Analyzing

the Internal Situation

Material:
Svend Hollensen (2015), Marketing Management:
A Relationship Approach, 3rd edition.
Chapter 2 – Identification of the firm’s core competences
Chapter 3 – Development of the firm’s competitive
advantage

dienvv@ntu.edu.vn ☏ 09 08 98 70 70
 Assessing the external
A Assessing the
marketing situation
N
Assessing competitiveness of the firm
A - Customer behavior
L the - Identification of the firm’s
- Competitor analysis and
Y
current core competence
S intelligence
I situation - Development of the firm’s
- Analysis relationships in
S competitive advantage
the value chain
P
L
A

Marketing Research and Decision Support

N Developing marketing strategies
N
I
- SWOT analysis, strategic marketing planning and
N
Strategic portfolio analysis
G decisions - Segmentation, targeting, positioning and
& competitive strategies
I

System
M Functional
P Developing marketing programmes
L / Tactical
- 4Ps decisions (Product, Price, Place, Promotion)
E decisions
M
E
N
T Organizing, implementing and controlling the
Action
A marketing effort
T planning
I - Organizing and implementing the marketing plan
decisions
O - Budgeting and controlling
N
Assessing the competitiveness of the firm Sales performance
Superior Market performance
Financial performance

Firm competitiveness
Competitive
advantage Industry competitiveness
of the firm
National competitiveness

Competences
Core
competences Capabilities
of the firm
Resources
Core competence of the firm
What are the resources of firm?
• The basic unit of asset, skill, ability, expertise,
knowledge, etc. owned and controlled by one firm
• Types of resources (Grant, 1991)
• Technological
• Financial
• Physical
• Human
• Organizational
• Reputation
 Resources classification
Tangible resources Intangible resources

• Inputs into a firm that • Intellectual property

can be seen, touched rights: patents,
and/or quantified trademarks and
• Assets such as plant copyrights
and equipment, access • The know-how of
to raw material and personnel, informal
finance, a trained and networks,
skilled workforce, and organizational culture
a firm’s organizational and a firm’s reputation
structure of its products
 Resource profile
Intangible Tangible
(knowledge embodied in
(physical facilities)
people)

Unique and inimitable Easy to access

(brand image) (without any scarcity)

Unmarketable Marketable

Systemic Discrete
(a complex network of (centred on one individual or
multiple routines) a team)

Spreadable Idiosyncratic
(reputation) (dedicated machinery)

Tacit Explicit
(culture, know-how) (procedures, patents)
 Strategic resources

Core Competence
(A strategic
capability)

YES
Does it meet criteria of
Capability sustainable competitive advantage?
(Integration of a
team of resources)
NO

Resources Capability
(Inputs to firm (A non-strategic
production process) team of resources)
A resource becomes a source of
sustainable competitive advantage
Must be competitively superior and valuable in the product market

Must be difficult to imitate

Must not be easy to replace by an alternative capability

Must be durable

Must be difficult to move

 Criteria for evaluation
Competitive superiority
• Evaluates if and to what extent the resource contributes to differentiating the
company from its competitors
Imitation
• Analyses actual and potential competitors’ difficulties in imitating the resource

Duration
• Measures if the resource’s benefits will also be generated in the long term

Appropriateness
• Verifies if the company owning the resource is able to exploit the advantages
generated in the market
Substitutability
• Assesses how difficult it is for competitors to replace the resource with an
alternative that gives the same advantages
Capabilities of the firm
• Ability to use resources to create value
• Capabilities are what the firm can do
Management

Organization

Knowledge
Processes

People
Capabilities
Competence
• The combination of different types of resources
• Examples:
• Engineering knowledge, production expertise, marketing
abilities
• Attributes of a competence:
• Proprietariness: a competence is a firm-specific set of
resources
• Learning: a competence results from years of
experience accumulated in a small number of fields
• Pervasiveness: a competence is diffused pervasively
throughout the entire firm and exists within several
product lines (or Strategic Business Units – SBUs)
Core competences
• The principal distinctive capabilities possessed by a
company
• What company is really good at.
• A core competence has three traits:

It makes a It is difficult It can be

contribution for leveraged to
to perceived competitors a wide
customer to imitate variety of
benefits markets
 Strategic implications

Maximize returns by Formidable barriers

focusing on what against the entry
company does best competitors

Using the
resources

Reduce risk, shorten

Utilize external suppliers’
cycle times and increase
strengths and investment
customer responsiveness
Competitive advantage of the firm
The roots of competition Competitive excellence
• Strong competitive position
• High market share
• High ROI – strong world brands
• High contribution margin
• Brand equity

