Resource-Based View and the Competitive Positioning of the Organization

University Degree Business and Administrative studies

200415450 / B1809 Resource-Based View and the Competitive Positioning of the Organization

Muawiya Abu Jubain

Student No.: 200415450

Student Ref.: B1809

For Submission to:

The University of Hull

Master in Business Administration

Module: Marketing

Module Code: 56652

Word Count: 3690

Date: July 6, 2005

Lecturer: Graham Spickett-Jones

Table of Contents

1. INTRODUCTION

Introduction

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.

Competitive Positioning Models.

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.

Approaches Used in any of the Positioning Models.

This is a preview of the whole essay

Approaches Used in any of the Positioning Models.

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.

Figure 1

One of the best examples to illustrate this fact is the strategy followed by Henry Ford where he dictated the to the firm that the policy to follow is to reduce the price of the manufactured cars. Doing this he forced the firm to use new innovative ideas, processes, and technologies to reduce the cost of production (Levitt, 1975).

Case Study, International Turnkey Systems (ITS) Competitive Positioning Model for Banking Solutions

International Turnkey Systems (ITS) is a professional services organization that is specialized in providing software and information technology solutions for specific markets and industries mainly the Financial industry and the Telecommunications Industry. During the 90’s, ITS was specialized in selling and maintaining computer hardware systems. The marketing department in ITS did an extensive research on the middle east market and found out that Banks are going to go through a major transformation cycle to change their core banking applications to industry standard ones that can allow them to provide better products and services to their clients. The marketing department produced a marketing plan for this line of business where they recommended to acquire an international banking solution and build the necessary skills to implement such solution. An extensive exercise took place during the late 90’s to find the suitable banking solution and to hire and build the needed human resources to implement and support the solution. Along with that new internal business processes that had also affected the Human Resources Department processes, the Finance Department Processes, the Sales, the Customer Services Department processes and finally the Business Solution Department processes which are the once that directly affect the solution implementation at the customer site. The reason behind changing the processes of all the departments in the organization is that there had to be a link created between all the departments to be able to serve the customer in the most professional way. After all, ITS is an organization that wants to create a competitive advantage for itself that reflects optimum customer service and value addition. Their main goal is to build long term relationships with their customers.

ITS business strategy is towards Specialization and Differentiation. The strategy selected is clearly shown by the positioning of ITS on the business strategy matrix provided in Figure 2 below.

Figure 2 – Business Strategy Matrix – ITS Position

(ITS Marketing Plan, 2002)

Since then, ITS had implemented more than fifteen (15) banking solutions projects and acquired a great deal of skills and knowledge. ITS got stronger over the years in the following areas:

Customer Relationship Management.
Project Management.
Banking Business Knowledge.
Banking Products Knowledge.
Technical Integration Capabilities.
Islamic Finance Business Skills.

In addition to that, ITS was able to establish its own software development house as a subsidiary organization called ITSoft. The above mentioned knowledge and capabilities and with the presence of ITSoft gave IT’S A competitive advantage to be positioned as one of the leading organizations in the middle east to provide total integrated solutions for the banking sector. ITS nowadays competes with only few organizations world wide. Being a local company in the middle east gives ITS another advantage that allows them to say, we are your local supplier next door and we are here to stay.

The competitive position that ITS obtained is easily sustainable since it takes a great deal of time and efforts to imitate all the accumulated knowledge, processes, skills and experiences for any organization that wants to compete with them. Nowadays, ITS has specialized staff in all business areas of the banking industries. They also have dedicated sales and marketing executives to look after the following areas:

New opportunities.
Customer relationship building.
Competitors.
Competitor products.
New market trends in the banking industry.
Supplier relationship management.
New features to be added to the current suit of products.
New products to be added to the suit of products supplied by ITS.
New geographical areas to be covered by ITS where they can sell their Banking Solutions. Recently, ITS managed to get new projects in Malaysia, Turkey and Pakistan.

