A Framework for Diagnosing Competitive Superiority

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George S. Day & Robin Wensley

Assessing Advantage: A Framework for Diagnosing Competitive Superiority Strategy is about seeking new edges in a market while slowing the erosion of present advantages. Effective strategy nnoves are grounded in valid and insightful monitoring of the current competitive position coupled with evidence that reveals the skiHs and resources affording the most leverage on future cost and differentiation advantages. Too often the available measures and methods do not satisfy these requirements. Only a limited set of measures may be used, depending on whether the business starts with the market and uses a customer-focused approach or alternatively adopts a competitor-centered perspective. To overcome possible myopia, the evidence of advantage should illuminate the sources of advantage as well as the manifestations of superior customer value and cost superiority, and should be based on a balance of customer and competitor perspectives.

HE notion that superior performance requires a business to gain and hold an advantage over comf)etitors is central to contemporary strategic thinking. Businesses seeking advantage are exhorted to develop distinctive competences and manage for lowest delivered cost or differentiation through superior customer value. The promised payoff is market share dominance and profitability above average for the industry. This advice is sound, but usually difficult to follow. Management first must understand the reasons for the current advantages or deficiencies of the business and the vulnerability of the advantages to copying or leap-frogging by competitors. Without a proper diagnosis, managers cannot choose the best moves to defend or enhance the current position. For many reasons the prevailing approaches to understanding competitive advantages are unlikely to yield valid and insightful diagnoses. We therefore evaluate the current approaches and methods within an organizing framework that clarifies the nature of competitive advantage. Our primary objective, however, is to use this framework to propose a process that can be used to

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ensure a thorough and balanced assessment of the reasons for the competitive position of a business. Perspectives on competitive position. Little is known about how managers decide what advantages distinguish their business and how those advantages were gained. Two distinct approaches have been identified; one starts with the market and is customer-focused and the other is primarily competitor-centered. Competitor-centered assessments are based on direct management comparisons with a few target competitors. This approach often is seen in stalemated industries where the emphasis is on "beat the competition." The key question is, "How do our capabilities and offerings compare with those of competitors?" These businesses watch costs closely, quickly match the marketing initiatives of competitors, and look for their sustainable edge in technology. Managers keep a close watch on market share and contracts won or lost to detect changes in competitive position. Customer-focused assessments start with detailed analyses of customer benefits within end-use segments and work backward from the customer to the company to identify the actions needed to improve performance. This "market back" orientation is found in service-intensive industries such as investment banking where new services are easily imitated, cost of funds is the same, and entry is easy (Bhide 1986).

George S. Day is Magna International Professor of Business Strategy, University of Toronto. Robin Wensley is Professor of Marketing, University of Warwick, UK.

Journal of Marketing Vol. 52 (April 1988), 1-20,

Assessing Advantage / 1

Relatively little attentioti is given to competitors' capabilities and performance—the emphasis is on the quality of customer relationships. Evidence of continuing customer satisfaction and loyalty is more meaningful than market share. Why should it...
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