Value Creation: Sustainable Competitive Advantage

Transcription

1 Value Creation: Sustainable Competitive Advantage If you're competing on price, you'll never achieve maximum profitability. Instead, everyone's job must become value creation. -Jeff Thull, President & CEO of Prime Resource Group Never follow the crowd. -Bernard M. Baruch, stock-market speculator & political consultant MKTG523 Spring 2012 Harmancioglu 2 1

2 Roots of Competitive Advantage (CA) Distinctive Advantage Meaningful Superior Value (Relative to Competitors) Unique Inimitable Resources/ Capabilities Sustainable Competitive Advantage Superior Performance Competitive Advantage (CA): An advantage over competitors gained by offering consumers greater value than competitors. MKTG523 Spring 2012 Harmancioglu 3 What is CA? What is SCA? A CA is a position a firm attains that lead to above normal profits or a superior financial performance. Sustainable CA (SCA) is an advantage that enables business to survive against its competition over a long period of time. A key difference between CA and SCA is that the processes and positions a firm may hold are nonduplicable and inimitable when a firm possesses a SCA. MKTG523 Spring 2012 Harmancioglu 4 2

3 How can SCA be attained? The processes and positions that engender CA is not necessarily non-duplicable or inimitable. It is possible for some companies to, temporarily, make profits without SCA. A firm possesses a SCA when it has value creating processes and positions that cannot be duplicated or imitated by other firms. To create an SCA, a strategy needs to be valued by the customers and supported by assets and competencies that are not easily copied by competitors. MKTG523 Spring 2012 Harmancioglu 5 Marks & Spencer s CA Physical/ Tangible Intangible Human/Organizational Resources & Capabilities Freehold locations Brand reputation Employee loyalty Supplier Chain Managerial judgment Competitive Advantage in UK 1% occupancy costs versus 3% to 9% industry average Customer recognition with minimal advertising No promotional sales Lower labor turnover 8.7% labor costs versus 10% to 20% industry average Lower costs and higher quality of goods sold Fewer layers of hierarchy MKTG523 Spring 2012 Harmancioglu 6 3

4 Resources and Capabilities Traditional Intangible Assets Intellectual Property: Patents, trademarks, or creative work products, typically with legal control of their use. Dolby Laboratories created industry standard signal-processing technology that improves sound quality, and enables multi-channel surround sound Competency: Possessing specialized skills that differentiate a firm from its competitors. Capital One has leading-edge capabilities for consumer micro-segmentation and mass customization ti of credit card offers Brand: Having a powerful image and reputation with customers. Virgin has created a powerful brand that spans diverse products such as airline travel and wireless MKTG523 Spring 2012 Harmancioglu 7 Resources and Capabilities Customer Relationships Reach: Possessing the ability to touch a large number of customers McDonald s has 48 million customer visits per day Interaction: Having deep or frequent contact with customers. Wal-Mart customers visit its Supercenters two times more per month than they visit traditional discount stores Insight: Possessing detailed knowledge about customers and their business problems. G.E.Plastics has deep expertise in automobile component design issues Authority: Having the reputation as an expert in a given field. UPS is viewed by many as an expert in the fields of shipping and logistics MKTG523 Spring 2012 Harmancioglu 8 4

5 Resources and Capabilities Strategic Real Estate Value Chain Position: Occupying a uniquely advantaged position within the chain of suppliers, manufacturers, and consumers Dell occupies a valuable position between computer manufacturers and end users of equipment Market Position: Owning a strong relative position versus competitors Intel Corporation became the dominant supplier of microprocessors for PCs, and was known for aggressive tactics in defense of its market position, esp. against AMD and Microsoft for control over the direction of the PC industry. Portal: Controlling a gateway through which others must pass to access information, products, or services Gemstar-TV Guide International developed an interactive program guide for TV that dominates its market and currently serves 15 million homes MKTG523 Spring 2012 Harmancioglu 9 Resources and Capabilities Networks Third-Party Relationships: Having unique relationships with key partners such as suppliers or current producers Oracle has a uniquely broad set of horizontal and vertical application development partners User Community: Having a set of people who view themselves as part of a larger group defined by its relationship to your product Harley Davidson has an active owners group of 650, riders and enthusiasts MKTG523 Spring 2012 Harmancioglu 10 5

