Chapter 4 - Developing Competitive Advantage and Strategic Focus

SWOT analysis

Focuses on the internal factors (strengths and weaknesses) and external factors (opportunities and threats) that give the firm certain advantages and disadvantages in satisfying the needs of its target market(s).

disruption

Reinventing business processes, collaborating and integrating within the firm, investing in new technology, and creating entirely new markets to meet untapped customers’ needs

right side up thinking

The current state of business based on known facts and information; in essence the basis of SWOT analysis.

upside down thinking

An assessment of what could change in the environment that might transform current strengths into weaknesses and current weaknesses into strengths.

outside in thinking

Looking at competitor strengths and weaknesses with a goal of identifying areas where competitive advantage can be gained by flipping the strengths and weaknesses of others.

strengths

What the firm can do well due to resources possessed by the firm or the nature of the relationships between the firm and its customers, its employees, or outside organizations (e.g., supply chain partners, suppliers, lending institutions, government agencies, etc.).

weaknesses

Deficiencies of a firm due to a lack of resources by the firm or the nature of the relationships between the firm and its customers, its employees, or outside organizations (e.g., supply chain partners, suppliers, lending institutions, government agencies, etc.).

capability

When strengths serve to satisfy a customer need.

opportunities

Favorable conditions in the external environment that could produce rewards for the organization if acted upon

threats

Barriers in the external environment that could prevent the company from reaching its objectives

SWOT matrix

A four-cell array that can be used to visually evaluate each element of a SWOT analysis (strengths, weaknesses, opportunities, threats)

competitive advantage

A firm’s capabilities that allow it to serve customers’ needs better than the competition.

operational excellence

A strategy that focuses on efficiency of operations and processes to develop capabilities and competitive advantages.

product leadership

A strategy that focuses on technology and product development to develop capabilities and competitive advantages.

customer intimacy

A strategy that focuses on working to know your customers and understand their needs better than the competition to develop capabilities and competitive advantages.

strategic focus

The overall concept or model that guides the firm as it weaves various marketing elements together into a coherent strategy.

strategy canvas

A tool for visualizing a firm’s strategy relative to other firms in a given industry; the horizontal axis identifies the key factors that the industry competes on with the products that are offered to customers; the vertical axis indicates the offering level that firms offer to buyers across these factors; the central portion of the strategy canvas is the value curve, or the graphic representation of the firm’s relative performance across its industry’s factors.

goals

Broad, simple statements of what will be accomplished through the marketing strategy.

objectives

Specific and quantitative benchmarks that can be used to gauge progress toward the achievement of the marketing goals.

strategic focus model

aggressive (+/+)

diversification (+/-)

turnaround (-/+)

defensive (-/-)

aggressive (+/+)

many strengths that can exploit many opportunities → best position to be in

expansion and growth focus

typical of new products/new markets

in a position to aggressively reshape the industry

diversification (+/-)

many internal strengths and many external threats

firm has a lot to offer but is limited by external factors that stymie ability to pursue aggressive strategies

diversification strategy can be feasible

turnaround (-/+)

many weaknesses and many external opportunities

too many short term internal problems exist to exploit opportunities

the firm must put itself back in order (turnaround) before looking beyond its current products/markets

defensive (-/-)

many weaknesses and many external threats

firm is overwhelmed by internal and external problems, simultaneously, and need to take a defensive posture

often use bankruptcies as a means to restructure

four actions framework

a new value curve:

reduce - which factors should be reduced below the industry standard?

create - which factors should be created that the industry had never offered?

raise - which factors should be raised well above the industry standard?

eliminate - which of the factors should be eliminated