competitive

MarketingStrategy2010ReviewMaterialsCompetitiveAdvantageIsabella

1

ExamQuestions:

-Provideadetailedanalysisofthestrategiesacompanymayemploytoachievecompetitiveadvantage

initschonmarkets.

-Provideadetailedcritiqueofthetheoriesadvancedtoexplainhowacompanymightachieve

competitiveadvantageinitschonmarkets.

-Prentadetailedanalysisofhowtheinsightsgainedfromthe“customermatrix”mayhelpmanagers

formulatestrategiesforachievingcompetitiveadvantage.

DifferentApproachestoStudyofCompetitiveStrategy

Competitivemarketingstrategyisconcernedwithdeliveringacombinationofbenefitsandpricewhichis

attractivetoconsumers,ferentapproacheswillbediscusd

below:market-ledviewandresourcesbadview.

AccordingtoDevlin(1998),competitiontakesplaceinamarket,n

thisasrtion,market-ledviewfocusontheforcesofbuyersthataffectthecompany‟sstrategiesandprofits.

Theofferingwhichisprentedtopotentialcustomersthroughthemarketistheprimaryfocusofcompetitive

ghresource-badviewofthefirmpointsoutthatresourcesandreputationofacompanyare

significantdriversofcompetitiveadvantageandhelpvaluetoanoffering,thisdoesnotalterthefactthat

lassicreasonudtosupporttothistheoryisthat

competitiontakesplacebetweencompanies‟offeringsbutnotcompaniesthemlves;inotherwords,firms

don‟tcompete,offeringsdo.

Ontheotherhand,inmanycas,togainasustainablecompetitiveadvantageatthecorporatelevelis

badoncompanies’ourcesshouldhavethefollowingfeatures:unique,takeslongtimeto

develop,mple,abrandnamethatcustomerstrustandrecognizeisa

r,itisimportanttonotethat

posssiiesalsoneedto

learnhowtoconvertresourcesintovalueperceivedbycustomer–givecustomersagoodreasontobuytheir

nbeachievedbyapplyingPorter‟sgenericstrategies:providingmore

benefitsatasimilarpricetocustomers(differentiation),deliveringcomparablebenefitsatalowerprice(cost

leadership)orfocusaspecificgroupofcustomersandbuildgoodcustomerrelationship(focus).Samsungisa

goodexamplettyearsofR&D

andproductdesignandlaunchedsuccessfulproductsaimedatupscale,nmarket

actionsaimedatdevelopingbrandimagethatcommunicateandreinforceittechnicalanddesignpower.

Overall,nomatterwhatspecificmarketingprogramscompaniestake,competitivestrategyisrelatedtothe

meansbywhichorganizationsektoachieveandsustaincompetitiveadvantage.

MarketingStrategy2010ReviewMaterialsCompetitiveAdvantageIsabella

2

IntroofPorter’sGenericStrategies

Ittheprimarydeterminantofafirm’sprofitabilityistheattractivenessoftheindustryinwhichit

operates,oughan

industrymayhavebelow-averageprofitability,afirmthatisoptimallypositionedcangeneratesuperior

returns.

Toguaranteethesuccessinamarketplace,aproducershouldcreateextravaluethatcanbettersatisfy

customer‟travalueisbroughtbyestablishingacompetitiveadvantage.

AccordingtoJobber(2004),acompetitiveadvantageistheachievementofsuperiorperformance

throughdifferentiationtoprovidesuperiorcustomervalue,orbymanagingtoachievelowestdelivered

rly,Porter(1985)statedthat„acompanycanoutperformitsrivalsonlyifitcanestablisha

delivergreatervaluetocustomersorcreatecomparablevalueatalower

costorboth‟.

Therearemainlytwomeansofcompetitiveadvantage,whencombinedwiththecompetitivescopeof

activities,whichresultinthreegenericstrategies:1)costleadership2)benefitleadership3)focus(Porter).

Thissayattemptsto…

1)Differentiation

2)Costleadership

3)Differentiationfocus

4)Costfocus

Differenceinthescopeofthetargetmarketandmarketneedsandalsothecorecompetenceofthefirm,

companiescompeteforthemi

ingtoMichaelPorter(1980,1985),afirm‟sstrengthen

ultimatelyfallintooneoftwoheadings:yingthestrengthsin

eitherabroadornarrowscope,threegenericstrategiesresult:costleadership,differentiation(building

customerperceptionsofsuperiorproductquality,designorrvice)andfocus(inwhichthebusinessavoids

directconfrontationwithitsmajorcompetitorsbyconcentratingonnarrowlydefinedmarketniches).The

ecalledgenericstrategiesbecautheyarenotfirmor

il

-Costleadership:strivingtobetheoveralllow-costproviderinindustry

-Differentiation:strivingtobuildcustomerloyaltybydifferentiatingone‟sproduct

-Costfocus:concentratingonanarrowbuyergment,outperformingrivalsonbasisonlowercost

-Differentiationfocus:offeringnichemembersaproductorrvicecustomizedtotheirneeds

Seekcompetitiveadvantageinabroadrangeor

marketofindustry

Confinedtoanarrowgment

MarketingStrategy2010ReviewMaterialsCompetitiveAdvantageIsabella

3

CostLeadership

Strategiclogicofcostleadershipisasfollows:acostleadershipfirmcreatesmorevaluethanitsrivalsby

ically,therearethreewaysbywhichafirmcan

achievecostleadership.

