Marketing studies and theories claim that organizations follow two main theories, Marketing Orientation and the Resource Based View, to create the needed competitive position for themselves. The purpose of this paper is to explore in detail the affect the resource based view theory has on the Creation of the differential advantage and the selection of the Target Market. The first part of the paper will discuss the different views of the Resource Based View and discuss its components. The second part of the paper provides a case study of a Middle East Professional Services Organization called International Turnkey Systems (ITS). The case study will illustrate the use of both theories especially the RBV in positioning ITS and in the creation of its differential advantage.
The strategies organizations use to position themselves in the market are mainly driven from two major concepts that must be put together to make these strategies work. The first concept being the Financial Growth and Gains the organization wants to achieve in a given period of time, whether long term or short term (Porter, 1985). The second concept is the level of customer satisfaction the organization wants to achieve and to position itself in to. In other words, what value the organization wants to deliver to the customer. These two factors dictate the base strategy any organization wants to adapt to position itself in the market. All other factors are in fact derived from these two main concepts. On the other hand, the Financial Growth strategy does not go hand in hand the Value Addition strategy. In other words, organizations who seek fast financial growth, normally, do not really care about the type of value they really want to add to the customer and/or the community. While the opposite is true (Hooley, Greenley, Fahy and Cadogan 2001).
From the above one can say that the Competitive Position any organization wants to achieve is really derived from the Financial Status it wants to accomplish. In order to create a sustainable Competitive Position the organization must first choose the target market or the target customers segments it wants to address and the type of products and/or services it wants to offer. For any organization to succeed in its business it must also differentiate itself from the its competitor by creating a hard to copy or imitate differential/competitive advantage (Hooley, Greenley, Fahy and Cadogan 2001).
Knowing that the Competitive Position any organization chooses is a collection of the Competitive Advantage and the Target Market, an organization can choose one or more of the Competitive Positioning models to place itself in the market and make itself different from its competitors. Such competitive positioning models could include:
* Attribute Positioning (Kotler, 2003): Such as size, location and or history. For example organizations that are located in the Middle East and enjoy the understanding of the culture or the Middle East can position themselves as the Local Organization Next door. They are here to stay while others aren't. This type of positioning gives some kind of commitment to customers who are from this part of the world.
* Benefit Positioning (Kotler, 2003): Organizations in this respect must find a special benefit that the customers would want to make them go for their products. For example, Professional Services organizations can position themselves to implement projects is shorter time than the competition and produce products that have low cost of ownership to the customer. For that to happen, organizations must address a certain segment of customer base to offer such market position.
* Use or Application Positioning (Kotler, 2003): Such positioning model dictates that the organization produces a product that is specific for a certain industry or business. For example, ORACLE is known for its Financials software solution that can address almost any organization financial needs and is well known for its flexibility and customization ability.
* User Positioning (Kotler, 2003): Some organizations use this positioning model to address specific organizations. For example, International Turnkey Systems (ITS) position themselves as the Application Solutions Provides to Organizations that use Critical Mission Application such as Banks and Telecommunications companies.
* Competitor Positioning (Kotler, 2003): Here the organization offer products that have better quality or more features than the competitors do. ITS claim that they have Banking Solutions that are richer in functionality than any other product supplied by the competitors.
* Price (Hooley, Greenley, Fahy and Cadogan 2001): Some organizations use low price as a competitive positioning model but others use high price. Organizations who use high price positioning model normally associate that with the high Quality positioning.
* Quality (Hooley, Greenley, Fahy and Cadogan 2001): This is one of the major differentiators use to position organizations especially when it come to commodity products. Quality is also used to target certain customer segments. Organizations who want to establish good name for themselves and build an image of a value adder must produce high quality goods and/or services.
* Innovation (Hooley, Greenley, Fahy and Cadogan 2001): Organizations who are in leading position or want to achieve a leading position in the market must apply this competitive position. The opposite to innovation is imitation. Innovative organization must maintain a degree of confidentiality to protect its investment and it competitive advantage from the rivals.
