How to develop competitive advantage

1. Developing Competitive
Advantage and Strategic
Focus
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Prof. Aparna Kanchan

2. 2
Step 1-
Collecting and
Analyzing Marketing
Information

3.  Analysis Alone Is Not a Solution
 Data Is Not the Same as Information
 Data – a collection of numbers or facts that have the potential
to provide information
 Information – data that have been transformed or combined
with other data in a manner that makes them useful to decision
makers
 The Benefits of Analysis Must Outweigh the Costs
 Conducting a Situation Analysis is a Challenging
Exercise
 Should provide a complete picture of three key environments:
Internal, Customer, and External
Conducting a Situation Analysis
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4. Internal, Customer, and External
Environments
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5. Of the three major environments in a
situation analysis (internal, customer,
external), which do you think is the
most important in a general sense?
Why? What are some situations that
would make one environment more
important than the others?
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6.  Review of Current Objectives, Strategy and
Performance
 An important input to later stages in the planning process
 Poor or declining performance must be the result of:
 Goals or objectives that are inconsistent with the customer or
external environments
 Flawed marketing strategy
 Poor implementation
 Changes in the customer or external environments that are beyond
the control of the firm
The Internal Environment
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7.  Availability of Resources
 Includes a review of financial, human, and experience
resources, as well as resources from key relationships
 Financial resources tend to get most attention
 Organizational Culture and Structure
 Problems can arise when marketing does not hold a prominent
position in the organizational hierarchy
 Culture and structure are relatively stable but can be affected
by mergers
The Internal Environment
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8.  Who are our Current and Potential Customers?
 What do Customers do with our Products?
 Where do Customers Purchase our Products?
 When do Customers Purchase our Products?
 Why (and How) do Customers Select our Products?
 Why do Potential Customers not Purchase our
Products?
The Customer Environment
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9. Understanding the motivations of a firm’s
noncustomers is often just as important
as understanding its customers. Look
again at the reasons why an individual
would not purchase a firm’s products.
How can a firm reach out to
noncustomers and successfully convert
them to customers?
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10.  Competition
 Economic Growth and Stability
 Political Trends
 Legal and Regulatory Issues
 Technological Advancements
 Sociocultural Trends
The External Environment
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11.  Brand Competitors
 Market products with similar features and benefits to the same
customers at similar prices
 Product Competitors
 Compete in the same product class, but with products that are
different in features, benefits, and price
 Generic Competitors
 Market very different products that solve the same problem or
satisfy the same basic customer need
 Total Budget Competitors
 Compete for the limited financial resources of the same
customers
The Competitive Environment
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12. Major Types of Competition
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13.  Identification
 Identify all current and potential competitors
 Characteristics
 Assess key competitors’ size, strategy, profitability, markets,
etc.
 Assessment
 Assess key competitors’ strengths and weaknesses
 Capabilities
 Focus the analysis on competitors’ marketing capabilities
 Response
 Estimate competitors’ most likely strategies and responses
under different environmental situations
Stages of Competitive Analysis
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14.  Economic change is inevitable and has a profound
impact on marketing strategy.
 General Economic Conditions
 Inflation, employment, income, interest rates, taxes, trade
restrictions, tariffs, business cycle
 Consumer Issues
 Willingness to spend, confidence, spending patterns
Economic Growth and Stability
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15.  The views of elected officials can affect marketing
strategy.
 Example hot-button issues: taxes, Government subsidies &
incentives, labor laws & employment practices, Digital policies
and internet Regulations, Consumer Protection law, FDI norms
etc.
 Lobbying is vital to marketing strategy in highly regulated
industries.
 Firms must abide by the law, but many laws are
vague and difficult to enforce.
 Example key issues: court decisions, corporate governance,
trade agreements
Political, Legal, and Regulatory Issues
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16.  Technology refers to the processes used to create
“things” considered to be new.
 Front-stage Technology
 Advances that are noticeable to customers…what customers
think of when they think of technological advancements
 Examples: smartphones, GPS, microwave ovens
 Backstage Technology
 Advances that are not noticeable to customers…these
advances make marketing activities more efficient and
effective
 Examples: computer technology, RFID, near-field
communication
Technological Advancements
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17.  Social and cultural influences that cause changes in
attitudes, beliefs, norms, customs, and lifestyles
 Socio-cultural forces can have a profound effect on
the way customers live and buy products.
 Changes in customer demographics and values have
a considerable impact on marketing.
Sociocultural Trends
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18.  Demographic Trends
 Youthful population
 Urbanization
 Changing Family structures
 Rise of the middle class
 Gender dynamics
 Increasing Education levels
 Digital adoption
 Migration patterns
Example- Trends in the Indian
Sociocultural Environment
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19.  Lifestyle Trends
 Focus of health & Wellness
 Remote work & Flexible schedules
 Sustainable living
 Digital Entertainment & Streaming
 Online Shopping & E-commerce
 Culinary Exploration & Food trends
 Mindfulness & Mental Health
 Personal Finance Management
 Fitness Tech & Wearables
 Cultural & Heritage Revival
Example -Trends in the Indian
Sociocultural Environment
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20.  Value Trends
 Digital Connectivity
 Education & Skill Development
 Family & Relationships
 Gender equality
 Environmental consciousness
 Cultural Pride and Identity
 Wellness & Mental Health
 Diversity and Inclusion
 Personal Freedom and expression
 Technology adoption
Example -Trends in the Indian
Sociocultural Environment
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21.  Many firms have corporate affairs specialists on staff
to track emerging trends and develop strategies for
dealing with external concerns.
 Key Corporate Affairs Activities
 Corporate communication
 Government relations
 Investor relations
 Corporate philanthropy
 Corporate sustainability
 Policy analysis
The Growing Importance of Corporate
Affairs
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22.  Secondary Information Sources
 Internal data sources
 Government sources
 Book and periodical sources
 Commercial sources
 Primary Data Collection
 Direct observation
 Focus groups
 Surveys
 Experiments
Collecting Marketing Data and
Information
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23.  Incomplete or inaccurate assessment of the situation
that the data should address
 Severe information overload
 Time and expense of collecting data
 Organizing the vast amount of data and information
collected during the situation analysis
Typical Problems in Data Collection
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24. Do you think the Internet has made it
easier or more difficult to collect
marketing data and information?
Why? How might the major data
collection issues of today compare to
the issues that occurred in the pre-
Internet era?
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25. Step 2-
SWOT Analysis
A Framework for Developing
Marketing Strategy
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SWOT Analysis
 “A widely used framework for organizing and utilizing
the pieces of data and information gained from the
situation analysis…”
 Encompasses both internal and external environments
 One of the most effective tools in the analysis of
environmental data and information