Firstofall,afirmthatfollowscostleadershipmayachievebenefitparitybyprovidingproductswithsame

benefitbutatalowercost(Steelintheglobalsteelindustry).Alternatively,firmscanachieve

benefitproximitybyofferingproductswithbenefitthatisnotmuchlessthancompetitorsbutatalowercost

thanitscompetitors.('scostadvantageovertraditionalpianoproducers,suchasSteinway).The

lastbutnottheleastwayistoofferaproductthatisqualitativelydifferentfromthatofitsrivals.

Firstly,firmsmayattempttoachieveahighastturnoversothatfixedcostsarespreadoveralargernumber

ly,firmscanofferhighvolumeofstandardizedandno-frills

iningthisstrategyrequiresacontinuous

rdpossiblewaytocontrol

overthesupplychaintoensurethelowcost–achievedbybulkbuyingorworkingwithvendorstokeep

mple,Dellkeepsitinventorieslowbybuildingcomputersonlywhen

orderscome.

Someofthewaysthatfirmsacquirecostadvantagesarebyimprovingprocesfficiencies,gainingunique

accesstoalargesourceoflowercostmaterials,makingoptimaloutsourcingandverticalintegrationdecisions.

Eachgenericstrategyhasitsrisk,mple,otherfirmsmaybeableto

lowertheircostsaswellinrespontoonefirm‟nologyimproves,thecompetition

maybeabletoleapfrogtheproductioncapabilities,er,the

strategyofcostbenefitsfocustoomuchonthecompetitionintheindustryandtheincreaofmarketshare

(theshareofacake)ratherthantheincreaandimprovementofthewholeindustry(thesizeofacake).It

mayleadtocostwarsmakethewholeindustrylessunprofitableandeverycompanyhardertosurvive.

Differentiation

MarketingStrategy2010ReviewMaterialsCompetitiveAdvantageIsabella

4

Adifferentiationstrategycallsforthedevelopmentofaproductorrvicethatoffersuniqueattributesthatare

valuedbycustomersantlue

addedbytheuniquenessoftheproductmayallowthefirmtochargeapremiumpriceforitandthefirmhopes

thatthehigherpriceswille

oftheproduct‟suniqueattributes,evenifsuppliersincreatheirpricesthefirmisabletopassalongthecosts

toitscustomerswhocannotfinesubstituteproductasily.

Firmsthatsucceedinadifferentiationstrategyoftenhavethefollowinginternalstrengths:

toleadingscientificrearch

skilledandcreativeproductdevelopmentteam

salesteamwiththeabilitytosuccessfullycommunicatetheperceivedstrengthedofthe

product

atereputationforqualityandinnovation

Asuccessfuldifferentiationstrategycanbebuiltonmanyfactors,includingdesign,brandimage,reputation,

technology,productfeatures,networks,thedifferentiating

elementsareapplicabletoanInternetbusiness;Chang(1997)foundthatcustomersofInternetbookstorein

Koreasawbrandasmoreimportantthatpriceastheirbuyingcriteria.

Therisksassociatedwithadifferentiationstrategyincludeimitationbycompetitorsandthechangesin

mescustomersmaynotvaluethedifferentiationcreatedbycustomersandbecome

muchpricensitiveandchooonpriceratherthanuniqueness.

Additionally,variousfirmspursuingfocusstrategiesmaybeabletoachieveevengreaterdifferentiationin

theirmarketgments.

Focus

Thefocusstrategyconcentratesonanarrowgmentandwithinthatgmentattemptstoachieveeitheracost

miisthattheneedsofthegroupcanbebetterrvedbyfocusing

singafocusstrategyoftenenjoysahighdegreeofcustomerloyalty,andthis

entrenchedloyaltydiscouragesotherfirmsfromcompetingdirectly.

Becauoftheirnarrowmarketfocus,firmspursuingafocusstrategyhavelowervolumesandthereforeless

r,firmspursuingadifferentiation-focudstrategymaybeable

topasfitsoffocus

strategyincludelowerinvestmentamount,easierentryandahigherdegreeofcustomerloyalty.

However,focusstrategylimitthecompanydevelopmentinacertainstructureandcauthelossofmany

tion,it

maybefairlyeasyforabroad-marketcostleadertoadaptitsproductinordertocompetedirectly.

