Strategic Marketing Assignment

1. Assignment on
Core competency
Submitted by
JOB THOMAS
#8, Sem -5
MBA (PT)
Email: job_thomas@cusat.ac.in
SCHOOL OF MANAGEMENT STUDIES
COCHIN UNIVERSITY OF SCIENCE AND TECHNOLOGY
COCHIN , KERALA, INDIA
PIN 682022

2. Core competency
A core competency is fundamental knowledge, ability, or expertise in a specific
subject area or skill set. A core competency is a concept in management theory
originally advocated by CK Prahalad, and Gary Hamel, two business book writers. In
their view a core competency is a specific factor that a business sees as being
central to the way it, or its employees, works. It fulfills three key criteria:
• It is not easy for competitors to imitate.
• It can be re-used widely for many products and markets.
• It must contribute to the end consumer's experienced benefits.
Core competencies are particular strengths relative to other organizations in the
industry which provide the fundamental basis for the provision of added value. Core
competencies are the collective learning in organizations, and involve how to
coordinate diverse production skills and integrate multiple streams of technologies. It
is communication, an involvement and a deep commitment to working across
organizational boundaries. Few companies are likely to build world leadership in
more than five or six fundamental competencies.
A core competence is the result of a specific set of skills or production techniques
that deliver value to the customer. Such competences enable an organization to
access a wide variety of markets. Executives should estimate the future challenges
and opportunities of the business in order to stay on top of the game in varying
situations. In order to be competitive an organization needs tangible resources but
intangible resources like core competences are difficult and challenging to achieve. It
is even critical to manage and enhance the competences with reference to industry
changes and their future.
A core competency will typically meet all rules on the following checklist:
• it provides benefit to the customer
• it is difficult to imitate
• it can be leveraged widely to create many products (or operate in many
markets)
• it will uniquely identify the organization
• it will be difficult to pin down, because it seems to be a combination of things
such as technology, process, and know-how.
Core Competency Example 1: Apple
The core competency of Apple can be said to be “making user friendly user
interfaces and design”. Let’s examine this statement against our checklist:
Criteria Yes/No

3. Customer benefit? Yes. The customer clearly benefits from great user interfaces
Yes. Companies have been trying for years and not yet
Difficult to imitate? succeeded.
Yes. This core competency has been rolled out to the
Can be leveraged? iPod, the iPhone, and most recently, the iPad.
Uniquely identifies Yes
the organization?
Yes – it’s not just design, but marketing, software, hardware
Difficult to pin down? etc
Core Competency Example 2: Walmart
The core competency of Walmart can be said to be “Groceries at a low cost”. Let’s
examine this statement against our checklist:
Criteria Yes/No
Yes. The customer gets their goods cheaper than
Customer benefit? anywhere else
Yes. A company would require huge scale to replicate,
Difficult to imitate? and that is obviously not an easy thing to achieve.
Yes. Walmart sells all kinds of goods using the same
Can be leveraged? model
Yes, I think in the US at least, most consumers would
Uniquely identifies the identify Walmart as being amongst the cheapest in this
organization? space.
Yes – it’s scale, but also supply chain management, and
Difficult to pin down? high inventory turnover etc.
Summary
A core competency is defined as something unique that an organization has, or as
something unique it can do. A company that develops a unique core competency can
create a long lasting competitive advantage. If you are working in a project or
program management environment then you should understand how what you’re
working on leverages or adds to your organization’s core competencies.

4. Competitive advantage
Competitive advantage is the advantage that a firm has over its competitors, which is
allowing the firm to generate greater sales or margins and/or retains more customers
than its competitors. There can be many types of competitive advantages
including the firm's cost structure, product offerings, distribution network and
customer support. It is the advantage over competitors gained by offering consumers
greater value, either by means of lower prices or by providing greater benefits and
service that justifies higher prices.
Porter suggested four "generic" business strategies that could be adopted in order to
gain competitive advantage. The strategies relate to the extent to which
the scope of a business' activities are narrow versus broad and the extent to which
a business seeks to differentiate its products. The four strategies are summarised in
the figure below:
Scope of business product
Broad Narrow
Source of competitive advantage
Cost Cost
Cost
leadership focus
Differentiation
Differentiation Differentiation
leadership focus
The differentiation and cost leadership strategies seek competitive advantage in a
broad range of market or industry segments. By contrast, the differentiation focus
and cost focus strategies are adopted in a narrow market or industry.
Cost leadership
With this strategy, the objective is to become the lowest-cost producer in the
industry. The traditional method to achieve this objective is to produce on a large
scale which enables the business to exploit economies of scale.
Why is cost leadership potentially so important? Many (perhaps all) market
segments in the industry are supplied with the emphasis placed on minimising costs.
If the achieved selling price can at least equal (or near) the average for the market,
then the lowest-cost producer will (in theory) enjoy the best profits.
This strategy is usually associated with large-scale businesses offering "standard"
products with relatively little differentiation that are readily acceptable to the
majority of customers. Occasionally, a low-cost leader will also discount its product to
maximise sales, particularly if it has a significant cost advantage over the competition
and, in doing so, it can further increase its market share.

