Competition: Lessons for Marketing in Mexico

1
Competition Lessons for Marketing in
Mexico Professor John Branch Olin School of
Business Washington University in St.
Louis Thursday 24 November 2005 ITESM Campus
Estado de México
La Copa Mondial 2006
Competition
Consumer Value
DW411k
Consumer Satisfaction
Innovation
Giovannis Ristorante
Resources
Questions
2
La Copa Mondial 2006

• El Tricolor?

La Copa Mondial 2006
Competition
Consumer Value
DW411k
Consumer Satisfaction
Innovation
Giovannis Ristorante
Resources
Questions
3
Competition

• What is competition?
• ResourceAdvantage (R-A) Theory of Competition
• Competition is an on-going, disequilibrium-provoki
  ng process which consists of the constant
  struggle among companies for comparative
  advantage in production resources and competitive
  advantage in market position, and, thereby
  superior performance.

La Copa Mondial 2006
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Consumer Value
DW411k
Consumer Satisfaction
Innovation
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4

• Human motivation is constrained, self-interest
  seeking
• A companys objective is superior performance
• A company must acquire production resources
• Classical economic theory
• Land
• Labour
• Capital

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5

• R-A Theory accounts for intangible production
  resources
• Financial
• Legal
• Informational
• Physical
• Human
• Organisational
• Relational
• Production resources, however, are scarce,
  heterogeneous, and imperfectly mobile

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6

• Organisations struggle for these production
  resources
• Yields different relative production-resources
  costs (cost or comparative advantage)
• Example Wal?Mart versus KMart
• To compete also means to get in the game
• An organisation must use its production resources
  to produce an offering for the market

La Copa Mondial 2006
Competition
Consumer Value
DW411k
Consumer Satisfaction
Innovation
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Questions
7

• Organisations struggles for consumers
• Consumers are heterogeneous
• Different consumers, therefore, derive different
  value from different offerings
• Yields different relative consumer value
  (consumer value or competitive advantage)
• Example Levi-Strauss versus Wrangler

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Competition
Consumer Value
DW411k
Consumer Satisfaction
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8
Relative Consumer Value
Inferior
Parity
Superior
Indeterminate
Superior Performance
Superior Performance
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Lower
Competition
Consumer Value
Inferior Performance
Parity
Superior Performance
DW411k
Relative Production Resources Costs
Parity
Consumer Satisfaction
Innovation
Inferior Performance
Inferior Performance
Indeterminate
Giovannis Ristorante
Higher
Resources
Questions
9

• Role of management is to recognise, understand,
  create, select, implement, modify, etc. company
  strategies which (hopefully) will yield
  comparative advantage and/or competitive
  advantage
• Disequilibrium-provoking
• Innovation is endogenous
• Challenge
• Information is imperfect and costly
• Example Toyota versus General Motors, Ford, and
  Chrysler

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Competition
Consumer Value
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Consumer Satisfaction
Innovation
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10
Consumer Value

• Consumers valuation of the consequences of an
  exchange
• Value S consequences
• Both positive (benefits) or negative (costs)
• Consequences
• Functional
• Financial
• Physiological
• Psychological
• Temporal

La Copa Mondial 2006
Competition
Consumer Value
DW411k
Consumer Satisfaction
Innovation
Giovannis Ristorante
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11
DW411K ¼ Sheet Sander
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Innovation
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12
Consumer Satisfaction

• Consumers are value maximisers
• Customer satisfaction
• Comparison between pre- and post-valuation
• Difference between what I expected and what I
  received (disconfirmation process)
• satisfaction received value-expected value
• Satisfaction when received value expected value
• Customer delight
• Received value gtgt expected value

La Copa Mondial 2006
Competition
Consumer Value
DW411k
Consumer Satisfaction
Innovation
Giovannis Ristorante
Resources
Questions
13
Innovation

• Competition begets innovation, innovation begets
  competition
• What is innovation?
• Creativity?
• RD?
• Process improvement?
• Product enhancements
• Two types of innovation
• Production resources innovation
• Consumer value innovation

La Copa Mondial 2006
Competition
Consumer Value
DW411k
Consumer Satisfaction
Innovation
Giovannis Ristorante
Resources
Questions
14
Giovannis Ristorante
La Copa Mondial 2006
Competition
Consumer Value
DW411k
Consumer Satisfaction
Innovation
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15
Resources

• Competition
• Hunt, Shelby. A General Theory of Competition
  Resources, Competences, Productivity, Economic
  Growth. London, England Sage, 1999.
• Value
• Woodruff, Robert B. and Gardial, Sarah H. Know
  Your Customer New Approaches to Understanding
  Customer Value and Satisfaction. Cambridge,
  U.S.A. Blackwell, 1996.

La Copa Mondial 2006
Competition
Consumer Value
DW411k
Consumer Satisfaction
Innovation
Giovannis Ristorante
Resources
Questions
16
Questions
La Copa Mondial 2006
Competition
Consumer Value
DW411k
Consumer Satisfaction
Innovation
Giovannis Ristorante
Resources
Questions