Every truck on the street can see the same leaderboard. Only a few have a reason customers can't get somewhere else. Which one is yours: the cheap truck, or the different truck?
Learning objectives. After this week you can (1) choose between cost leadership and differentiation; (2) run a SWOT analysis; and (3) explain barriers to entry and market share.
Remember this: strategy is choosing what you will not do.
1) Competitive advantage: two ways to win
A competitive advantage lets a firm outperform its rivals. It is sustainable when rivals find it hard to copy. Cost leadership wins by being the lowest-cost producer and pricing low. Differentiation wins with something unique customers value, which supports a premium price. Your margin is a fingerprint of which one you are running:
Gross Margin = (Price − Unit Cost) ÷ Price × 100
A burger at $8.50 with a $3.20 unit cost: 5.30 ÷ 8.50 ≈ 62.4%. The same burger at $7.50: 4.30 ÷ 7.50 ≈ 57.3%. A cost leader lives on thinner margins and more volume; a differentiator needs the fatter margin to pay for being special.
2) SWOT analysis
SWOT = Strengths + Weaknesses (internal) · Opportunities + Threats (external)
| Quadrant | Food-truck example |
|---|---|
| Strength (internal) | A signature recipe and loyal regulars |
| Weakness (internal) | A small crew that caps capacity |
| Opportunity (external) | A street fair announced for tomorrow |
| Threat (external) | A rival truck parking in your district |
3) Barriers to entry and market share
Barriers to entry keep new rivals out: high startup costs, strong brands, patents, and economies of scale (lower cost per unit as volume rises). Low barriers let rivals pour in and compete profits away. Growth strategies include new items, new locations and franchising, expanding the brand through independent operators.
Market Share = Your Sales ÷ Total Market Sales × 100
Sell $1,200 on a street where all trucks together sell $9,600 and your share is 12.5%.
Quick self-check
(a) A rival opening nearby is which SWOT quadrant? (b) Price $6.50, unit cost $2.10: gross margin? (c) Sales of $900 in a $7,200 market: market share? (Answers: a threat, external; 4.40 ÷ 6.50 ≈ 67.7%; 12.5%.)
Common mistakes
- Mixing the SWOT axes. A competitor is a threat, not a weakness.
- Getting stuck in the middle. A truck that is neither cheapest nor different wins neither crowd.
- Calling a price cut a strategy. Cost leadership is about low cost, not just a low price.
This week in the arena
Compute your main item's gross margin from your decision form, and write one item for each SWOT quadrant. Then check your rank and net worth on the leaderboard. Report which strategy your numbers say you are actually running, whichever one you meant to run.