ETAN2021 SUSTAINABLE COMPETITIVE ADVANTAGES

Name : Eric Tanudjaja

NIM : 1420204032

Program Study : Magister Management S2 Reg B2 (Post Graduate)

Lecturer : Mariana Rachmawati, Dr., S.E., M.M.

Competitive advantage is a concept that is widely used in commercial contexts, and it is often what

causes higher profitability, greater product sales, and the potential to develop indefinitely.

According to Michael E. Porter in the book of Competitive Strategy (1982), The Source of

differentiation of a firm, is when it provides something unique that is valuable to buyers beyon

simply offering a low price. Companies with substantial competitive advantages are better

positioned to prosper in their industries and can generally fend off competitors more readily than

their competitors.

Cost management, product differentiation, and customer service are some of the most prominent

elements that influence competitive advantage. These are what win you business today … but they

do not guarantee that you will keep that business tomorrow. In other words, what works today may

not work tomorrow. So BE CREATIVE.

The year 2021 filled with so many distraction and changes to our Marketing plan or company

strategy, thus I summarized 8 Strategies to give your organization the Competitive Advantage for

this year and for the next.

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TUGAS MATA KULIAH ADVANCED MARKETING MANAGEMENT

SUSTAINABLE COMPETITIVE ADVANTAGES

ETAN2021

8 Strategies of Creative Competitive Advantage

It is critical to have a strategy. Every expert defines it differently, but in general, strategy is making

clear and consistent decisions about who we serve, what we provide them, and how we deliver that

to them.

1. Partnership with a company outside our market

2. Differentiate and Innovate

3. Move early to the next battleground

4. Lock up resources

5. Attack from two fronts

6. Introduce a new piece to the game board

7. Coordinate the uncoordinated

8. Embrace what others abandon

1. Partnership with a company outside our market

You can catch your competitors off guard by partnering with a player from outside your market.

Of the 100 companies I studied, 21% cited using this move. One of them was the largest motorcycle

company in the world: India’s Hero Honda. Although Hero Honda produces more than 3 million bikes

a year, they remain relatively unknown in the Western world. Thus, many don’t know of how their

success stems from an ally between two distant enemies: a motor company and a bicycle distributor.

First, a little bit of a backstory. India’s government has protective laws that don’t allow foreign

companies to enter the country unless they create a minority joint venture with a local company. So,

when Honda wanted to sell its motorcycles in India, they needed to find a local partner Logically,

Honda should partner with a company that has experience assembling and distributing motorcycles.

Instead, they chose to align with a family-owned bicycle firm: Hero.

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Founded by two brothers in the 1950s, Hero was one of India’s leading bicycle brands who had:

a. Begun adopting just-in-time inventory practices pioneered by Honda and other Japanese

manufacturers.

b. Blanketed India with a large network of independent bicycle dealers (Figure 1).

c. Organized hundreds of suppliers who delivered just in time.

These 3 factors convinced Honda to partner with Hero. This caught the competition off guard. While

their competition was busy focused on running their own dealerships at limited locations, Honda

leveraged Hero’s independent dealers to establish a powerful network of 5,000 outlets. Had Honda

partnered with a “nearby” enemy, it might have remained in a crowded pack of good motorcycle

companies. Instead, by partnering with a distant enemy, Honda became outstanding at its game and

established its dominance over competitors like Suzuki, Yamaha and Kawasaki

2. Differentiate and Innovate

A firm differentiates itself from its competitors when it provides something unique that is valuable to

buyers beyond simply offering a low price. Differentiation allows the firm to command a premium

price, to sell more of its product at a given price, or to gain equivalent benefits such as greater buyer

loyalty during cyclical or seasonal downturns (Michael E. Porter, Competitive Strategy, 1982).

Differentiation and innovation leads to Superior performance if the price premium achieved exceeds

any added costs of being unique.

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Figure 1.


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Take the case of HEIQ, a Swiss based company leveraging their boundless academic

research network and internal development specialists to invent disruptive new technologies that

meet consumer needs and outperform the market. Engaging with consumer along the entire value

chain, making this company the ideal partner to help their brand

customers innovate, differentiate their products and capture the added value at the point of sale.

Developed in record time and launched after the Swiss authorities announced the lockdown in March

2020, HeiQ Viroblock has had a major impact on the global textile industry and is being

unprecedently adopted by mills around the world. HeiQ Viroblock is seen as one of the world’s most

efficient and effective antiviral/antimicrobial technologies and has been applied by more than 150

brands worldwide and to over 1 billion products from face masks and apparel, to home textiles,

mattresses and curtains.