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Major Benefits of SWOT
Analysis
Simplicity
Lower Costs
Flexibility
Integration and Synthesis
Collaboration

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 SWOT Matrix:
 A four-cell array used to categorize information at the conclusion
of a SWOT analysis.
 Should be based on customer perceptions, not the
perceptions of the analyst.
 Elements with the highest total ratings should have the
greatest influence in marketing strategy.
 Focus on competitive advantages by matching
strengths with opportunities.
Analysis of the SWOT Matrix

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The Elements of a SWOT
Analysis
 Strengths and Weaknesses
 Scale and Cost Economies
 Size and Financial Resources
 Intellectual, Legal, and Reputational Resources
 Opportunities and Threats
 Trends in the Competitive Environment
 Trends in the Technological Environment
 Trends in the Sociocultural Environment

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SWOT-Driven Strategic
Planning
Four issues the marketing manager must
recognize:
 (1) The assessment of strengths and weakness should look
beyond products and resources to examine processes that meet
customer needs. Offer solutions to customer problems instead of
specific products.
 (2) Achieving goals and objectives depends on transforming
strengths into capabilities by matching them with opportunities.
 (3) Weaknesses can be converted into strengths with strategic
Investment. Threats can be converted into opportunities with the
right resources.
 (4) Weaknesses that cannot be converted become limitations
which must be minimized if obvious or meaningful to customers.

