Competition: what does it really mean?

The TQM Magazine Competition: what does it really mean? Keith Walley

Article information: To cite this document: Keith Walley, (1998),"Competition: what does it really mean?", The TQM Magazine, Vol. 10 Iss 3 pp. 186 - 189 Permanent link to this document: http://dx.doi.org/10.1108/09544789810214819

Downloaded by HARPER ADAMS UNIVERSITY COLLEGE At 06:49 07 September 2015 (PT)

Downloaded on: 07 September 2015, At: 06:49 (PT) References: this document contains references to 8 other documents. To copy this document: [email protected] The fulltext of this document has been downloaded 3960 times since 2006*

Users who downloaded this article also downloaded: Edmund Fitzpatrick, Leigh Davison, (1997),"Competition policy and the competing interpretations of the notion of substantial part of the Common Market", European Business Review, Vol. 97 Iss 4 pp. 179-186 http:// dx.doi.org/10.1108/09555349710175306 PAT SCOTT, ROBERT NORTON, PHILIP WHITEMAN, (1985),"No Competition?", New Library World, Vol. 86 Iss 5 pp. 84-87 http://dx.doi.org/10.1108/eb038634 (1999),"Competition", Work Study, Vol. 48 Iss 7 pp. - http://dx.doi.org/10.1108/ws.1999.07948gaa.002

Access to this document was granted through an Emerald subscription provided by emerald-srm:172770 []

For Authors If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information.

About Emerald www.emeraldinsight.com Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services. Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. *Related content and download information correct at time of download.

Techniques Competition: what does it really mean?


Keith Walley

The author Keith Walley is Senior Lecturer in Marketing at Harper Adams Agricultural College, Newport, Shropshire, UK Abstract Extends a discussion concerning competition. A model is introduced, based on the concept of the extended product, in order to help TQM practitioners manage the competitiveness of their products. Further, a discussion is initiated which addresses a number of issues relating to competition.

Introduction In 1996 a paper was published in The TQM Magazine entitled “Competition: what does it mean?” (Zairi, 1996). In this paper Mohamed Zairi explicated a modern approach to competitiveness by discussing the meaning and implications of several key competitive principles. The purpose of the paper was to encourage people involved in total quality management (TQM) to see their actions in a wider context; a vital perspective if an organisation is to reap real benefits from adopting the principles and practices of TQM. However, while this paper initiated a very useful discussion concerning TQM and competition there were areas where its value appeared limited. Specifically, some of the terms used were too general to be of use to practitioners seeking to improve the competitiveness of their own products. For instance the terms “product/service technological capability”, “customer service”, “responsiveness” and “quality” were mentioned but all are multivariate and difficult to manage. Similarly, a model which was introduced to help organisations undertake benchmarking affords practitioners only a limited opportunity for managing them, because it focuses on the factors influencing competitiveness. Further, the paper contained a number of points which were not developed very well and, as a consequence, are potentially misleading. These points relate to “time-based competition”; “being a global competitor”; and “having a focus on core competences”. This discussion therefore, while acknowledging the valuable contribution made by Zairi, sets out to reconsider some aspects of the original paper with a view to providing more help for practitioners. Readers are introduced to another model which enables them to focus on the specific aspects of their products which make them competitive; before the discussion progresses to develop a number of points in the original paper. First though, it is necessary to understand a little more about the nature of competition.

The nature of competition

The TQM Magazine Volume 10 · Number 3 · 1998 · pp. 186–189 © MCB University Press · ISSN 0954-478X

An important first step in any discussion of “competition” is to recognize that, in entering into competition an organisation is seeking competitive advantage; and that competitive advantage lies at the heart of corporate success (Porter, 1985). Once this has been recognised it is just as important to know that there are only two routes to achieving 186


Competition: what does it really mean?

The TQM Magazine

Keith Walley

Volume 10 · Number 3 · 1998 · 186–189

competitive advantage (Porter, 1985). One route is by adopting a cost-leadership strategy. A company that adopts this strategy will be offering products which are equivalent to those offered by competitors, but will be doing so far more efficiently and therefore at lower cost than competing organisations. The various companies within the value network and the various departments within the value chain will be co-operating with each other, rather than competing with each other which is the approach to TQM advocated by W.E. Deming (Deming, 1995). In practice, there can only be one costleader in any market; so other companies that may exist, and there are often several, are achieving their competitive advantage via the differential route. Here a company will be trying to keep costs similar to the competition but will be supplying a product which consumers value more highly and are willing to pay more for. Companies compete in terms of both costs and products but their competitive advantage comes primarily from one route or the other. While much of TQM focuses on achieving competitive advantage via the cost-leadership route, Zairi, in writing about market-driven competition, was actually discussing differential advantage. Once this is accepted it becomes possible to convey a deeper understanding of differential advantage through the concept of the “extended product”.

