Virtual University of Pakistan

1/21/2020 SMM1 1
 Session 3

SMM 2
Introduction
 The nature of competitive advantage and its sustainability

 Customer value creation as the core of marketing concept

 Sources of competitive advantage

a. Resource Based View (RBV)
b. Dynamic Capabilities Approach
c. Marketing Orientation
d. I/O perspective and the value chain

SMM 3
Introduction (Cont’d)
 Five forces – Porter’s model and its framework

 The Focus of competitive advantage in corporate and

business strategy development

 An integration of application of CA in creating

strategic fit

SMM 4
Competitive Advantage and its
Source
 Competitive advantage is the competitive value a firm
offers to the customer
 Its source can lie in identifying the needs of the
customers

1/21/2020 SMM 5
Competitive Advantage
 It is the point of differentiation in terms of value –
price or quality – as perceived by the customer
 Source of CA is not price of quality ; it is the outcome
of strategic use of firm’s resources (machinery or
processes)
 Translating the source of CA into point of CA
requires identification of the source of competitive
advantage

1/21/2020 SMM 6
Value proposition and Perception
 Customer’s response to the value proposition offered by a
firm in terms of price reduction or quality, indicates
customer’s value perception
Competitive Parity
 Competitor can either develop same set up and strategy
or use a promotional tool to switch the customers from
the firm whose CA it intends to nullify

SMM 7
Translating the Source of Competitive
Advantage into Actual CA
Strategic Marketing Management

Fit is created
Sources of CA with values in
inside Strategy
the Customer’s
Organization mind

Internal resources translated into CA

1/21/2020 SMM 8
Sustainability of Competitive Advantage
 The firm can sustain its competitive advantage as long as
the competitor develops the same strategy and processes

SMM 9
Source Ambiguity
 Firms need to identify their source of Competitive
Advantage
 It can be
a. Technology
b. Process
c. Advertising campaign

These sources create CA as long as competitors does not

achieve similar level of CA by adopting same
techniques

1/21/2020 SMM 10
The Role of Marketing and Internal
Sources in creating strategic fit
External
Source
of CA
Unique Capabilities
Customer's perception of
& Assets that adjusts
the value – quality / fair
STP accordingly
price, service,
innovation, luxury

Strategic Fit

Internal
Source
of CA

Marketing resources and Action or

identifies capabilities behavior creating
customer’s needs SCA

SMM 11
Integration of Application of CA
in creating Strategic Fit
 Aligning internal processes with an external strategic
focus for delivering value with what customer value
(Burns and Woodruff, 1992)
Strategic Fit can be created by understanding:
 what the customer values
 which requirements of the customer firms should focus on
to gain CA
 What are customer’s perception about the value delivery
 What are the likely changes to happen in this perception
over time
 How to link the firm’s internal resources of CA to the
external source of customer’s needs and wants

SMM 12
Value Chain – How the value is
delivered

Marketing helps to Strategy designs Deliver product or service

understand customer process – from raw of competitive value
need and informs material procurement Price-based/
strategy till finished product Quality based

Customer’s Willingness to pay for the

value proposition

SMM 13
Value Chain, Value Proposition
and Brand Equity

 Firms intend to continuously add value to the

customer for which customer is willing to pay a higher
price
 Difference between the actual price of a firm’s product
and the willingness of the customer to pay a higher
price is the firm’s competitive advantage

1/21/2020 SMM 14