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The SWOT Matrix

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Directives for a Productive
SWOT Analysis
 Stay Focused
 Search Extensively for Competitors
 Collaborate with other Functional Areas
 Examine Issues from the Customers’ Perspective
 Look for Causes, Not Characteristics
 Separate Internal Issues from External Issues

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Directives…
 Stay Focused
 It is a mistake to complete one generic SWOT
analysis for the entire organization or business unit.
 When we say SWOT analysis, we mean SWOT
analyses.
 Search Extensively for Competitors
 Information on competitors is an important aspect of a
SWOT analysis.
 Look for all four types of competition:
 Brand competitors
 Product competitors
 Generic competitors
 Total budget competitors

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Collaborate with Other
Functional Areas
Information generated from the
SWOT analysis can be shared
across functional areas.
SWOT analysis can generate
communication between managers
that ordinarily would not
communicate.
Creates and environment for creativity
and innovation.

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Examine Issues from
the Customers’ Perspective
 To do this, the analyst should ask:
 What do customers (and non-customers) believe about us as a
company?
 What do customers (and non-customers) think of our product
quality, customer service, price, overall value, convenience,
and promotional messages in comparison to our competitors?
 What is the relative importance of these issues as customers
see them?
 Taking the customers’ perspective is the cornerstone
of a well done SWOT analysis.

36. Breaking Down Managerial Clichés
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37. Look for Causes, Not
Characteristics
Causes for each issue in a SWOT analysis can
often be found in the firm’s and competitors’
resources.
Major types of resources:
-Financial -Organizational
-Intellectual -Informational
-Legal -Relational
-Human -Reputational
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38. COMMON SOURCES OF COMPETITIVE ADVANTAGE
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Relational Advantages
Brand-loyal customers
High customer-switching costs
Long-term relationships with supply chain
partners
Strategic alliance agreements
Co-marketing or co-branding agreements
Tight coordination and integration with
supply chain partners
Strong bargaining power
Legal Advantages
Patents and trademarks
Strong and beneficial contracts
Tax advantages
Zoning laws
Global trade restrictions
Government subsidies
Organizational Advantages
Abundant financial resources
Modern plant and equipment
Effective competitor and customer
intelligence systems
Culture, vision, and shared goals
Strong organizational goodwill
Human Resource Advantages
Superior management talent
Strong organizational culture
Access to skilled labor
Committed employees
World-class employee training
Product Advantages
Brand equity and brand name
Exclusive products
Superior quality or features
Production expertise
Guarantees and warranties
Outstanding customer service
Research and development
Superior product image
Pricing Advantages
Lower production costs
Economies of scale
Large-volume buying
Low-cost distribution
Bargaining power with vendors
Promotion Advantages
Company image
Large promotion budget
Superior sales force
Creativity
Extensive marketing expertise
Distribution Advantages
Efficient distribution system
Real-time inventory control
Extensive supply chain
integration
Superior information systems
Exclusive distribution outlets
Convenient locations
Strong e-commerce capabilities

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Separate Internal from
External Issues
 Failure to understand the difference between internal
and external issues is one of the major reasons for a
poorly conducted SWOT analysis.
 Socratic Advice:
 “Know thyself”
 “Know thy customer”
 “Know thy competitors”
 “Know thy environment”

40. Potential Internal Strengths
 Abundant financial resources
 Well-known brand name
 Number 1 ranking in the industry
 Economies of scale
 Proprietary technology
 Patented processes
 Lower costs (raw materials or
processes)
 Respected company/product/brand
image
 Superior management talent
 Better marketing skills
 Superior product quality
 Alliances with other firms
 Good distribution skills
 Committed employees 40
Potential Internal Weakness
 Lack of strategic direction
 Limited financial resources
 Weak spending on research and
development
 Very narrow product line
 Limited distribution
 Higher costs (raw materials or
processes)
 Out-of-date products or technology
 Internal operating problems
 Weak market image
 Poor marketing skills
 Alliances with weak firms
 Limited management skills
 Undertrained employees