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Since its inception HeiQ has strived to do things differently, to question the

status quo, to create differentiating innovation and added value for our

partners. - CARLO CENTONZE Co-founder & CEO/HeiQ Group and DR.MURRAY

HEIGHT Co-founder & Chief Science Officer/HeiQ Group.

HeiQ Viroblock is also a shining example of Swiss cooperation

between academics and industry. The silver technology was

developed at ETHZ (Eidgenössische Technische Hochschule

Zürich), the vesicle technology at EPFL (École polytechnique

fédérale de Lausanne), and the production was scaled up at

FHNW (Fachhochschule Nordwestschweiz)

3. Move early to the next battleground

This next strategy leverages an increasing pace of disruption. New battlegrounds in business are

emerging at an accelerated pace. If you can identify when and how your market will evolve, you can

move to the next battleground and establish a defensive position before your competition even

realizes that the future has changed. Of the companies I studied, 21% cited using this move, including

many of the world’s most dominant companies (like Walmart and Google). Let’s first take a look into

how Google executed this strategic opening. Early on in the game, Google realized that internet users

would increasingly start their surfing sessions through a search engine. They realized that instead of

typing an address into their browser’s URL box, users would prefer to enter search terms into their

favorite search engine.

Google moved onto this battlefield early on in the game and positioned themselves to play defence

instead of offense. Despite costly efforts to improve their search engines, both MSN and Yahoo!

continue losing ground to Google. It has effectively turned the game on its main competitors.

As for Walmart, their success also sprung from a simple initial tactic: identifying the next

battleground, setting up a stronghold there, and waiting for the competition. While large retailers

such as Sears, JC Penny, and Kmart positioned stores only in large city and town centers, Walmart

took the opposite approach: it focused on smaller towns

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“ALWAYS MAKE SURE YOU ARE ONE STEP AHEAD.”– QUOTE BY ODD ROAR LOFTERØD

Walmart adopted this strategy in part to avoid direct competition, and in part because they believed

the battleground would shift. They predicted that as consumers began migrating to suburban

neighbourhoods, consumers would subsequently prefer to shop at suburban retail stores over city-

center retail stores.

When leading retailers faced with declining sales in their key locations followed customers into these

smaller markets, they encountered an unexpectedly strong competitor. Walmart had been waiting

for them, fortified with a strong brand and an efficient distribution system. Today, Walmart has

become the world’s largest retailer thanks to their strategic opening move of moving early to the

next battleground.

4. Lock up resources

This next strategic opening is much like a strike from the shadows. It starts with identifying critical

pinch points in supply in your niche or industry. By doing so, you can restrict your competitors’ access

to resources, thereby pre-empting their ability to resist your expansion.

17% of the companies I studied used this move. Take the case of the iPod. While a sequence of

creative decisions contributed to iPod’s success, Apple would have fallen at the starting gates were it

not for this strategic opening of locking up resources. When Apple launched its first iPod, it signed an

exclusive agreement with Toshiba which prevented competitors from following quickly.

The iPod is essentially built of two key components: a hard-drive and a beautiful box. Before the iPod,

hard drives were simply too large to fit in an appealing box. Toshiba had recently developed a

revolutionary new hard drive the same size as players that use flash-memory the size of flash-

memory-based players, but could hold ten times the number of songs as these flash-memory players.

Apple quickly made its move: it purchased Toshiba’s entire inventory of these new hard drives to

prevent competitors like Sony from following too closely. By locking up Toshiba’s supply, at least

temporarily, Apple made it impossible for competitors to match the iPod’s performance.

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This gave Apple a period of protection of several months, which, in the consumer-electronics market,

can make a world of difference. By the time competitors could get their hands on Toshiba’s new hard

drives, iPod had imprinted itself in the minds of consumers.

Many other companies have sustained strong profits by applying this move. Coca-Cola, for instance,

signed large, long-term supply contracts with corn syrup manufacturers. This effectively blocked

Pepsi from their supply of corn syrup.

Oil and gas companies compete primarily by locking up drilling rights. De Beers came to dominate the

diamond industry by locking up mines.

