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

• DW411k

• Consumer Value

• Competition

• Consumer Satisfaction

• Giovanni’s Ristorante• Resources

• Innovation

• Questions

• La Copa Mondial 2006

La Copa Mondial 2006• El Tricolor?

• DW411k

• Consumer Value

• Competition

• Consumer Satisfaction

• Giovanni’s Ristorante• Resources

• Innovation

• Questions

• La Copa Mondial 2006

Competition• What is competition?

• Resource–Advantage (R-A) Theory of Competition

• Competition is an on-going, disequilibrium-provoking 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.

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• Consumer Value

• Competition

• Consumer Satisfaction

• Giovanni’s Ristorante• Resources

• Innovation

• Questions

• La Copa Mondial 2006

• Human motivation is constrained, self-interest seeking

• A company’s objective is superior performance

• A company must acquire production resources

• Classical economic theory:• Land• Labour• Capital

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• Innovation

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• 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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• Consumer Value

• Competition

• Consumer Satisfaction

• Giovanni’s Ristorante• Resources

• Innovation

• Questions

• La Copa Mondial 2006

• Organisations struggle for these production resources

• Yields different relative production-resources costs (cost or ‘comparative’ advantage)

• Example: WalMart 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

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• Consumer Value

• Competition

• Consumer Satisfaction

• Giovanni’s Ristorante• Resources

• Innovation

• Questions

• La Copa Mondial 2006

• 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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• Consumer Value

• Competition

• Consumer Satisfaction

• Giovanni’s Ristorante• Resources

• Innovation

• Questions

• La Copa Mondial 2006

Indeterminate

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• Consumer Value

• Competition

• Consumer Satisfaction

• Giovanni’s Ristorante• Resources

• Innovation

• Questions

• La Copa Mondial 2006

• 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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• Consumer Value

• Competition

• Consumer Satisfaction

• Giovanni’s Ristorante• Resources

• Innovation

• Questions

• La Copa Mondial 2006

Consumer Value• Consumer’s valuation of the consequences

of an exchange• Value = Σ consequences

• Both positive (benefits) or negative (costs)

• Consequences:• Functional• Financial• Physiological• Psychological• Temporal

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• Consumer Value

• Competition

• Consumer Satisfaction

• Giovanni’s Ristorante• Resources

• Innovation

• Questions

• La Copa Mondial 2006

DW411K ¼ Sheet SanderSPECIFICATIONS

Amps 2.0 Amps

Orbits/Min 7,000-12,000 opm

Orbit Diameter 3/32”

Paper Size/Type 5”, 8 hole hook and loop

Dust Collection Yes

Tool Weight 3.2 pounds

Dust Sealed Switch Yes

Counter-Balanced Fan Yes

Shop Vacuum Attachment Yes

Electronic Speed Control Yes

Cord Length 9 feet

Case Included Yes

• DW411k

• Consumer Value

• Competition

• Consumer Satisfaction

• Giovanni’s Ristorante• Resources

• Innovation

• Questions

• La Copa Mondial 2006

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 >> expected value

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• Consumer Value

• Competition

• Consumer Satisfaction

• Giovanni’s Ristorante• Resources

• Innovation

• Questions

• La Copa Mondial 2006

Innovation• Competition begets innovation,

innovation begets competition

• What is innovation?• Creativity?• R&D?• Process improvement?• Product enhancements

• Two types of innovation:• Production resources innovation• Consumer value innovation

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• Consumer Value

• Competition

• Consumer Satisfaction

• Giovanni’s Ristorante• Resources

• Innovation

• Questions

• La Copa Mondial 2006

Giovanni’s Ristorante

• DW411k

• Consumer Value

• Competition

• Consumer Satisfaction

• Giovanni’s Ristorante• Resources

• Innovation

• Questions

• La Copa Mondial 2006

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.

• DW411k

• Consumer Value

• Competition

• Consumer Satisfaction

• Giovanni’s Ristorante• Resources

• Innovation

• Questions

• La Copa Mondial 2006

Questions

• DW411k

• Consumer Value

• Competition

• Consumer Satisfaction

• Giovanni’s Ristorante• Resources

• Innovation

• Questions

• La Copa Mondial 2006