Chapter 4 Lecture Notes
Developing Competitive Advantage and Strategic Focus
Chapter 4: Developing Competitive Advantage and Strategic Focus
Chapter Outline
I. Introduction
A. Beyond the Pages 4.1 discusses innovation as one of the key competitive
advantages of the twenty-first century.
B. The synthesis of information gathered from the situation analysis is critical in
developing competitive advantages and the strategic focus of the marketing plan.
C. SWOT (strengths, weaknesses, opportunities, and threats) analysis is a widely
used tool for organizing and using the information gathered from the situation
analysis. A SWOT analysis encompasses both the internal and external
environments of the firm.
D. SWOT analysis is considered to be one of the most effective tools in the analysis
of marketing data and information. SWOT analysis has many benefits; and is so
useful and logical that many underestimate its value in planning. [Exhibit 4.1]
II. Making SWOT Analysis Productive [Exhibit 4.2]
A. Stay Focused
1. A mistake planners often make in conducting SWOT analysis is to
complete one generic analysis for the entire organization or business unit.
2. In most firms, there should be a series of analyses, each focusing on a
specific product/market combination. The only time a single SWOT
analysis would be appropriate is when an organization has only one
product/market combination.
B. Search Extensively for Competitors
1. Information on competitors and their activities is an important aspect of a
well-focused SWOT analysis. The key is not to overlook any competitor,
whether a current rival or one on the horizon.
2. The firm will focus most of its efforts on brand competition. However, the
firm must watch for any current or potential direct product substitutes.
C. Collaborate with Other Functional Areas
1. The final outcome of a properly conducted SWOT analysis should be a
fusion of information from many areas.
2. While combining the SWOT analyses from individual areas, the marketing
manager can identify opportunities for joint projects and cross selling of
the firm’s products.
D. Examine Issues from the Customers’ Perspective
1. Every issue in a SWOT analysis should be examined from the customers’
perspective. Marketing planners must also gauge the perceptions of each
customer segment that the firm attempts to target.
2. Examining issues from the customers’ perspective also includes the firm’s
internal customers: its employees.
3. Taking the customers’ perspective can help the firm interpret the clichés
they might develop. [Exhibit 4.3]
Chapter 4 Lecture Notes
Developing Competitive Advantage and Strategic Focus
E. Look for Causes, Not Characteristics
1. Many analysts simply list strengths, weaknesses, opportunities, and threats
as descriptions or characteristics of the firm’s internal and external
environments without going deeper to consider the causes for these
characteristics.
2. More often than not, the causes for each issue in a SWOT analysis can be
found in the resources possessed by the firm and/or its competitors:
financial resources, intellectual resources, legal resources, human
resources, organizational resources, informational resources, relational
resources, and reputational resources.
F. Separate Internal Issues from External Issues
1. Internal issues are the firm’s strengths and weaknesses, while external
issues refer to opportunities and threats in the firm’s environment.
2. The key test to differentiate a strength or weakness from an opportunity or
threat is to ask, “Would this issue exist if the firm did not exist?” If the
3. The failure to understand the difference between internal and external
issues is one of the major reasons for a poorly conducted SWOT analysis.
III. SWOT-Driven Strategic Planning
A. The role of SWOT analysis is to help the marketing manager make the transition
from a broad understanding of the marketing environment to the development of a
strategic focus for the firm’s marketing efforts.
B. The issues that can be considered in a SWOT analysis are numerous and will vary
depending on the particular firm or industry being examined. [Exhibit 4.4]
C. Strengths and Weaknesses
1. Strengths and weaknesses exist either because of resources possessed (or
not possessed) by the firm, or in the nature of the relationships between
the firm and its customers, its employees, or outside organizations.
2. A strength is meaningful only when it serves to satisfy a customer need.
When this is the case, that strength becomes a capability.
3. The marketing manager must also develop strategies to overcome the
firm’s weaknesses, or find ways to minimize their negative effects.
D. Opportunities and Threats
1. Opportunities and threats exist outside the firm, independently of internal
2. The marketing manager must develop strategies to take advantage of
opportunities and minimize or overcome the firm’s threats.
E. The SWOT Matrix
1. To utilize SWOT analysis successfully, the marketing manager must be
cognizant of four issues:
a) The assessment of strengths and weaknesses must look beyond the
firm’s resources and product offering(s) to examine processes that
Chapter 4 Lecture Notes
Developing Competitive Advantage and Strategic Focus
b) The achievement of the firm’s goals and objectives depends on its
ability to create capabilities by matching its strengths with market
opportunities.
c) Firms can often convert weaknesses into strengths, or even
capabilities, by investing strategically in key areas.
d) Weaknesses that cannot be converted into strengths become the
firm’s limitations.
2. A SWOT matrix is a four-cell array that can be used to visually evaluate
each element of a SWOT analysis. [Exhibit 4.5]
3. To begin the analysis, the manager must evaluate the issues within each
cell of the matrix in terms of their magnitude and importance. This
evaluation should be based on customers’ perceptions.
4. It can be informative to quantitatively assess each cell of the SWOT
matrix [Exhibit 4.6]
5. Elements with the highest total ratings (positive or negative) should have
the greatest influence in developing the marketing strategy.
IV. Developing and Leveraging Competitive Advantages
A. The conversion of strengths into capabilities gives the firm a competitive
advantage and allows it to serve customers’ needs better than the competition.
