Competition: Lessons for Marketing in Mexico Professor John Branch Olin School of Business

1. 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 • La Copa Mondial 2006 • Competition • Consumer Value • DW411k • Consumer Satisfaction • Innovation • Giovanni’s Ristorante • Resources • Questions

2. La Copa Mondial 2006 • El Tricolor? • La Copa Mondial 2006 • Competition • Consumer Value • DW411k • Consumer Satisfaction • Innovation • Giovanni’s Ristorante • Resources • Questions

3. 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. • La Copa Mondial 2006 • Competition • Consumer Value • DW411k • Consumer Satisfaction • Innovation • Giovanni’s Ristorante • Resources • Questions

4. 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 • La Copa Mondial 2006 • Competition • Consumer Value • DW411k • Consumer Satisfaction • Innovation • Giovanni’s Ristorante • Resources • Questions

5. R-A Theory accounts for ‘intangible’ production resources: • Financial • Legal • Informational • Physical • Human • Organisational • Relational • Production resources, however, are scarce, heterogeneous, and imperfectly mobile • La Copa Mondial 2006 • Competition • Consumer Value • DW411k • Consumer Satisfaction • Innovation • Giovanni’s Ristorante • Resources • Questions

6. Organisations struggle for these production resources • Yields different relative production-resources costs (cost or ‘comparative’ advantage) • Example: WalMart 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 • La Copa Mondial 2006 • Competition • Consumer Value • DW411k • Consumer Satisfaction • Innovation • Giovanni’s Ristorante • Resources • Questions

7. 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 • La Copa Mondial 2006 • Competition • Consumer Value • DW411k • Consumer Satisfaction • Innovation • Giovanni’s Ristorante • Resources • Questions

8. Relative Consumer Value Parity Superior Inferior Indeterminate Superior Performance Superior Performance • La Copa Mondial 2006 Lower • Competition • Consumer Value Superior Performance Inferior Performance Parity • DW411k Relative Production Resources Costs Parity • Consumer Satisfaction • Innovation Inferior Performance Inferior Performance Indeterminate • Giovanni’s Ristorante Higher • Resources • Questions

9. 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 • La Copa Mondial 2006 • Competition • Consumer Value • DW411k • Consumer Satisfaction • Innovation • Giovanni’s Ristorante • Resources • Questions

10. 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 • La Copa Mondial 2006 • Competition • Consumer Value • DW411k • Consumer Satisfaction • Innovation • Giovanni’s Ristorante • Resources • Questions

11. DW411K ¼ Sheet Sander • La Copa Mondial 2006 • Competition • Consumer Value • DW411k • Consumer Satisfaction • Innovation • Giovanni’s Ristorante • Resources • Questions

12. 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 • La Copa Mondial 2006 • Competition • Consumer Value • DW411k • Consumer Satisfaction • Innovation • Giovanni’s Ristorante • Resources • Questions

13. 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 • La Copa Mondial 2006 • Competition • Consumer Value • DW411k • Consumer Satisfaction • Innovation • Giovanni’s Ristorante • Resources • Questions

14. Giovanni’s Ristorante • La Copa Mondial 2006 • Competition • Consumer Value • DW411k • Consumer Satisfaction • Innovation • Giovanni’s Ristorante • Resources • Questions

15. 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. • La Copa Mondial 2006 • Competition • Consumer Value • DW411k • Consumer Satisfaction • Innovation • Giovanni’s Ristorante • Resources • Questions

16. Questions • La Copa Mondial 2006 • Competition • Consumer Value • DW411k • Consumer Satisfaction • Innovation • Giovanni’s Ristorante • Resources • Questions