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MF strategic marketing slides competitive advantage MF
This document discusses corporate strategy components and issues, including scope, objectives, development strategy, resource allocation, and sources of synergy. It also covers competitive advantage, defining it as creating value for customers that exceeds a firm's costs. Firms can achieve competitive advantage through cost leadership or differentiation. The value chain is discussed as analyzing where value is added across a firm's activities from raw materials to final consumers. Core competencies, which provide competitive advantage, are expertise in areas that can be applied widely and are difficult for competitors to imitate.
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MF strategic marketing slides competitive advantage MF
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- 2. Corporate Strategy Componentsand Issues Strategy components Key issues Scope, mission & intent • What business/es should the firm be in? • What customer needs, market segments and / or technologies should be focused on? • What is the firm’s enduring strategic purpose? Objectives • Performance dimensions? • Target level of performance to be achieved on each dimension? • Time frame? Development strategy • How can a firm achieve a desired level of growth over time? • Can desired growth be attained by expanding the firm’s current businesses? Or diversify into new businesses or product markets to achieve its future growth objectives? Resource allocation • Firm’s limited financial resources allocation across its businesses to produce highest returns • Of the alternative strategies that each business might pursue, which will produce the greatest returns for the money invested? Sources of synergy • What competencies, knowledge and customer based intangibles might be developed and shared across the firm’s businesses? • What operational resources, facilities or functions might the firm’s businesses share to increase their efficiency?
- 3. Competitive Advantage Competitive advantagegrows out of value a firm is able to create for its buyers that exceeds the firm's cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price. There are two basic types of competitive advantage: cost leadership and differentiation. Michael Porter, Competitive Advantage, 1985, p.3
- 4. A firm issaid to have a (sustained) competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy. (Barney, 1991 )
- 5. Core Competencies(Roots of CA) Expertise in a critical functional area or aspect of a particular business that helps provide a company’s unique competitive advantage or simply put “what a company does best”. Three tests to identify core competencies: 1. Provides potential access to wide variety of markets 2. Makes significant contribution to end user value 3. Difficult for competitors to imitate
- 6. Core Competencies Expertisein a critical functional area or aspect of a particular business that helps provide a company’s unique competitive advantage or simply put “what a company does best”.
- 7. Total Customer Satisfaction CustomerExpectations Delivering High Customer Value Value proposition Value-delivery system Measuring Satisfaction (Tools) Defining Customer Value and Satisfaction
- 8. Competitive Advantage The Natureof High Performance Business Sources of Competitive Advantage Core Competencies Value Chain
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- 10. Competitive Advantage Firms either: Confrontadversity and overcome it through innovation and application or Decline and decay as a result of self-satisfaction and complacency which dulls sensitivities and ability to recognize that change is inevitable Example, clogs to clogs in 4 generations.
- 11. Tools for BuildingCompetitive Advantage Resources are inputs into a firm’s production processes: Tangible Resources Intangible Resources Financial resources Technological resources Physical resources Innovative resources Human resources Reputation Organizational resources Capabilities are the capacity for a set of resources to perform a task or activity in an integrative manner
- 12. Competitive Advantage CoreCompetencies Bundle of skills and technologies that enables a company to provide a particular benefit to customers. (Hamel & Prahalad) Competitive Advantage A firm is said to have a (sustained) competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy. (Barney, 1991 )
- 13. Core Competencies RequireVRIS-O Value – do a firm’s resources and capabilities allow a firm to respond to its environment? Rare – how many rival firms already possess this resource/capability? Inimitable – do firms face a cost disadvantage in obtaining this resource/capability compared to firms that already have it? Non-substitutable – are there strategic alternatives? Organization – is the firm organized to exploit the full potential of its resources/capabilities?
- 14. CRITICAL FACTORS FORCOMPETITIVE ADVANTAGE COMPETITIVE ADVANTAGEVALUE RARENESS INIMITABILITY ORGANIZATIONAL CLIMATE Non-substitutable
- 15. Cost Disadvantages ofImitation Inimitability is critical for a resource/capability to become a core competence Firms trying to imitate another firm’s core competence are at a cost disadvantage relative to rivals due to Unique historical conditions Casual ambiguity Social complexity Patents
- 16. Building Blocks ofCompetitive Advantage Efficiency Innovation Quality Customer Responsiveness Lower Costs Higher Prices
- 17. Competitive Advantage viaEfficiency Manufacturing Econ of scale/Learning Flexible manufacturing Marketing Build brand loyalty Infrastructure Commitment to efficiency Human Resources Train skills/teams Performance incentives R&D Design for manufacturing Process innovation Materials mgt (Supply Chain). JIT etc.
