Assessing competitive advantage
George S. Day and Robin Wensley suggest that there are two distinct approaches to assess the competitive position of the business. One starts with the market and is customer-focused and the other is primarily competitor-centered. Competitor-centered assessments are based on direct management comparison with a few target competitors. These businesses follow the competitor’s costs closely and quickly match their marketing initiatives. Customer-focused assessments start with detailed analyses of customer benefits in order to identify the actions needed to improve performance. These approaches are found in service-intensive industries. Customer-focused approaches have the advantage of examining the full range of competitive choices, but lack an obvious connection to activities. The positional advantage requires that the business set up barriers that make imitation difficult. These barriers to imitation are disappearing with a time; in order to sustain the positional advantage firm must continue investing. The creation and sustenance of a competitive advantage are the outcome of a long-run feedback or cyclical process (see figure 1.1). Sources of advantage
* superior skills
* superior resources
* superior customer value
* lower relative costs
* market share
Investment of profits to sustain advantage
Source: ‘Assessing Advantage: A Framework for diagnosing competitive superiority’, George S.Day, Robin Wensley, Journal of Marketing, April 1988 Sources of advantage represent the ability of the company to perform better and more than its competitors. The positional advantages can be created through lower relative costs or differentiation. Lower relative costs position requires performance of most activities at lower costs than competitors while still offering a parity product. Differentiation can be achieved by providing superior service, using strong brand name, offering innovative features, superior product quality. However, the customer must be willing to pay extra price for these value added activities. The popular indicators of competitive advantage are market share and profitability. Finally, to sustain the competitive advantage firms must invest their profits. Positioning
According to Penny M. Simpson effective positioning means determine what consumers currently think about the product, especially in relation to competing products, what the marketers wants consumer to think about the product and, which positioning strategy will elevate the consumers’ current product image to the desired product image. A book by Al Ries and Jack Trout suggests that positioning begins with a product positioning in the mind of customer and that marketers are involved in a battle for the minds of customers. It is very difficult to change consumer’s opinion about the product once it is form. Reis and Trout propose that the easiest way of getting into someone’s mind is to be first. Even if the company is not the first in this area, it can still position its product as first in the minds of customer. When there is a clear market leader in the mind of customer, it can be nearly impossible to replace the leader, especially in the short-run. David Jobber in book ‘Principles and Practice of Marketing’ presents the successful positioning framework, which relies on four factors: 1. Clarity
The positioning idea must be clear in terms of both target market and differential advantage. 2. Consistency
The consistency of the message is required for successful positioning. The message should not change during the years. 3. Credibility
The differential advantage that is chosen must be credible in the minds of target customers. 4. Competitiveness
The differential advantage should have a competitive edge.
Consumer market segmentation
The market can be divided by...
References: 3. Al Ries and Jack Trout, Positioning: The Battle for Your Mind (New York: McGraw-Hill, 1981).
4. Penny M.Simpson, Marketing Best Practices, chapter 7, 2000, The Dryden Press
6. Svend Hollensen, ‘Marketing Planning’, McGraw-Hill Companies, 2006
12. Scott Edgett, Stephen Parkinson, ‘Marketing of service industries- A review’, Service Industries Journal, 1993
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