5. A strategy of cost leadership requires close cooperation between all the functional
areas of a business. To be the lowest-cost producer, a firm is likely to achieve or
use several of the following:
• High levels of productivity
• High capacity utilisation
• Use of bargaining power to negotiate the lowest prices for production inputs
• Lean production methods (e.g. JIT)
• Effective use of technology in the production process
• Access to the most effective distribution channels
Cost focus
Here a business seeks a lower-cost advantage in just one or a small number of
market segments. The product will be basic - perhaps a similar product to the higher-
priced and featured market leader, but acceptable to sufficient consumers. Such
products are often called "me-too's".
Differentiation focus
In the differentiation focus strategy, a business aims to differentiate within just one
or a small number of target market segments. The special customer needs
of the segment mean that there are opportunities to provide products that are clearly
different from competitors who may be targeting a broader group of customers.
The important issue for any business adopting this strategy is to ensure that
customers really do have different needs and wants - in other words that there is a
valid basis for differentiation - and that existing competitor products are not meeting
those needs and wants.
Differentiation focus is the classic niche marketing strategy. Many small businesses
are able to establish themselves in a niche market segment using this strategy,
achieving higher prices than un-differentiated products through specialist expertise or
other ways to add value for customers.
There are many successful examples of differentiation focus. A good one is Tyrrells
Crisps which focused on the smaller hand-fried, premium segment of the crisps
industry.
Differentiation leadership
With differentiation leadership, the business targets much larger markets and aims to
achieve competitive advantage across the whole of an industry.
This strategy involves selecting one or more criteria used by buyers in a market - and
then positioning the business uniquely to meet those criteria. This strategy is usually
associated with charging premium price for the product - often to reflect the higher
production costs and extra value-added features provided for the consumer.
Differentiation is about charging a premium price that more than covers the
additional production costs, and about giving customers clear reasons to prefer the
product over other, less differentiated products.
There are several ways in which this can be achieved, though it is not easy and it
requires substantial and sustained marketing investment. The methods include:
• Superior product quality (features, benefits, durability, reliability)

6. • Branding (strong customer recognition & desire; brand loyalty)
• Industry-wide distribution across all major channels (i.e. the product or brand
is an essential item to be stocked by retailers)
• Consistent promotional support – often dominated by advertising, sponsorship
etc
Great examples of a differentiation leadership include global brands like Nike and
Mercedes. These brands achieve significant economies of scale, but they do not rely
on a cost leadership strategy to compete. Their business and brands are built on
persuading customers to become brand loyal and paying a premium for their
products.

7. Sustainable competitive advantage
A firm is said to have a sustained competitive advantage when it is implementing a
value creating strategy not simultaneously being implemented by any current or
potential competitors and when these other firms are unable to duplicate the benefits
of this strategy. (Barney,1991).
Sources of Sustable competitive advantage (SCA)
Barney (1991) states that not all firm resources hold the potential of SCAs; instead,
they must possess four attributes: rareness, value, inability to be imitated, and
inability to be substituted.
Hunt and Morgan (1995) propose that "potential resources can be most usefully
categorized as financial, physical, legal, human, organizational, informational, and
relational".
Prahalad and Hamel (1990) suggest that firms combine their resources and skills
into core competencies, loosely defined as that which a firm does distinctively well in
relation to competitors.
Therefore, firms may succeed in establishing an SCA by combining skills and
resources in unique and enduring ways. By combining resources in this manner,
firms can focus on collectively learning how to coordinate all employees’ efforts in
order to facilitate growth of specific core competencies.
Five steps to SCA
While creating a sustainable competitive advantage is not easy, the following steps
will help ensure to remain ahead of the field.
1. Establish Brand Loyalty. Customers will often remain with a brand they have
loyalty towards, even though the company does not offer the cheapest or most
effective product. Focus on building strong relationships with your customers and
delivering a great customer experience and service.
2. Patent Your Product. There has been a lot of debate recently about the true value
of a patent. While patents are not a ‘cure all’, they are an important weapon in an
entrepreneur’s competitive advantage arsenal.
3. Continually Innovate. Customers like updates and upgrades. Keeping your
product fresh and compatible with the market place (particularly if software), is
essential.
4. Hire ‘Connected’ Team Members. If your market includes large companies and
government departments, connections to key individuals within these organizations
can dramatically accelerate the ability to meet and secure contracts. Try to have at
least one member on the team who is ‘connected’.
5. Use Long Term Contracts and Incentives. This step has to be executed carefully,
as it can backfire. If the firm can establish a long term contract with the customer,
then clearly they are less likely to switch to a competitor. If the firm only offers long

8. terms contracts, however, and your competitors are offering short terms contracts,
then you are likely to lose business.
Ideally one firm want to maintain the customers to enter into a long term contract,
possibly by providing a slight reduction in cost or a bonus. Equally, customers are
more likely to be willing to enter into a long terms contract if they have just completed
a successful short term contract with the firm.