10/28/2013

Marketing Strategy Week 3, Class 5 & 6

Competence, Core Competence, Value Adding Process, The Value Chain, Value Proposition, Developing and Leveraging Competitive advantages
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Competences
A competence is an attribute or collection of attributes possessed by all or most of the companies in an industry. Without such attributes a business cannot enter or survive in the industry. Competences develop from resources and embody skills, technology or knowhow.
For example, in order to operate in the pharmaceuticals industry, it is necessary to possess both the ability to manufacture medicines (by using specially designed factory equipment) and, importantly, a detailed understanding of how medicines work on the human body. Every successful survivor in the industry possesses both of these areas of competence.

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Core competences
A core competence or distinctive capability is an attribute, or collection of attributes, specific to a particular organization which enables it to produce above industry average performance.
It arises from the way in which the organization has employed its competences and resources more effectively than its competitors. The result of a distinctive capability is an output that customers value more highly than those of competitors. It is based upon one or more of superior organizational knowledge, information, skills, technology, structure, relationships, networks and reputation.

Core competence arises from the unique and distinctive way that the organization builds, develops, integrates and deploys its resources and competences.
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Distinguishing core competences from general competences

Core competences are distinguished from competences in several ways: they are only possessed by those companies whose performance is superior to the industry average; they are unique to the company; they are more complex; they are difficult to emulate (copy); they relate to fulfilling customer needs; they add greater value than general competences; they are often based on distinctive relationships with customers, distributors and suppliers; they are based upon superior organizational skills and knowledge

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BMW - Example
In the motor industry, all manufacturers have the competences and resources required to build motor vehicles, but a company such as BMW has core competences in design, engine technology and marketing which act as the basis of its reputation for high-quality, high performance motor cars. These core competences make it possible for BMW to charge premium prices for its products. In this way, core competences are the basis of a organizations competitive advantage.
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Resources
A resource is an input employed in the activities of the business. Success rests in large part upon the efficiency by which the business converts its resources into outputs.

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A resource-based viewpoint
Unique bundle of tangible and intangible resources
Financial Resources cash, access to financial markets, physical facilities, equipment, raw materials, systems and configurations Intellectual Resources expertise, discoveries, creativity, innovation Legal Resources patents, trademarks, contracts Human Resources employee expertise and skills, leadership Organizational Resources culture, customs, shared values, vision, routines, working relationships, processes and systems Informational Resources customer intelligence, competitive intelligence, marketing information systems Relational Resources strategic alliances, relations with customers, vendors, and other stakeholders, bargaining power, switching costs Reputational Resources brand names, symbols, image, reputation 7

Value Added
The value added to a good or service is the difference in the financial value of the finished product compared to the financial value of the inputs.
There are clear linkages between value-adding activities, core competences, competences and resources. Resources form the inputs to the organizations value-adding activities, while competences and core competences provide the skills and knowledge required to carry them out. The more that core competences can be integrated into value adding activities, the greater will be the value added.

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The value-adding process

The value chain

Activities of an organization broken down into a sequence of activities known as the value chain
Primary activities - directly add value Support activities indirectly add value

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Foundations of Economic Performance The Value Chain

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Defining the Value Chain

Competing in a business involves performing a set of discrete activities, in which competitive advantage resides There can be different ways of configuring the value chain in the same industry Linkages with suppliers are known as upstream linkages, those with distributors and customers are downstream linkages.

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Example - Defining the Value Chain Homebuilding

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Defining the Value Proposition

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Strategic Positioning BMW

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Strategic Positioning Enterprise Rent-A-Car

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Developing and Leveraging Competitive Advantages

Capabilities that allow a firm to serve customers needs better than the competition give it a competitive advantage. Competitive advantages can arise from many internal or external sources.

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