Core competences are the basis for creating sustainable competitive advantage

Core competences
• Important determinants for customer satisfaction and creating customer value
• The firm is better than competitors in delivering customer value regarding functions
• Difficult for competitors to copy core competences

Resources are combined into a development of capabilities or bundles of capabilities

Resources
(roots of competitive advantage)
Technical Financial Human Marketing
- Relationships with Information
- R&D - Ability to put - Managerial skill
- Process engineering strategies into action - Abilities of employees
customers systems
- Brand equity - Decision support
- Worldwide patents - Creditworthiness - Individual/group learning
- Customer loyalty
What is a competitive advantage?
• Historically, competitive advantage
was thought as a matter of
position, where firms occupied a
competitive space; built and
defended market share.

• Today, sustained competitive

advantage is the result of an
enduring value differential
between the products or services
of one organisation and those of its
competitors in the mind of
customers.
 Roots of competitive advantage
Resource-based view (RBV)
- Inside-out perspective
- Proactive quest for markets that allow
exploitation of the firms’ resources.

The value chain based view (VBV)

Market
Firm - Balancing the two views
(competitive
(resources) - Building sustainable competitive advantages environment)
based on the firm’s positioning in the value
chain.

Market orientation view (MOV)

- Outside-in perspective
- Adapting the firm’s resources to market
conditions and the competitive environment.
 RBV versus MOV
Market Orientation View Resource-based View

Basic Adapt firm’s resources to Proactive quest for

principle the requirements of its environments that allow the
competitive environment best exploitation of the firm’s
resources
Strategic Centered on industry Emphasis on internal
analysis structure and market diagnosis
attributes
Formulation Outside-in Inside-out
process
Source for Market positioning in Firm’s idiosyncratic set of
competitive relation to local resources and competences
edge competitive environment
 Marketing capability gap

Resources required =
Heterogeneity resources:

f (market complexity
required vs. available

and velocity)

Marketing
capability
gap

Resources available = f (heterogeneity and

adaptability of marketing capabilities)

Time
 Exploiting vs. Exploring
Exploiting Exploring
(short-term) (long-term)

Capabilities are exploited in New capabilities are added

Inside- a few well-defined market to pursue new market
segments opportunities
out Market

(RBV) Firm Market Firm Market

Market

Capabilities are adapted to Experimental learning

Outside the needs in a few well- through rapid configuration
defined market segments of capabilities
-in Market

(MOV) Firm Market Firm Market

Market
 Value chain
Research and Sales and
Production Marketing
Development Service
- Technology - Purchasing - Marketing - Sales force
- Research - Scale economies information management
- Development - Productive system - Merchandising
- Patents capacity - Distribution - Logistics/
- Product features - Productivity Prices transportation
- Technical - Components parts - Communication - Terms of sale/
specification - Assembly - Technical delivery
- Product - Material flow literature - Terms of
performance - Production - Packaging payment
- Design technology - Product - Inventory
- Engineering - Quality argumentation - Customer service
- Product quality management - Brand
- Manufacturing positioning
cycles - Social media

Upstream Downstream
Value chain-based view (VBV)
Example of Nike’s value chain
Inter- and intra-firm relationship
Business system of IKEA
Competitiveness
How effective Effectiveness Efficiency
and efficient a - Quality of products
firm is, relative - Market share
- Response speed
- Low costs
to its rivals, at - Profitability

serving
customers and
resellers.
Competitive rationality
- The strength of the firm’s competitive drives
- The firm’s decision-making skills
Sources of competitive advantage

Economies of
scope
Economies of Strategic
scale thinking
Ability to
provide global
services
Exploitation of
Company-
local
Ability to use specific CA
advantages
human
resources
 Economies of scale
Cost
Price MC1
AC1
P1

AC1-min

MC2

P2 AC2

AC2
D(AR)
MR

Q1 Q2 Output (Q)
 Economies of scope
• Breadth of
product range
• Activities in
interrelated
geographical
markets
• Transfer of
resources,
experience, ideas
and successful
concepts across
products and
markets
Three levels of competitiveness
Analysis of national competitiveness
Competition analysis in an industry
Value chain analysis

Firm A

Competitive
Relative cost triangle Customer
model

Firm B
Competitive benchmarking
Holistic model of
competitiveness
Customer value proposition (CVP)
 Exploiting vs. Exploring
High

Nightmare Heaven
Value creation

(High customer value, (Profitable business model)

but too low profit)

Hell Fantasy
(No prospect for success) (Unsustainable revenue and
profit logic)
Low

Low Value capture High