[Exhibit 4.7]
B. While competitive advantages most often stem from real strengths possessed by
the firm or in real weaknesses possessed by rival firms, competitive advantages
can also be based more on perception than reality.
C. Many successful firms have developed capabilities and competitive advantages
based on one of three basic strategies: [Exhibit 4.8]
1. Operational excellence—focusing on efficiency of operations and
processes, lower costs, and delivering good value to customers.
2. Product leadership—focusing on technology, product development, and
delivering the most advanced, highest quality goods and services in the
industry.
3. Customer intimacy—focusing on knowing customers, understanding their
needs better than the competition, and developing long-term customer
relationships.
D. Beyond the Pages 4.2 discusses how the 3M Company uses a product leadership
strategy to successfully compete in many markets.
V. Establishing a Strategic Focus
A. The firm’s strategic focus is the overall concept or model that guides the firm as it
weaves various marketing elements together into a coherent strategy.
B. A firm’s strategic focus is typically tied to its competitive advantages, or it can be
geared toward compensating for the firm’s weaknesses or defending against its
vulnerabilities.
C. There are four general directions for a firm’s strategic efforts:
1. Aggressive (many internal strengths and external opportunities)
2. Diversification (many internal strengths and external threats)
Chapter 4 Lecture Notes
Developing Competitive Advantage and Strategic Focus
3. Turnaround (many internal weaknesses and external opportunities)
4. Defensive (many internal weaknesses and external threats)
D. Many firms struggle with finding a focus that translates into a strategy that offers
customers a compelling reason for purchasing the firm’s products.
E. The strategy canvas, developed by Professors Kim and Mauborgne in their book
Blue Ocean Strategy, is a useful tool for identifying a strategic focus.
1. A strategy canvas is a tool for visualizing a firm’s strategy relative to
other firms in a given industry. [Exhibit 4.9]
2. The central portion of the strategy canvas is the value curve, or the graphic
representation of the firm’s relative performance in its industry.
3. The key to using the strategy canvas (and the key to developing a
compelling strategic focus) lies in identifying a value curve that:
a) clearly depicts the firm’s strategic focus
b) is distinctively different from competitors
4. Beyond the Pages 4.3 provides more information on the Blue Ocean
approach to developing a strategic focus.
VI. Developing Marketing Goals and Objectives
A. Developing Marketing Goals
1. Goals are statements of broad, desired accomplishments and do not
2. Goals indicate the direction in which the firm attempts to move, as well as
3. All marketing goals should have these characteristics:
a) Attainability—goals should be realistic and capable of being
achieved
b) Consistency—goals must be consistent with each other and with
the goals of other functional areas
c) Comprehensiveness—marketing goals should relate to the
organization’s goals and help to clarify the roles of all parties in the
organization
d) Intangibility—marketing goals should be somewhat ambiguous
and open-ended to motivate employees by promoting comparisons
with rival firms
B. Developing Marketing Objectives
1. Objectives provide specific and quantitative benchmarks that can be used
to gauge progress toward the achievement of the marketing goals.
2. A particular goal may require several objectives for its progress to be
adequately monitored, usually across multiple business functions.
3. Goals without objectives are essentially meaningless because progress is
impossible to measure.
4. All marketing objectives should have these characteristics:
a) Attainability—marketing objectives should be realistic given the
internal and external environments of the firm
Chapter 4 Lecture Notes
Developing Competitive Advantage and Strategic Focus
b) Continuity—objectives should be consistent with those set in
previous periods (continuous objectives), or should be set to
elevate the level of performance significantly (discontinuous
objectives) [Exhibit 4.10]
c) Time frame—objectives should have an appropriate time frame to
allow for accomplishment with reasonable levels of effort
d) Assignment of responsibility—an objective must identify the
person, team, or unit responsible for achieving it
C. Establishing goals and objectives sets into motion a chain of decisions and serves
as a catalyst for the subsequent stages in the planning process.
Questions for Discussion
1. Strengths, weaknesses, opportunities, and threats: Which is the most important? Why?
How might your response change if you were the CEO of a corporation? What if you
were a customer of the firm? An employee? A supplier?
Although answers will vary, most students are likely to argue that strengths are the most
2. Support or contradict this statement: “Given the realities of today’s economy and the
rapid changes occurring in business technology, all competitive advantages are short
lived. There is no such thing as a sustainable competitive advantage that lasts over the
long term.” Defend your position.
3. Is it possible for an organization to be successful despite having a value curve that is not
distinct from the competition? In other words, can an organization be successful by
selling a me-too product (a product that offers no compelling differences when compared
to the competition)? Explain.
Chapter 4 Lecture Notes
Developing Competitive Advantage and Strategic Focus
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can lead to high sales/profits. This, of course, assumes that sales/profits are the most
important measure of success.
Exercises
1. Perform a SWOT analysis using yourself as the product. Be candid about your resources
and the strengths and weaknesses you possess. Based on the opportunities and threats you
see in the environment, where do you stand in terms of your ability to attend graduate
school, get a job, begin a career, or change careers?
2. Choose two companies from the same industry: one that is quite successful and one that
is struggling. For each company, list every strength and weakness you believe it
possesses (both the company and its products). Compare your answers with those of your
colleagues. What could these companies learn from your analysis?
3. Using the same companies from question 2 above, draw a strategy canvas that depicts the
value curve of both firms, as well as the “average” firm in the industry (i.e., draw three
value curves). What does the successful firm offer that the struggling firm does not offer?
What might a firm do to break away from the industry’s traditional competitive factors?