StuckintheMiddle

MarketingStrategy2010ReviewMaterialsCompetitiveAdvantageIsabella

5

Inaddition,Porteralsoarguedthattheworststrategyis„stuckinthemiddle‟,neitherdifferentnorlowerin

nyinsuchpositioncannotofferreasonswhycustomersshouldchoits

tegyisimplemented

attheproductmarketlevel,calrearchontheprofit

impactofmarketingstrategyalsoindicatesthatfirmswithhighmarketsharewereoftenquiteprofitable,but

stprofitablefirmswerethowithmoderatemarketshare.

Thisphenomenoncanbeexplainedbythefactthatfirmswithhighmarketsharepurdacostleadership

strategyandthowithlowmarketshareudmarketgmentationtofocusonsmallbutprofitablemarket

niche.

-in-the-middlepositionexamplewasGeneralMotorwithitsOldsmobilecar,theoriginalcarwas

highlydifferentiated,with6-litreV8engine,rtocutcost,theenginewas

replacedwithalowerlevel,lesspowerandlessreliable,whichresultinsalesplummeted.

Critiques

Itisarguedthatgenericstrategieslackspecificity,flexibility&(1992)

questionsthenotionofbeing„caughtinthemiddle‟.Heclaimsthatthereisaviablemiddlegroundbetween

,manycompanieshaveenteredamarketasanicheplayerandgraduallyexpanded.

Contemporaryrearchhasshownevidenceoffirmspractisingsucha„hybridstrategy‟.Hambrickalso

indentifiedsuccessfulorganizationsthatadoptamixtureoflowcost&differentiationstrategy.

Inaddition,mandReneeMauborgeeintheir1999

HarvardBusinessReviewarticle„CreatingNewMarketSpace‟.Inthisarticletheydescribeda„value

innovation‟modelinwhichcompaniesmustlookoutsidetheirprentparadigmstofindnewvalue

pproachfundamentallygoesagainstPorter‟sconceptthatafirmmustfocuitheroncost

leadershiporondifferentiation.

Conclusion

Inconclusion,afirm‟srelativepositionwithinanindustryisgivenbyitschoiceofcompetitiveadvantage

(entiation)itivescopedistinguishes

betweenfirmcstrategies

areufulbecaur,italsohas

Porterinsistedthat„stuckinthemiddle‟istheworststrategythat

shouldbeavoided,Miller(1992)arguesitisquiteafeasiblemethodandrecentrearchevidenceshowsthat

the„hybridstrategy‟mayalsobringsuccesstocompanies.

OtherWaystoWinaCompetitiveAdvantage

-Becomethelow-costproducer

MarketingStrategy2010ReviewMaterialsCompetitiveAdvantageIsabella

6

-Makethebest-madeproduct

-Providecustomermorevalueforthemoney

-Providesuperiorcustomerrvice

-Providemoreconvenientlocations

-Makeamorereliable&durableproduct

CaStudy

Zara

Thedevelopmenthistoying

thecostleadershipstrategy,ZarabecametheleaderinClothesretailindustryin1999.

MostofotherretailerssuchasSwedishbrandH&Mcompletelyoutsourcetheirproductiontofactoriesaround

rast,Zaracontrolledpartsofmanufacturingincludingitsdyingandprocessing,cuttingand

vesZaraalargeamountofcontroloverproductionandthereforeenhances

efficiencyofproduction

OnereasonofZara‟regardedasa

fashionbrand,Zaraspendquitelittleondesigningnewstylesbutmainlyfollowothers,andincomparison

withotherclothingretailerswhospent3-4percentofsalesonadvertising,Zaraspentonly0.3percenton

marketingprograms.

Sony

Sonybeganllingitsfirstnetbookcomputerinthefallof2009,finallyenteringtheonlyctorofthePC

‟snetbookusthesameprocessorfoundincompetingproducts

andlikeothersimilarproducts,Sony‟r,ithasaresolutionof1,366by

768pixelsratherthanthenormal1024by600pixels,whichmeansmoreofawebsiteorapicturecanbefitted

ontothescreensothaturscanscrolllesstoemore.

Pepsi

USbadPepsiCoconductedamajorrestructuringexerciin1997-98byspinning-offitsbottlingbusiness.

Therestructuringwasaimedatachievingimprovedfocusonthecompany'scorebeverage(Pepsi-Cola).One

ofthemajorinitiativesundertakentofocusitscorebusinesswascreatingaparatecorporationknownas

PepsiBottlingGroup(PBG),inSeptember1998.

Frombottlingoperationspartofthecompanymadefurtherattemptstostrengthenitsmarketpositioninthe

sachievedthroughtheacquisitionsofSouthBeachBeverage

Company(SBBC)4inOctober2000,andQuakerOats,aleadingfoodanddrinkscompanyinDecember2000.

Bysuccessfullyadoptingthe'focus'strategysince1997,PepsiCohamergedasthecondlargestconsumer

packagedgoodscompany(intermsofrevenues)intheworld.