DEVELOPING A SPECIFIC COMPETITIVE ADVANTAGE

STRATEGIC ALIGNMENT PROCESS

How do organisations convert generic advantage into a unique and
sustainable advantage?
This is done by the firm developing a successful strategy where the
firm is able to match its internal capabilities with the external market
needs.
Strategy is the matching of a firm’s resources and capabilities to the
environment in which it operates. This process is sometimes referred
to as ‘Strategic Fit'. This step ensures that by matching markets,
channels and customers with internal assets and competencies a
sustainable competitive advantage is developed.
It is about identifying unmet customer needs and having the
necessary skills and resources to meet these needs. This is known as
the ‘Strategic Alignment Process’.
STAGES:-
1.Identify utilizable assets:- assets could include
brands,property;patents,finance relationships and scale advantages
2.Identify utilizable competencies:-these relate to skills- marketing,
developing new and innovative products, customer relationship
management,(selling);operations (e.g. inventory control).
3. Select and rank business opportunities in terms of attractiveness:-
Involves identifying market opportunities and then developing criteria by
which to measure the attractiveness of each option. Portfolio analysis can be
used to identify the most attractive strategies.
4.Match internal assets and competencies with market opportunities:-
involves the identification of areas in which it will be most effective for a firm
to compete.
5.Identify any assets or competencies that need to be strengthened:-
The firm may acquire, develop or decide to get the necessary competencies
to exploit the market ( e.g. entering into a strategic alliance, employing new
staff, acquiring new brands).
SEGMENTATION,TARGETING AND POSITIONING:- (STP).
SEGMENTATION: The identification of groups of individuals or firms
with characteristics in common that have significant implications for
the development of marketing strategy.
1. Identify methods of segmentation (bases).
2. Develop profiles for these segments
MARKET TARGETING
3. Evaluate market segment attractiveness
4. Select target segments
Market Positioning
5. Identify positioning for each segment
6. Develop marketing mix to achieve the desired positioning
BENEFITS OF SEGMENTATION
Better matching of customer needs
Enhanced profits
Enhanced opportunities for growth
Retention of customers
Targeted communications
Stimulation of innovation
Market segment share
Bases of Segmentation:--Consumer markets
Demographic:-age,gender,income,occupation,education,family life--
cycle, religion
Geographic:-country,region,city size, town
Geodemographic:-residential neighboughoods that combine
demographics with socio-economic information- ACORN,FiNPiN
Psychographic:-social class,personality,life styles,e.g.VALs
Behavioural:-benefit sought, usage frequency,(occasional or regular),usage
status ( e.g.non-user,user,lapsed user),purchase occasion, attitude towards
the product,buyer readiness stage
ORGANISATIONAL MARKETS:-
Firm demographics:- industrial sector, geographical location, company size
Operating variables:-technology, user-non-user status, customer's financial
capabilities
Purchasing approaches:-firm DMU,purchasing policies, purchasing criteria
Situation factors:-urgency, size of order, application
Personal attributes:-motivation, buyer-seller relationship, perceptions of risk
2. Development of profiles:-after identifying bases of segmentation,
develop profiles of resulting segments. A combination of factors can
be used where necessary.
Targeting:-it is a two stage process—evaluate the attractiveness of
the segments and selecting a market coverage strategy
3. Which segments to target?—decide which of these segments to
serve by looking at the attractiveness of each segment and the
extent to which a firm can match the needs of the segments.
EVALUATING SEGMENT/MARKET ATTRACTIVENESS:-
Market factors:-segment size, segment growth rate, stage of industry
evolution,predictability,price elasticity and sensitivity, bargaining
power of customers, seasonality and cyclical pattern of demand
Economic and technological factors:-barriers to entry, barriers to exit,
bargaining power of suppliers, level of technology utilization,
investment required, margins available
Competitive factors:-competitive intensity, quality of competition,
threat of substitution, degree of differentiation
Environmental factors:-exposure to economic fluactuations,exposure to
political and legal factors, degree of regulation, social acceptability and
physical environment impact
DETERMINING ORGANISATIONAL STRENGTHS:-
Current market position:-relative market share, rate of change of market
share,exploitable market assets,uique and valued products and services
Economic and technological position:-relative cost position, capacity
utilization, technological position
Capability profile:-management strength and depth, marketing strength,
forward or backward integration
ALIGNING MARKET OPPORTUNITIES WITH COMPANY STRENGTHS:-
Once the attractive segments and internal company strengths have
been identified, it is necessary to match them in order to identify the
most appropriate segments to pursue.
Other subjective ways of selecting target markets:-
Does it create a sustainable market position?
Is it compatible with the mission statement?
Is it consistent with organizational culture and values?
Can the current organizational structure serve the proposed market?
Does it facilitate an innovative approach to market entry?
Does it provide a focal point for action and future development?
Is it compatible with current internal information flows and reporting
lines?
MARKET COVERAGE STRATEGIES:-
Undifferentiated marketing:-this is the same as mass marketing and
involves producing one product that is designed to appeal to all
segments. In todays highly fragmented markets it is rare that this
strategy is appropriate
Differentiated marketing:- this involves developing a different
product for each different segment. For example, Toyota has
identified a number of different segments with different
requirements for cars and therefore produces different cars to meet
the needs of each segment.
