How to Develop a Competitive Advantage in a Bakery and Confectionery
The future of the Polish economy seems uncertain. In the coming months, there may be a significant decline in GDP associated with the recession.
Depleting society will not have as much impact on the bakery's problems as the increase in energy, wages and taxes.
How can we deal with a situation that is not entirely up to us? Undoubtedly, it affects all bakeries in the industry.
If so, the best and the strongest will survive, those who will develop a competitive advantage in the new economic situation.
W-MOSZCZYNSKI-2023-4-26Developing a competitive advantage
Creating competitive advantage is the essence of management. Each activity of the company managers is usually linked to maintaining or increasing it.
The competitive advantage is very difficult to obtain. Competition is usually a combination of financial expenditure and efforts related to ingenuity and creative innovation.
The creation of competitive advantage is often linked to an increase in efficiency of production, transport or distribution.
Sometimes the competitive advantage developed involves a temporary loss of efficiency in production or sales. This is what happens when the bakery launches a new oven to bake bread.
The unit cost of baking bread increases because the cost of leasing and technical service is incurred.
Such initiatives are usually not linked to an increase in current sales efficiency but to an improvement in product quality and productivity.
The purchase of a new oven should therefore require a greater baking. This in turn is linked to the increase in demand for bread. How to increase demand?
Only by increasing competitiveness.
Areas of competitive advantage
The competitive advantage is a way by which the company raises revenue or profits, it produces a larger market share.
Competition advantages are usually developed by companies that have a well-established position in the market. Of course, companies that have just started their business are also looking for them.
But they are not seeking a constant advantage but a recipe for their actions and survival.
Looking for such a prescription in a methodical sense is slightly different from creating a lasting competitive advantage by stable companies.
There are three areas of competitive advantage.
Operating area advantage
The operational area is a mode of action commonly called organisation and management.
In simple terms, achieving an operating advantage can consist of selling its products at the lowest prices, which is much cheaper than competition.
The advantage may concern the time of delivery of bread or the conditions for receiving returns from shops.
If the products are delivered much faster than the competition, the competitive advantage will be developed.
which may be important for the choice of bread suppliers by shops. A competitive advantage in the operational area may also concern quality.
A perfect example of competitive advantage in the operational area is the standardization of quality in the McDonald's network.
Everywhere in the world you can find identical looking and very similar prices McDonald's restaurants.
The competitive advantage is that the customer is always sure that wherever he meets McDonald's restaurants, he will always be served the same way.
There will be the same products, the same decor, the same prices.
Thus, undoubtedly the repetition of products, their prices, delivery time, quality of service are areas where you can gain a competitive advantage.
Advantage in the area of customer intimacy
It takes a very long time to build a deep relationship with the customer. The customer must have full confidence in the bread supplier.
Thanks to intimacy, the customer is willing to pay more for the cake or cake for an important family ceremony because he is aware that the transaction will be subject to a lower risk.
It can be assumed that risk mitigation on the part of the consumer is the main source of higher margin on the part of the supplier.
It should be added that in some industries it is easy to develop a competitive advantage in the area of customer intimacy, including the pastry and bakery industries.
Customers who make frequent purchases are able to develop intimacy with a bakery or a supplier of cakes and gateaux.
Intimacy with the client is always easier to create when the customer and supplier combine frequent transactions with some minor risks.
Advantage in the technology area
It is the most popular area in industries related to the sale of luxury goods, high technology components and equipment and works of art.
The technological advantage is to create a kind of monopoly.
In the case of technology industries, the vendor of services or equipment has a technology that is not available to its competitors.
For luxury goods, design, fashion, or sometimes publicity counts.
This is how the art markets and in a large part of the sectors related to construction or interior design work work. The bakery and confectionery industry also has a lot to play here.
You have to look for opportunities to create a small monopoly in this industry.
Therefore, new products should be sought that will distance competition, new ways of selling or places of sale in which there is no competition.
It should be mentioned that the company,
which is working on one of the three areas of competitive advantage mentioned above must maintain a high market standard in the other two areas.
Thus, if the company is working on a new recipe for bread, it must still maintain market prices and standard of sales in shops and work on intimacy with customers.
The bakery management area can be divided into three parts: production, logistics, sales.
The sale of bread at an attractive price must not result in a decrease in the profitability of the sale.
Thus, low bread prices must follow the low cost of production and logistics. A reduction in costs must not result in a reduction in quality.
Costs can only be reduced as a result of increased efficiency.
So we can say that the fall in prices for the customer must result from an increase in efficiency of production, logistics and sales. Each company has limited resources.
The management of these resources determines the level of efficiency.
Because of its limitations, man is unable physically to achieve extremely perfect efficiency.
Each process can be improved by mathematical data science tools. The process optimization department deals with so-called.
Operational Research, in Polish called Operations Research. In this area, production structures are created, the organization of manufacturing resources,
changes in routes and the way bread is assembled in the logistics area and the corresponding sales structure is built starting with the points of sale,
on the presentation of products to the local community ending. Operational research does not require a large amount of data.
This methodology is based on the creation of mathematical models of value flow. The company's management sets a target for the organization.
Such a goal may be to maximize profit or maintain existing sales areas, expand to new market segments or reduce costs without losing sales volume.
On the basis of the objective set, the function of the target shall be created and the conditions imposed on the organisation shall be limited.
This creates optimal process configurations, which are then implemented into the organization.
Optimum configurations are those that ensure the maximization of the target set by the management.
Developing a competitive advantage in the area of technology
This is the second area after the operational area, a very important area in which the bakery can develop an economically significant competitive advantage.
The technological advantage called the advantage of availability also involves the development of a new customer need, which the customer is unable to meet in competitors.
In the case of cakes and cakes, it can be innovative or unique raw material for production. It can also be an interesting design that will appeal to customers.
In this situation customers will be able to pay significantly more for cakes and cakes, because this offer will be attractive for them.
Especially when baked goods are to be at an exclusive party. In a way, customers will have no choice, because competition will not have such design or raw materials.
In the area of baking bread, we can consider diet, health, or even medical baking.
There we can create a kind of monopoly for customers who are suffering from various kinds of ailments or those who are absorbed in high sporting performance.
Wojciech Moszczyński — graduate of the Department of Econometrics and Statistics of Nicolaus Copernicus University in Toruń; specialist in econometrics, finance, data science, and management accounting. He specializes in the optimization of production and logistics processes. He conducts research in the area of the development and application of artificial intelligence. For years he has been engaged in the popularization of machine learning and data science in business environments.
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