Competitive strategy is essential for any company that wishes to achieve a sustainable advantage and superior long-term returns. Esteban R. Brenes and Mauricio Mena present a conceptual framework called “The Three Vertices of Competitive Strategy,” which helps organizations define and validate their strategies. This model focuses on three fundamental questions: Where to compete? How to compete? and How to execute these decisions?

Vertex I: Where should I compete?

Defining the competitive field is crucial for any strategy. This involves deciding in which industry to compete, which market segments to serve, the geographic scope of activities, and the line of products and services to offer. This choice determines the industrial analysis necessary to understand potential customers, competitors, and the competitive forces within the industry.

A notable example is Southwest Airlines (SAL), which chose to compete in short flights between nearby cities in the southwestern United States, using less congested secondary airports. This specific competitive field allowed SAL to offer limited service at low prices, meeting the needs of its target segment: business travelers.

Vertex II: How should I compete?

The generic strategy defines the general approach to addressing the company’s critical functions and activities. There are two main types of generic strategies:

• Cost leadership: Involves ensuring the delivery of products or services at the lowest cost within the competitive field. This requires identifying critical activities from a cost perspective and developing expertise in them or outsourcing them to those who can perform them more efficiently. For example, SAL standardized its aircraft fleet to facilitate maintenance and reduce costs.

• High perceived value: Focuses on creating additional value for the customer, for which they are willing to pay more than the cost of creating it. An example is Café Britt Coffee Corporation (CBCC), which developed a high-quality gourmet coffee for local consumers and tourists, transforming consumption habits and positioning itself as a leader in its segment.

Vertex III: How to execute the actions?

Competitive advantage is achieved through the effective execution of defined strategic actions. This includes:

• Structure and organization: Defining necessary functions, responsibilities, and interrelationships within the company to ensure superior execution in key functions.
• Policies, processes, and systems: Aligning strategic policies and developing excellence in critical processes. Evaluating outsourcing and designing strategic alliances when necessary.
• Strategic investments and divestments: Determining which assets to control and which to sell. This may involve acquisitions, co-investments, or divestment of non-core divisions.
• People, culture, and leadership: Attracting and retaining the right talent, developing the correct organizational culture, and having leadership aligned with strategic decisions.

At bac & asociados, we are experts in strategic transformation. We can help you define and execute an effective competitive strategy, ensuring sustainable positioning in your industry. Our personalized approach and experience across various industries in Latin America make us your strategic ally on the path to success.

If you want to transform your company and stand out in your industry, bac & asociados is ready to support you every step of the way toward a solid and sustainable strategy. We are here to help you achieve your strategic goals and ensure a competitive future.