Focused marketing:-in this case, the company selects one or a few
segments on which to concentrate.e.g., Morgan cars.
Customised marketing:-individual customer needs are unique and it
is financially viable to offer them customized products /services
tailored to individual customer requirements e.g. Rolls Royce
POSITIONING:-The way the product is defined by consumers on
important attributes—the place the product occupies in consumers’
minds relative to competing products.
A brand can be positioned using some of these associations:-
product attributes
usage occasions
users
activities
personality
origin
competitors
product class
Symbol
Positioning Maps:-in planning their differentiation and positioning
strategies, firms often prepare perceptual positioning maps, which
show consumer perceptions of their brands versus competing
products on important buying dimensions. For example, luxury sport
utility vehicles on price and performance.
IMPLEMENTATION:-employ the marketing mix variables 4p + 3ps.
BRANDING:-
Brand Equity:-the sum of brand awareness, brand association, brand
identity, perceived quality and brand loyalty
Brand Valuation
Benefits of Branding
Branding Strategies—brand extensions, brand stretching, global
brands
Brand revitalization
Brand repositioning
INNOVATION AND NEW PRODUCT DEVELOPMENT:-
What is Innovation-It involves the conversion of new knowledge into
new products, processes and services and the putting of these new
products, processes and services into commercial use.
Types of Innovation:
1.Frugal innovation-it involves sensitivity to poor peoples’ real
needs.It emphasizes low cost,simplicity,robustness and easy
maintenance.E.g.Tata Nano car which is a very simple car produced
for the Indian market for only $2,000.0
Open Innovation:-It involves the deliberate import and export of knowledge
by a company in order to accerelate and enhance its innovation .For
example,IBM has established a network of 10 ‘collaboratories’ with other
firms and universities in countries ranging from Switzerlandto Saudi
Arabia .Swedish music streaming service Spotify arranges ‘music hack days’
in various locations around the globewhere developers are invited for a day
of free food,drink and work on discussions and developing new applications
Disruptive Innovation:-It creates substantial growth by offering a new
performance trajectory that even if initially inferior to the performance of
existing technologies,has the potential to become markedly superior.e.g the
mobile phone disrupted the fixed telephone business
Radical Innovation:-These are novel or new methods or materials serving new
markets. They produce fundamental changes by evoking major departures
from existing practices. These are breakthrough innovations in management
systems, control techniques and organisational structure. Examples include
electricity, the telephone, the transistor fibre optics, artificial and emotional
intelligence, genetically engineered drugs among others.
Incremental Innovation:-these enhance existing practices or make small
improvements in products and processes. They are a source of competitive
advantage when they increase revenue by creating a new marketplace
offering or speed productivity.E.g. frozen foods, sport drinks, steel-belted
radial tyres electronic businesses and digital telephones
Forms of Innovation:-
1.Technological innovation-these consist of research and engineering
efforts aimed at developing new products and services
2.Product-market innovation:-these include market research,
product design, new developments in advertising and promotion-
social media marketing
3.Administrative innovation:-these refer to novelty in management
systems, control techniques and organisational structure.
DIFFUSION OF INNOVATION:-
Diffusion is the process by which innovations spread among users.A
model has been developed that identifies the various types of
individuals and the rate at which they will be likely to purchase new
products. This model is useful in helping to identify potential target
markets for new products and for tailoring the marketing mix to
meet the needs of each group of customers.
Innovators(2.5%):-These customers embrace new ideas and new
products readily, very venturesome, are prepared to pay initially high
prices, are well informed,wealthy,very sophisticated and
independent
Early Adopters(13.5%):-This group is also willing to adopt new products and
ideas. These are mostly opinion leaders in their communities who are likely to
seek information before purchasing.
Early Majority(34%):- In general they more conservative than the innovators
and early adopters and are more likely to be risk averse
Late Majority(34%):-These are individuals who are very cautious about new
products. They seek a lot of information, must be convinced by those who
have sampled and used the product before they go ahead to adopt it.
Laggards(16%):-These group tends to be very traditional and averse to
change. Very price sensitive and would wait for prices to begin to reduce
before the begin to adopt the product
Factors that Influence the rate of Adoption of Innovation:-
New ness/Degree of Improvement:-the new products offers better
performance above the existing product from the customer’s
perspective,e.g.4G and 5G mobile phones
Compatibility:-the new product agrees with the users
specifications,e.g.HDTV(High Definition TV)
Complexity:-how easy it is to communicate the product and its benefits.
Trialability(Experimentation):-how easy it is for customers to try the new
product before commitment to buy
Relative Cost:-comparing the cost of the new product to the existing in light
of its benefits
Additional Costs:-to what extent does the consumer incur additional
costs when buying the new product,e.g maintenance costs,etc
Market awareness:-how easy is it to create consumer awareness
using promotional initiatives
Network Effects:-the way that demand growth for some products
accelerate as more people adopt the product or service
THE NEW PRODUCT DEVELOPMENT PROCESS (NPD)
1.Idea Generation
2.Idea Evaluation
3 Concept Development
4 Business Evaluation
5 Product Development
6.Test Marketing
7. Product Launch
Open Innovation:-