6 Resources and Capabilities Information Market Window: Having superior visibility into marketplace activity Apple has visibility into market dynamics; esp. preferences of the youth. Technical Know-How: Possessing deep, often proprietary, technical knowledge in an area of importance to customers IBM is a leading expert on the implementation of SAP software Software and Systems: Owning internally developed computer programs and databases with potential external value American Airlines built Sabre, the leading reservation and booking system in the airline industry, from in-house reservation management tools MKTG523 Spring 2012 Harmancioglu 11 Value Creation it is the prospect of providing a customer with value that gives the corporation purpose, and it is the satisfaction of the customer s s requirements that gives it results. (Peter Drucker 1954, The Practice of Management) 6

7 Understanding Value What is customer value? Customer s perception of the balance between the quality of goods and services that a firm provides and the cost of acquiring the product/service. Customer Value = (1-Perceived Risks)*(Perceived Benefits Perceived Lifecycle Costs) Note: Perceived Risks measured based on 0-1 scale MKTG523 Spring 2012 Harmancioglu 13 Customer Costs Across the Lifecycle Cost Price paid Acquisition costs Usage costs Maintenance costs Ownership costs Disposal costs Example of Firm lowing cost Amazon.com lowers purchase price with the online purchase of books Acıbadem reduces costs with an electronic patient reservation system Sealed Air reduces packaging labor costs with AirCap Siemens lowers the cost of repair through modular product design Citibank Turkey works with customers to create affordable loans and ownership Profilo reduces disposal costs by allowing trade-ins. MKTG523 Spring 2012 Harmancioglu 14 7

8 Customer Benefits Performance benefits: Function, innovation, design, fashion, style Price benefits: Best price for reliable quality Relational benefits: Service excellence, tailored and integrated offerings/solutions Intangible meanings linked to tangible qualities: these benefits can become associated with individual brands and the overall firm Once these benefit priorities are understood, other customer characteristics can be used to segment the market. MKTG523 Spring 2012 Harmancioglu 15 Customer Value Means-end chain analysis provides insights into consumer s value priorities and drivers. Price Perceived Benefits Perceived Costs MKTG523 Spring 2012 Harmancioglu 16 8

9 Means-End Chain A model that seeks to explain how products or services, as means, are linked to ends, which are a person s values. Values: enduring beliefs that specific modes of conduct or endstates of existence are personally or socially preferable to opposite or converse modes of conduct or end-state of existence. Help us understand how values (general) guide behavior like consumer choice (specific). Products Benefits Personal Goals Attributes Functional Consequences Psycho-social Consequences Values What does it do? How does it make me What specific feel about myself in function or problem is relation to others? addressed? MKTG523 Spring 2012 Harmancioglu 17 Means-End Chain People find it difficult to identify functional and psychosocial consequences, so we may not be able to derive a true means-end chain. An alternative pseudo-chain that is easier to elicit: First, have respondent list attributes of the product. Then, for each attribute, ask the respondent first why the attribute is important, then why what they just responded is important. Follow this chain as far as the respondent will take it, probing them for deeper levels of meaning. MKTG523 Spring 2012 Harmancioglu 18 9

10 Means-End Chain Examples Attributes Functional Consequences Psycho-social Consequences Values Gillette Fusion Lubrication strip Smooth shave Comfortable Relaxed Five blades No five o clock shadow Well groomed Socially acceptable Attractive Popular By working backwards from goals and values, we can: Understand what customers want but can t get from products they purchase. Evaluate if the product attributes are relevant to customers. MKTG523 Spring 2012 Harmancioglu 19 Three Firm Value Positions MKTG523 Spring 2012 Harmancioglu 20 10

11 What Value Leadership Requires: Superiority on 1 value vector and parity on other 2 vectors Points of parity = Measures up to other offerings P i t f diff U i d l t f t d/ b fit Point of difference = Unique and relevant features and/or benefits MKTG523 Spring 2012 Harmancioglu 21 What Value Leadership Requires: Three reinforcing elements in the customer value proposition MKTG523 Spring 2012 Harmancioglu 22 11

12 Increase Value by Changing the Competitive Profile Value Leadership MKTG523 Spring 2012 Harmancioglu 23 12

13 Value Leadership & Business Model Align the business model to make the value proposition possible and sustainable The value proposition is the position of advantage The business model is the source of that advantage MKTG523 Spring 2012 Harmancioglu 25 Let s look at ZARA MKTG523 Spring 2012 Harmancioglu 26 13

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