* Superior Service (Hooley, Greenley, Fahy and Cadogan 2001): With this competitive positioning model the organization must obtain all the needed skills to build the relationship with the customers and all the necessary infrastructure, which must include business processes and training programs, that will enable them to provide such excellent services to their customers. Providing superior service is also connected heavily to the culture of the organization in question.
* One to One Marketing (Hooley, Greenley, Fahy and Cadogan 2001): One to One (1:1) Marketing is considered the oldest and yet the newest trend competitive positioning. It depends on building a 1:1 relationship with the customer. Organizations must gather and know enough information about their target customer so that a relationship can be built. Personal Preferences, Professional, Financial and even social information is gathered depending on the type of products the organization is trying to market. With 1:1 positioning the concept of Customized Product started to appear (Peppers and Rogers, 1993:5).
* Differentiation (Porter, 1985): In this model the organization positions itself to be the only supplier for certain products or services. This can be achieved by the products the organization it is offering, the services they provide the customer, the supply chain process they have and many other factors that contribute to the organization being different from others. For such model, normally, organizations charge high prices.
* Focus (Porter, 1985): Using this model the organization positions itself as a focused organization for a specific target customers segments. In fact, this model is a combination of the many models such as differentiation, benefit, quality and superior service.
Theories and actual practice led to two main approaches organizations use when deciding to go for any of the competitive positioning models mentioned above. Market Orientation or Market Paradigm and the Resource-Based View are used to create the competitive position and advantage for any organization. Market Orientation or Market Paradigm, as it is mentioned in some literature, focuses on the ability of the organization to analyse the market, its trends, customer behaviour, competitor organizations, competitor products, social aspects, political aspects and many other aspects to come up with the model of competitive positioning. On the other hand, it also takes internal efforts and practices to support the selected competitive positioning model. The internal efforts and practices depend a great deal on the internal resources and capabilities of the organization (Day, 1994). And this is basically what is meant by the resource-based view.
In the resource-based view concept the organizational internal resources are classified as follows (Hooley, Greenley, Fahy and Cadogan 2001):
* Organizational Culture: The culture of the organization plays a major part in dictating the competitive position of the organization. Although it is not really clear to many but it does. For example, there will be a great difference in the way the organization behaviour if it is driven based on the financial performance rather than value delivery. Organizations that are financially performance driven do not pay much attention to the value they are adding to the customer. They do not really care for long term relationships with their customers. Since the culture is the root of all behaviours in the organization, one would find that all processes and practices are directed towards this culture including the once that have to do with positioning the company in the market.
* Marketing Assets and Capabilities: This is basically the assets the organization has in terms of customer relationships management and customer access ability. In addition to that, there are other capabilities that are considered important to this which are market sensing, market targeting, product management and product development capabilities.
* Internal Assets: These are the main players when it comes to the resource-based view (RBV) theory. RBV is based on the fact that the organization supports innovation and the development of new products and services. Without the internal assets and that includes Employees, Skills and Knowledge innovation will never take place.
* Alliance Based Assets: Are the ones that allow the organization to acquire new geographical span or markets, new managerial skills and new technology.
It is very important to know that in order for any organization to sustain its competitive position it must prevent the competitors from imitating whatever gives it its competitive advantage. Mainly the competitors must try to imitate what is called the intangible assets (Kaplan, R. and Norton, P., 2004) of the organization in order for them to be able to compete with it. Example of intangible assets are business processes, skills, patents, organizational culture, customer relationships and knowledge. Sustainability, on the other hand, comes from years of consistent execution and experience. Since more experience increases the learning capability of the organization and its knowledge, the ability to sustain its competitive advantage increases (Dell M., Rollins K., Stewart T. and O'Brien L., 2005).
Studies have shown and proved that it takes the two approaches mentioned above to create the competitive position and therefore the competitive advantage for any organization (Levitt, 1975). The reader must note that the outcome of RBV is innovation where the organization using its internal resources to innovate the way they do their business and the products and/or services they offer to the market. Therefore, it actually takes both approaches for any organization to create its competitive advantage. The figure below illustrates this fact.