LITERATURE REVIEW

How marketing strategy can develop a competitive advantage for a firm?

How marketing strategy can develop a competitive advantage for a firm?

International business can be traced back to many of the earliest civilisations and the Egyptians, Greeks and Romans were all to a great extent involved in trade across their borders. However, the great influence of globalisation has developed during the last centuries due to the impact of different driving forces (Yip, 1992) within the economy, which have caused businesses to become internationalised and then globalise.

At the same time, the internationalisation has been a slow process for most companies and it has often been a question of gaining experience of other countries step by step. When the home market limits the opportunities it might be necessary for expansion into other market areas. In this situation it has been necessary for the company to attempt to reduce uncertainty by exporting to neighboring markets.

Limited resources might also lead to that the company prefers forms of market entry that are not so costly and hazardous. However, during the last two decades, companies have developed their international activities more on a contingency basis. The international market behavior has been influenced by a need to take advantage of different market opportunities and by an increasing need to serve customers in the global market environment. Due to the competitive situation it might also have been necessary to introduce products more quickly in the marketplace or to introduce products to several markets simultaneously.

Several researchers within the area of international marketing have, during the last decade, devoted their topics to the process of internationalisation. For the most part, this research has been focused (Fletcher, 2001) on factors causing internationalisation or to the process why companies become increasingly involved in international activities. Less interest has been devoted to the marketing strategy as such. This paper will therefore be focused on the marketing strategy and the need for adjustment due to the market situation.

Competitive Advantage for a Firm

When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rivals. The goal of much of business strategy is to achieve a sustainable competitive advantage.

Michael Porter identified two basic types of competitive advantage:

* cost advantage

* differentiation advantage

A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products (differentiation advantage). Thus, a competitive advantage enables the firm to create superior value for its customers and superior profits for itself.

Cost and differentiation advantages are known as positional advantages since they describe the firm's position in the industry as a leader in either cost or differentiation.

A resource-based view emphasizes that a firm utilizes its resources and capabilities to create a competitive advantage that ultimately results in superior value creation. The following diagram combines the resource-based and positioning views to illustrate the concept of competitive advantage:

A Model of Competitive Advantage

Resources

 

 

 

 

DistinctiveCompetencies

Cost AdvantageorDifferentiation Advantage

ValueCreation

Capabilities

 

 

Resources ...