services
Does the venture offer a further service or more developed product? These value-added aspects may
often be free with the purchase of a product, such as free installation or delivery.
Extended Growing/Operating Season
Is the venture’s product available before or after competitors’ products? For instance, with sweet corn,
is it the first available of the season? Soils, Buildings, Location, and Landscape Do the physical facilities
and resources of the venture contribute to the quality of what is being produced and sold?
Water, Access to Irrigation, and Wetlands
Are there sufficient water resources available to produce a product which might not typically be
produced in the region? Is it possible to differentiate the venture to consumers by performing good
stewardship of the venture’s water resources?
Weather
Is the weather conducive to producing and selling the product or service? For instance, common
weather resources are wind, rain, and sun. While in a small geographic area these same resources
would be available to all competitors, a venture that is trying to compete in a larger geographic area
may face competition from producers located in an entirely different region, who are exposed to
different weather resources.
Plants and Animals
If the venture is agritourism-based, then what wildlife can be supported? For example, can the
agritourism venture involve bird watching, or is livestock available for a petting zoo or for rides? For
more traditional operations, can the venture’s location support the plants and animals that are intended
for use? Can the venture offer a unique heirloom variety or exotic breed with potential benefits?
Organization and Alliances
Does the venture have unique alliances or sources of supply? Some ventures are able to pool resources
to provide a unique offering, such as through a cooperative.
Customer Experience
Providing customers with additional information about the farm/ranch is a way for clients to connect to
the physical operation. This connection can be strengthened through identifying with the
farmer/rancher or visiting the farm/ranch (or the website and making a connection there), as well as
through educational resources such as recipes and information about the history of and people
associated with the farm or ranch (the “farm/ranch story”).
Quality
With all of the above potential sources of competitive advantage, quality is an underlying factor.
Successful ventures offer consistent quality, so an important consideration for any venture is how
quality is going to be perceived and measured. In some cases quality may be related to value-added
strategies, such as obtaining third party certification for organics, kosher production, etc. In other
cases, quality may be related to the fact that the product being offered is of a higher physical quality
than the competitor’s product, or from providing excellent customer service.
Competitive Advantage Evaluation Process
When a business is just starting out, it may be worthwhile to perform a comprehensive evaluation of
the business’ goals and how it might fit into the market  Evaluate Resources
The basis for a competitive advantage often lies in the resources and abilities that are already
available, even though the resources may not initially be recognized. Begin by taking a critical
look at the existing resources and product/service offerings. What does the venture have that could be
used as an advantage? Reading through the potential options for competitive advantage above, which
of these resources are already available and which does the venture need to obtain in order to focus
one or more of the strategies?
Clarify Goals
Has a clear idea of what the venture seeks to accomplish been established? Businesses with specific
and achievable goals tend to have better and more consistent growth. Challenging, but realistic goals
should be written out to help clarify what the business will do for itself and its customers in the future.
These goals will become benchmarks for success and will help maintain focus among all involved
parties.
Define Customers
Determining the products and services customers want and cannot get from the competition is a first
step toward defining the business’ potential customers. Once the needs and wants of the potential
customers have been established, the characteristics of those customers can be examined in an effort
to identify commonalities. For instance, the development of salad mixes came from the realization that
for convenience, some consumers needed a pre – washed and mixed salad alternative, rather than
bunches of greens that needed to rinsed and spin-dried. When developing a hypothesis about what
potential customers will buy, speaking to potential customers will provide an understanding of their
needs. This may help the venture to learn about what features customers need and what they will pay
for, and provides an opportunity to ask them for additional suggestions.
Examine Competitors
With an understanding of what customers want and an idea of how this can be provided, it is important
to take a look at other ventures that might be targeting the same market. First, look at the direct
competition. For example, a venture selling fresh produce in a farmers’ market would have direct
competition from other vendors at the market, while the indirect competitor would be grocery stores in
the same area. Once the competition has been identified, compare the strengths and weaknesses of
the competition to the strengths and weaknesses of the venture. This will
provide more insight as to where the venture’s competitive advantage lies

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