Competitive Positioning Models used by ITS

All the above mentioned capabilities gave ITS the opportunity to use the following competitive positioning models and that made ITS obtain a competitive advantage that is very hard for many organizations to achieve:

Attribute Positioning: ITS uses attributes such size and location to place itself as one of the leading organizations when it comes to implementing banking solutions. ITS employs more than 600 employees and they are all serving the customer base of the Middle East area. Local banks and financial institutions see this as a great value adder to them.
Benefit Positioning: ITS have proven to customers and competitors that they can implement new banking projects in a very short time such as 60 days. The speed to go on production for a new bank makes a huge difference to the shareholders and the management of such banks. The speed of which ITS can mobilize resources and implement projects is a great advantage here.
User Positioning: ITS has all the infrastructure in terms of hardware, application software, help desk and processes to provide and implement solutions that are classified as critical mission applications. Banking applications are considered to be mission critical and that is one of the reasons that ITS is one of the most organizations that get this type of business.
Quality Positioning: ITS was one of the first IT organizations that obtained the ISO-9000 certification for Quality Assurance. In addition to that ITSoft, the ITS subsidiary for software development, has also obtained the CMM (Capability Maturity Model) Level 3 certification which is an international quality assurance certification for software houses. Because of this, ITS is very well known to deliver quality products and services.
Focus: In their marketing campaigns and organization profile, ITS stresses on the fact that it is a focused organization that is specialized for solutions in only the Banking and Telecommunications industries.

The ITS internal resources used to create the Competitive Position

ITS uses all of the internal resources mentioned in the RBV theory that were discussed earlier.

Organization Culture: The Customer value is one of the main beliefs ITS management preach to all employees. This is also demonstrated by providing the superior service and quality products. Another aspect of the culture that is worth mentioning here is the focus on employee satisfaction. Employees are the ones who provide ITS with its capabilities since all ITS sells is the knowledge obtained by its people. Therefore, ITS management makes sure that ITS employees are always motivated and satisfied. This on the other hand encourages the employee to be innovative and creative to give more to ITS. This leads us to another value in ITS culture which is innovation. Many new deals came about from new products that evolved from innovative ideas from ITS employees. ITS sales executives along with the Business Solutions department professionals and the Marketing department executives hold regular meeting to come up with need creation tactics to create certain needs at the customer site. Once the need the created, the technical and the Business consultants at ITS would have a new service or product to address this need. And that, in turn, get sold to the customer and therefore new business in acquired. Finally, the internal communication system and processes that is imbedded in ITS culture allows all staff from all departments to know what is going on in the market and at the customer site.
Marketing Assets and Capabilities: ITS builds very close relationships with their customers. In fact, many new business opportunities were won because of the strong relationship ITS enjoys with their clients. These relationships allows for strong market sensing capability. What competitors are doing and what new products they are producing are such information that ITS Marketing and Sales executives get from their own customers. On the other hand, ITS employs specialized professionals who perform market research and analysis. Periodic reports are submitted to Marketing, Sales and Business Solutions Managers so that the necessary decisions can be made after that. In addition to that, ITS employs product manager and industry specialists who work together to create and develop new products or add new features to the existing products.
Alliance Based Assets: ITS management is always eager to expand their business in new countries. As mentioned earlier, ITS managed to get new business deals in Malaysia, Turkey and Pakistan. This was done by partnering with local organizations in those areas. New products are also added to the ITS products portfolio by partnering with new suppliers.

Conclusion

Resource Based View theory plays a major part in creating the competitive position of any organization. One can think of the Resource Based View as the response to the Marketing Paradigm/Orientation theory where the Market is researched and the results are passed to the organization. RBV then takes over to respond with new innovative products, services, processes, policies even cultures to sustain the competitive position the organization has and to get to new ones. This concept is very clear in the above case study where new business was created and along with that new products, services, processes and even the new culture was introduced to the organization.

It is very essential for the organization’s management and leadership to pay attention to the Resource-Based View theory and make it visible to other managers in the organization. This will create more focus to enhance the internal assets and capabilities of the organization in which case will lead to better competitive position and better competitive advantage for the organization on the long run.

References

Day, George S., Oct. 1994, The Capabilities of Market-Driven Organizations, Journal of Marketing, Vol. 58, Oct.1994

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