But perhaps the most interesting application of this tactic involved Minnetonka, the maker of

Softsoap. Before Procter & Gamble and Colgate-Palmolive introduced their own liquid-soap products,

Minnetonka signed large, long-term contracts with the manufacturers of the pumps needed to

produce liquid-soap products.

This strategy afforded Minnetonka sufficient time to establish a defensible position in liquid soaps.

While most small companies that go head to head with P&G and Colgate-Palmolive fail, Minnetonka

survived by targeting its enemy’s source of power, rather than attacking directly.

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5. Attack from two fronts

Many successful companies are now creating a name for themselves in more than one industry. We

call this strategic dynamic the “two-front battle”, and 16% of the companies I studied cited using this

move.

Amazon is one of them. In the early 2000s, Amazon was generating nearly all of its revenue from

online sales and was considered an e-commerce company from an external perspective. To others, it

wouldn’t be logical for Amazon to help other retailers with technology support to bolster their own e-

commerce businesses. After all, this would be helping their competitors. Yet, that’s exactly what

Amazon was doing. They were helping retailers like Target manage their e-commerce technology.

There were doing this because Amazon viewed itself and its business differently. Jeff Bezos once said,

“we are in the business of protecting customers’ information”.

Their vision was “to be Earth’s most customer-centric company.”

None of these statements anchor Amazon in e-commerce. So, the idea of helping retailers with their

technology made sense to them. They developed a cloud service called Amazon Web Services (AWS)

which proved popular among retailers and other businesses. By 2018, AWS was generating over $25

billion in revenue.

If Amazon had defined itself as an e-commerce company belonging to just one industry, it would have

overlooked the $25 billion opportunity AWS became. Another important thing to note is that a large

part of AWS’ success comes from the fact that Amazon forced their competitors onto a two-front

battle, which their competitors were not prepared for.

Software firms like Microsoft had already identified the cloud service market as a big opportunity.

Microsoft was prepared to compete with other software firms like Oracle, but had not considered a

retailer like Amazon to be a credible player in the space. Essentially, Microsoft now had to compete

on two fronts: one against software companies and another against Amazon

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The siege of British Airways by Virgin is another example of this strategic opening. By 1984, numerous

start-up airlines had failed to challenge British Airways in the U.K. When Virgin Group launched Virgin

Atlantic, it had less money, capacity, political clout, and experience.

However, Virgin had something other direct competitors of British Airways didn’t have: a strong

brand in the music industry. Virgin leveraged its music brand to win over airline passengers with edgy

advertisements and PR stunts. British Airways was under attack on two fronts — airlines and music.

In just five years Virgin Atlantic grew to £10 million in profits. Today, it generates over £2.5 billion in

revenue and is the first UK-born airline to have successfully competed against British Airways.

6. Introduce a new piece to the game board

By creating a new entity, you can disrupt competitive dynamics in your favour. Of the companies I

studied, 13% grew by applying this move.

One of the most intriguing case studies of this move is Igvar Kamprad, a furniture salesman with a

simple business. Kamprad would rent space at furniture conferences and sell furniture. He was such a

successful salesman that his competitors ganged up on him and prevented him from participating.

Kamprad could have decided to sell something else or find a different furniture conference, but

instead he decided to create something out of nothing.

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Launching the Still Red Hot campaign with 90-

second TV spots gave the brand the stature and

scale needed to assert the brand’s confidence

at a time of economic uncertainty. This was

complemented by premium outdoor sites and

press titles to deliver the product superiority

story. Tried and tested response driving in the

press and on the radio acted as the bedrock to

the campaign, ensuring goodwill translated into

sales.

Figure 1. The Still Red Hot 25th anniversary campaign 2009

Kamprad created his own furniture conference but didn’t allow his competitors to sell their goods at

his conference. His new furniture conference business made so much profit, he decided to run

another conference and then another. Eventually, it occurred to him that he might as well run his

conference every day. That concept became what is now IKEA, the largest furniture retailer in the

world. By creating something out of nothing, Kamprad disrupted his industry.

Another application of this tactic is creating your own customer. This is what Tony Fernandes did

when he bought the nearly bankrupt airline AirAsia for just 27 cents in 2001. Fernandes’ core concept

was not to compete for airline customers. Instead, he created new airline customers by convincing

railroad customers to take a plane instead.

He opened up routes in smaller airports, closer to geographies in which people tended to take

railroads. He geared his marketing and pricing to appeal to railroad customers. By creating a new

customer, he unlocked a new, uncontested market space. Today, Air Asia is the second-largest

discount airline in the world.