41. Potential External
Opportunities
 Rapid market growth
 Complacent rival firms
 Changing customer needs/tastes
 Opening of foreign markets
 Mishap of a rival firm
 New product discoveries
 Economic boom
 Government deregulation
 New technology
 Demographic shifts
 Other firms seeking alliances
 High brand switching
 Sales decline for a substitute product
 Changing distribution methods
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Potential External Threat
 Entry of foreign competitors
 Introduction of new substitute
products
 Product life cycle in decline
 Changing customer needs/tastes
 Declining consumer confidence
 Rival firms adopting new strategies
 Increased government regulation
 Economic downturn
 New technology
 Demographic shifts
 Foreign trade barriers
 Poor performance of ally firm
 International political turmoil
 Weakening currency exchange rates

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 Competitive advantages can arise from many
external or internal sources.
 Competitive advantages refer to real differences
between competing firms.
 Three basic strategies for competitive advantage:
 (1) Operational Excellence
 (2) Product Leadership
 (3) Customer Intimacy
Leveraging Competitive
Advantages

43.  Operational Excellence Ex: Toyota Motor Corp
 Core Competencies
 Low cost Operations
 Totally dependent product supply
 Expedient Customer Service
 Effective demand Management
 Common attributes of Operationally Excellent firms
 Delivery of compelling Value through use of low prices, standardized
product offerings and convenient buying processes
 Targeting a broad heterogeneous market of price sensitive buyers
 Investing to achieve scale economies & efficiency for buyers
 Developing information system geared toward capturing and
distributing information on inventories, shipments , customer
transactions and costs in real time
 Maintaining a system to avoid waste and high reward efficiency
improvement
Core Competencies necessary for
Competitive advantage strategies
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44.  Product Leadership Ex: Apple, Tesla, Infosys
 Core Competencies
 Basic research/rapid research interpretations
 Applied research geared towards product development
 Rapid exploitation of market opportunities
 Excellent Marketing skills
 Common attributes of Operationally Excellent firms
 Focusing their marketing plans on the rapid introduction of high sophisticated
products in order to create customer loyalty
 Constant scanning the environment in search of new opportunities, then
making their own products obsolete through continuous innovation
 Targeting narrow, homogenous market segments
 Maintaining organizational cultures characterized by decentralization,
adaptability, entrepreneurship, creativity and the expectations of learning from
failure
 Having an attitude of “How can we make this work” rather than “Why cant we
make this work”
Core Competencies necessary for
Competitive advantage strategies
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45.  Customer Intimacy Ex: Amazon, Zappos, Ritz Carlton
 Core Competencies
 Exceptional skills in discovering customer needs
 Problem- solving proficiency
 Flexible product/solution customization
 A customer relationship management mindset
 A wide presence of collaborative (win-win) negotiation skills
 Common attributes of Intimate Firms
 Maintaining an intimate knowledge of customer requirements
 Consistently exceeding customer expectations by offering high quality product &
Services without an apology for charging higher priced
 Decentralizing most decision-making authority to customer contact level
 Regularly forming strategic alliances with other companies to address customers
needs in a comprehensive fashion
 Assessing all relationships with customers or alliance partners on a long term,
even lifetime basis
Core Competencies necessary for
Competitive advantage strategies
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Four major directions for strategic efforts:
 Aggressive (many internal strengths / many external
opportunities)
 Diversification (many internal strengths / many external
threats)
 Turnaround (many internal weaknesses / many
external opportunities)
 Defensive (many internal weaknesses / many external
threats)
These are the most common, but other
combinations of strengths and weaknesses are
possible.
Establishing a Strategic Focus

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Developing Marketing Goals
 Attainability
 Consistency
 Comprehensiveness
 Intangibility
Developing Marketing Objectives
 Attainability
 Continuity
 Time Frame
 Assignment of Responsibility
Moving Beyond Goals and Objectives
Developing Marketing
Goals and Objectives

48. THANK- YOU
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