- 18. Competitive Advantage viaQuality Manufacturing Trace defects to source Input from employees Marketing Focus on customer Customer feedback on quality Infrastructure Measure & commit to quality Human Resources Train quality (TQM) Quality incentives R&D Design for manufacturing Process & product innovation Materials mgt (supply Chain ). Help suppliers implement TQM
- 19. Competitive Advantage viaInnovation Manufacturing Design for manufacturing Inputs on process innovation Marketing Customer focus for product innovation Infrastructure Invest in R&D tools Overall project management Human Resources Hire talented innovators Incentives/opportunities for innovation R&D Cooperate with other functions in process and product innovation Materials mgt. No primary responsibility
- 20. Competitive Advantage viaCustomer Responsiveness Manufacturing Customization through flexible mfg Marketing Know the customer Customer feedback to functions Infrastructure Commit to customer responsiveness Information systems for feedback Human Resources “Customer focused” training Employee incentives and security R&D Customers in innovation process Materials mgt. Build responsive logistics systems
- 21. First developed byMcKinsey and Co. in 1960s as a tool to evaluate competition based on the view that business is a system which links raw materials (supply) with customers customers (demand) and comprising 6 basic elements or subsystems: The Value Chain Raw material Consumer or user Retail distribution Production Wholesale distribution After-sale service
- 22. Degree of competition Number of competitors Their profitability Their degree of integration Their cost structure The existence and nature of any barriers to entry Where, in the total system, value is added Analysis of each subsystem
- 23. Where is thesystem’s marketing leverage? Control of a scarce resource e.g. patent, brand name etc. The location of economic leverage Fully integrated vs. owning one subsystem. Analysis of each subsystem
- 24. WHO buys andwho consumes? Demographics, socioeconomic criteria WHAT do people buy? Variety, design, quality, performance, price WHERE do people buy? Purchase channels, direct vs. indirect selling WHEN do people buy? Seasonal, regular, irregular, associated with another activity HOW do people buy? Involvement (impulse etc.), quantity, sources Analysis of consumer or user
- 25. Where in thesystem are company’s measurable strengths and weaknesses Raw material Consumer or user Retail distribution Production Wholesale distribution After-sale service How does company compare in raw materials? • Do they have advantage in supply? • Degree of integration? How does company compare in technology? • What is their rate of product, process improvement? • How good is process efficiency? • Advantages in location of facilities? How does company compare in cost and profit? • Raw material costs? • Processing costs? • Profit? • Return on investment? • Access to capital? How does company compare in channels? • In which channels are company sales concentrated? • Do products reach point of sale faster or more efficiently? How does company compare in distributors? • Have they more, larger or more effective distributors? • Share of channel’s sales? How does company compare in economics? • Compensation of distributors ? • Distribution costs? • Service costs? How does company compare in products? • Have they greater variety, better design or quality, lower prices, superior performance? • Share of market? How does company compare in customers? • Who are core buyers; core customers? • Do these customers buy more frequently in larger quantities or more consistently? • How is company’s product used? • Who are core competitors? How does company compare in service? • Doe s company have a service advantage - type, quality, quantity?
- 26. Where in thesystem are company’s measurable strengths and weaknesses Raw material Consumer or user Retail distribution Production Wholesale distribution After-sale service How does company compare in pricing? • Do they have price advantage (price/quality relationship)? • Are they price leaders? How does company compare in economics? • Service costs? • Cost of consumer marketing?
- 27. The Value Chain Theconcept was later firmly established by Michael Porter as an important diagnostic technique in Competitive Advantage (1985). Hamel and Prahalad, and Bartlett and Ghoshal further elaborated on value improving activities.
- 28. Porter’s Value Chain FirmInfrastructure Human Resource Management Technology development(Innovation) Materials Procurement Inbound Logistics Operations Outbound Logistics Marketing &Sales Service Primary Activities Support Activities
- 29. The Value Chain Theadditional insights and work done by Senge on learning Organization led Norman and Remirez to expand the concept into one of value constellation; incorporating those activities which involve the entire organization for value improvement . These are called value enhancement Activities.
- 30. Porter’s Value Chain FirmInfrastructure Human Resource Management Technology development(Innovation) Materials Procurement Inbound Logistics Operations Outbound Logistics Marketing &Sales Service Primary Activities Organizational entrepreneurship Organizational Learning Cross functional synergy Core competence building Organizational creativity, Innovation and imagination Value Enhancement Activities Central Activities Support Activities
- 32. Learning Organization According toPeter Senge, In future it is knowledge that will determine competitive performance and the organization with the greatest capacity to learn will dominate the chosen sphere of activity.
- 33. Learning Organization A learningorganization is one skilled in acquiring, creating, transferring and retaining knowledge – as well as transforming that knowledge into improved performance or innovative products and services
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- 35. Knowledge Management According toArthur D. Little, Knowledge management could be through four integrated dimensions: • Content • Culture • Process • Define knowledge objectives, organizational core knowledge and describe future knowledge needs • Identify available knowledge • Save knowledge • Disseminate knowledge • Use knowledge
- 36. Knowledge Management • Infrastructure •Knowledge adapted to company’s needs should be: • Accessible • Flexible • Up-to-date • Strategically relevant information identified through knowledge audit.