Lecture 3 r.pdf

STRATEGIC MARKETING MK42009E - MK42025E Lecture 3: External environment and sustainable competitive advantage ASST. PROF. ISMAIL ERZURUMLU AGENDA 1. Analyzing the external environment 2. Sustainable competitive advantage 3. Creating superior value 2 Analyzing the external environment The environment...

STRATEGIC MARKETING MK42009E - MK42025E Lecture 3: External environment and sustainable competitive advantage ASST. PROF. ISMAIL ERZURUMLU AGENDA 1. Analyzing the external environment 2. Sustainable competitive advantage 3. Creating superior value 2 Analyzing the external environment The environment(s) 4 What is the most important environmental factor that might affect company “X’s” business in the next 10 years? 5 The competitive environment  What do you think are the weaknesses/risks associated with the five forces model? Lack of analyzing core competencies Static model: how about external dynamics (e.g., tech advances) Nothing about strategic alliances 6 The competitive environment Porter’s Analysis – Unattractive Industry  What do you think are the weaknesses/risks associated with the five forces model? Lack of analyzing core competencies Static model: how about external dynamics (e.g., tech advances) Nothing about strategic alliances 7 Analyze Netflix’s industry 8 Analyze Netflix’s industry 9 Sustainable competitive advantage Competitive Advantage (CA) Competitive Advantage (CA): An advantage over competitors gained by offering consumers greater value than competitors.  Think about the firm “X”: 1. Do you think firm “X” has a CA over competitors? 2. Why? Why not? 11 Roots of Competitive Advantage (CA) Meaningful Superior Value (Relative to Competitors) Distinctive Advantage Inimitable Unique Resources/ Capabilities Sustainable Competitive Advantage Superior Performance 12 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 valuecreating processes and positions a firm may hold are non-duplicable and inimitable when a firm possesses a SCA. To create a SCA, a strategy needs to be valued by the customers and supported by assets and competencies that are not easily copied by competitors. 13 Resources and capabilities (1) Intangible assets Intellectual Property: Patents, trademarks, or creative work products, typically with legal control of their use. Competency: Possessing specialized skills that differentiate a firm from its competitors. Brand: Having a powerful image and reputation with customers. Customer relationships: Reach, interaction, insight and authority. 14 Resources and capabilities (2) Tangible assets Value Chain Position: Occupying a uniquely advantaged position within the chain of suppliers, manufacturers, and consumers. Market Position: Owning a strong relative position versus competitors. Portal: Controlling a gateway through which others must pass to access information, products, or services. 15 Resources and capabilities (3) Network and information Third-Party Relationships: Having unique relationships with key partners such as suppliers or current producers. User Community: Having a set of people who view themselves as part of a larger group defined by its relationship to your product. Market Window: Having superior visibility into marketplace activity. Technical Know-How: Possessing deep, often proprietary, technical knowledge in an area of importance to customers. Software and Systems: Owning internally developed computer programs and databases with potential external value. 16 Creating superior value Roots of Competitive Advantage (CA) Meaningful Superior Value (Relative to Competitors) Distinctive Advantage Inimitable Unique Resources/ Capabilities Sustainable Competitive Advantage Superior Performance Competitive Advantage (CA): An advantage over competitors gained by offering consumers greater value than competitors. 18 Definitions of value A BASIC DEFINITION Perceived Value = Customer Benefits Customer Costs A BETTER DEFINITION Customer Value = (1-Perceived Risks)*(Perceived Benefits – Perceived Lifecycle Costs) Note: Perceived Risks measured based on 0-1 scale 19 Costs across the lifecycle Cost Example of firm lowering cost Price paid Amazon.com lowers purchase price with the online purchase of books. Acquisition costs Car dealers use lease deals to reduce acquisition costs. Usage costs Easier packaging reduce the cost of consuming a product. Maintenance costs Siemens lowers the cost of repair through modular product design. Ownership costs Online banking reduces the cost of using a bank account. Disposal costs Darty reduces disposal costs by taking your old white goods. 20 Customer benefits Performance benefits: Function, innovation, design, fashion, style Price benefits: Best price for reliable quality Relational benefits: Service excellence Once these benefit priorities are understood, other customer characteristics can be used to segment the market 21 Three value positions 22 Value superiority Superiority on 1 value vector and parity on other 2 vectors Points of parity = Measures up to other offerings Point of difference = Unique and relevant features and/or benefits  How do you measure these value dimensions? 23 Increase Value by Changing the Competitive Profile Value Leadership 24 25 26 REDUCE  ? ELIMINATE  ? CREATE  ? NETFLIX RAISE  ? 27   REDUCE Complexity of fees Consumption costs ELIMINATE   NETFLIX Physical renting of movies Old supply chains      CREATE Binge viewing New offerings (other revenue streams) New consumption setting RAISE Cash flow predictability Brand profile 28 Roots of Competitive Advantage (CA) Meaningful Superior Value (Relative to Competitors) Distinctive Advantage Inimitable Unique Resources/ Capabilities Sustainable Competitive Advantage Superior Performance Competitive Advantage (CA): An advantage over competitors gained by offering consumers greater value than competitors. 29 Bringing it all together 2249 stores in 96 30 ZARA’s SCA https://blog.celect.com/markdown-optimization-early-in-the-season 31