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This move can also be applied through creating a new category. Gatorade, for example, started off

selling drinks with electrolytes designed to replenish tired athletes. They didn’t sell their drink in

stores, they sold it to athletic clubs.

As Gatorade’s sales grew, Pepsi and Coca-Cola failed to notice because their market share reports did

not (yet) include the new sports-drink category Gatorade was creating. By the time they realized

there was a new category, it was too late. Gatorade had solidified its position and remains the largest

sport-drink brand up to this day.

7. Coordinate the uncoordinated

If you can organize independent players into a coordinated front, you can simulate greater power

with less investment. 13% of the companies I analyzed applied this move. Wikipedia and open source

software are great examples of this principle at work.

In 2001, an unusual player entered the encyclopedia market. Jimmy Wales and Larry Sanger had been

working for Nupedia, a web-based encyclopedia that provided free content reviewed and edited by

experts. Nupedia’s innovation was delivering content exclusively via the web, not by CD-ROM or

print, and it gave its content away for free.

Then, Nupedia added a new service: an open encyclopedia that users could edit without the burden

of expert review. This had the potential to unlock an ocean of content. Contributors spontaneously

organized to build content and by the end of its first year, the new service called Wikipedia had

grown to approximately 20,000 articles in 18 languages. By the end of 2006, Wikipedia had absorbed

its former parent Nupedia and became a stand-alone business wielding an army of over 4,500 active

editors who offer over 5 million articles in 229 languages

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Its English-language edition alone offers over 1.4 million articles, dwarfing its competitors Britannica

and Microsoft’s Encarta that had about 100,000 and 68,000 articles respectively. By efficiently

coordinating millions of individuals, Wikipedia has been able to replicate and arguably exceed the

power of better-funded rivals.

This pattern of coordinating individual elements is growing in prevalence. Uber has used it to disrupt

the automobile market by coordinating under-used automobile capacity. Airbnb has grown into a

company worth over $30 billion in less than ten years by coordinating under-used bedrooms,

apartments, and houses.

Today, we are on the cusp of an historic breakthrough in the application of this strategic approach

with Blockchain technology, which enables the coordination of information without any central

authority maintaining the official record. Used primarily to enable cryptocurrencies, blockchain is

finding its way into other applications such as music.

Historically, musicians depended on music labels to track when their songs are played to calculate

royalty payments. With blockchain, no central authority is needed, opening up a whole new

possibility in the industry.

8. Embrace what others abandon

Many of the most disruptive companies in history were not born out of doing something new but

from embracing something old. By adopting what your market discards or abandons — such as an old

business model, a technology, or player — you can secure an advantage because your competitors

are unlikely to “return to the past” after moving on to something new.

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This strategy works particularly well when competitors, in their drive for “innovation,” clamor for the

new thing. Another 13% of the companies I analyzed used this move to some degree.

Southwest Airlines is a prime example of finding a jewel among the discarded by resuscitating an

abandoned business model.

The largest airlines had long-since switched to the hub-and-spoke system. The hub is a central airport

that flights are routed through, and spokes are the routes that planes take out of the hub airport. The

hub-and-spoke system allow airlines to offer more flights for passengers and book full planes more

consistently. Southwest Airlines however decided to put their gear in reverse. They shook up the

industry by reintroducing the old point-to-point model. This old system takes travelers directly to a

destination, instead of going through a central hub. Adopting this model helped Southwest to

differentiate its business by offering the convenience of point-to-point travel which other airlines

were not offering. It was also difficult for its competitors to copy, because they had invested heavily

in hubs.

As a result, Southwest enjoyed a long period of differentiation. Ironically, at the core of Southwest’s

innovation, was the decision to return to the past. Another company that succeeded with this

strategy was Craiglist. At a time when websites were investing in video and dynamic displays,

Craigslist embraced the abandoned. They created what most interface designers would call an ugly

interface of simple text links. This choice helped Craigslist emerge as the most popular online

classified site in the US and disrupt the newspaper industry.

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Bibliography

Competitive Advantage , Creating and sustaining superior performance, by Michael E. Porter, 1985

https://blog.growthinstitute.com/business-strategy/7-strategies-competitive-advantage

https://www.innovationintextiles.com/heiq-viroblock-wins-swiss-technology-award-2020/

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ETAN2021 SUSTAINABLE COMPETITIVE ADVANTAGES