Page 58 - Marketing Management

DEVELOPING MARKETING STRATEGIES AND PLANS | CHAPTER 2 35

Pratt & Whitney employs cross-
functional employee teams to
build its products, such as this
4000 series aircraft engine.

partnered with specific suppliers and distributors to create a superior value delivery network, also
called a supply chain.

Sony In May 2009, Sony announced it would cut its number of suppliers in half over the
Sony next two years (to 1,200),increasing the volume of parts and materials from each and thus reduc-
ing unit costs and overall procurement spending.Some stock analysts received the news positively
as evidence of the company’s commitment to restructuring. Others were less optimistic, such as
Mizuho Investors Securities analyst Nobuo Kurahashi: “I’m not sure how effective this is because
it’s just operational streamlining and wouldn’t simply push up earnings or bear fruit immediately.” 7

Core Competencies
Traditionally, companies owned and controlled most of the resources that entered their businesses—
labor power, materials, machines, information, and energy—but many today outsource less-critical
resources if they can obtain better quality or lower cost.
The key, then, is to own and nurture the resources and competencies that make up the essence of
the business. Many textile, chemical, and computer/electronic product firms do not manufacture
their own products because offshore manufacturers are more competent in this task. Instead, they
focus on product design and development and marketing, their core competencies. A core compe-
tency has three characteristics: (1) It is a source of competitive advantage and makes a significant
contribution to perceived customer benefits. (2) It has applications in a wide variety of markets.
(3) It is difficult for competitors to imitate. 8
Competitive advantage also accrues to companies that possess distinctive capabilities or excel-
lence in broader business processes. Wharton’s George Day sees market-driven organizations as
excelling in three distinctive capabilities: market sensing, customer linking, and channel bonding. 9
In terms of market sensing, he believes tremendous opportunities and threats often begin as “weak
10
signals” from the “periphery” of a business. He offers a systematic process for developing periph-
eral vision, and practical tools and strategies for building “vigilant organizations” attuned to
changes in the environment, by asking three questions each related to learning from the past,
evaluating the present, and envisioning the future.
Competitive advantage ultimately derives from how well the company has fitted its core competen-
cies and distinctive capabilities into tightly interlocking “activity systems.” Competitors find it hard to
imitate Southwest Airlines, Walmart, and IKEA because they are unable to copy their activity systems.