The concept of the extended product It is widely accepted in the marketing literature that a product can be conceived of as a “bundle of attributes”. In the case of a car these attributes would include colour, speed and marque (name) to list but a few. Some of these attributes are closely related to the core benefit that possession of the product confers on its owner, but others are not and this gives rise to several definitions of “product”. To illustrate this, selected attributes of a screw conveyor are shown in Figure 1. At the centre of the illustration is the “core product” which is closely related to the “core benefit” provided by the product and which, in this case, is the transport of grain. The attributes of the product which assist directly with the transport of grain may include “weight” and “power”. These attributes comprise what is referred to as the “recognized product”. There are, however, a whole host of other attributes which, while not part of the screw conveyor itself, are associated with it in so much as within the customers mind they may influence the purchase

Figure 1 A model of a screw conveyor as an extended product EXTENDED PRODUCT Delivery on time

Company reputation RECOGNIZED PRODUCT

Length Delivery of correct item

Screw angle

CORE PRODUCT (BENEFIT)

Speed of quotes

Tansport of grain

Weight

Power

Price

Spares service Ease of maintenance

AUGMENTED PRODUCT X-Stock Delivery

decision. In the case of the screw conveyor these attributes may include “price”, “ease of maintenance” and the provision of a “spares service”. These attributes comprise the extended product and it is these that form the building blocks of a product’s differential advantage. In practice, an extended product can comprise many attributes. In the screw conveyor project a total of 53 extended product attributes were identified (Walley et al., 1994). It is possible to identify and measure them in terms of their importance to the customer; and competing products’ performance on these same attributes (Thwaites et al., 1996), through market research. Where this is done not just for your own product, but also for those with which it is competing it is then possible to make comparisons and “benchmark” your product. It is also possible to identify attributes which need resources investing in them to improve the competitiveness of a product; attributes which can have resources withdrawn from them because the company has a large competitive advantage; and even attributes which constitute latent sources of competitive advantage by not being currently exploited. One thing to watch out for is the occasional unique attribute which certain products have. It is possible that this attribute has been introduced deliberately to gain a differential advantage over competitors. A product which contains one of these attributes has been augmented and is know as an “augmented product”. This model helps to objectively identify, measure and evaluate specific dimensions of

187


The TQM Magazine

Keith Walley

Volume 10 · Number 3 · 1998 · 186–189

market-driven competition. Consequently, it might seem a better model for benchmarking differential advantage than the model proposed by Zairi but that is not really the case. The two models adopt different perspectives in order to explain competition and it is better to think of them as complementing each other rather than being alternatives.

competitive advantage. Specifically, he stated that “…being first and good matters more than being last and best”. This is not always wrong but it is potentially misleading. Certainly there is a literature (e.g. Kerin et al., 1992) concerning the advantages that accrue to those companies that are first into a market, many of which originate from the experience curve effect. However, there is also a literature (e.g. Guasch and Weiss, 1980) concerning the advantages to be gained by being late into a market and it is important for readers to be aware that, just because they are not first into a market does not mean that they cannot compete successfully in that market, if they adopt the right strategies. Also, it is worth remembering at this point that, while the compression of time is a good general guide for competitive success, it does not apply in every instance. For example, if one supplier company reduces its manufacturing cycle-time by a day but its customers do not, then the reduction will not be turned into a competitive advantage, because the customers cannot benefit from the improved cycle-time. At least in the short-term, the manufacturing company may well be left at a competitive disadvantage because of increased levels of finished stock.


Innovation and the extended product One issue which the original paper focused on, and which the extended product model may help explicate further, is the role of innovation in achieving competitiveness. The competitive environment is dynamic and continually evolving. As soon as one company augments its product to gain a competitive advantage, its competitors seek to nullify the threat by adding a similar attribute to their own product. Eventually, customers come to expect this attribute in all of the products. The attribute has moved inward on the extended product model and becomes necessary, but not sufficient, for achieving differential and competitive advantage. The omission of the attribute from a product can put it at a competitive disadvantage, but not give it a competitive advantage. Therefore, in order to maintain competitive advantage there is an ongoing need to add new attributes or develop existing ones. In other words there is a need to continually innovate. However, the precise form of innovation may not be that which Zairi had in mind when writing the original paper. While accepting that the intention of the original paper was to focus on market-driven competition (differential advantage) it should be recognised that innovation relates to more than just products and services. While product and service innovation is important as a source of differential advantage there is often just as much scope for achieving a competitive advantage through innovation in the processes and systems which generate the products and services. Having examined the nature of marketbased competition, or differential advantage, in some detail, it is now propitious to give some attention to a number of other aspects of the original paper. In particular, it is worth reconsidering what Zairi termed “key competitive principles”.

Time-based competition According to Zairi “time-based competition” is a key competitive principle which currently represents one of the main sources of

Being a global competitor Another key competitive principle according to Zairi is the need to be a global competitor; and again, while correct in principle, it does need some clarification. As a strategy for achieving competitive advantage the statement is true. Operating on a global scale is a source of competitive advantage for some companies. However, it is not true for all. Indeed, not for most. Many companies survive and indeed flourish because they have built competitive advantages on a smaller scale. Some exploit their small scale by developing a superior appreciation of their customers’ needs, and satisfying those needs faster than a larger company where administration and managerial bureaucracy become obstructive. Other companies develop competitive advantages behind legal barriers which prevent competitors from entering their market (e.g. many Japanese markets are effectively protected from outside competitors). Many companies compete successfully without operating on a global scale. Further, by simply suggesting that global competition is a source of competitive advantage it would appear that this strategy is being advocated for all companies. In reality,

188


The TQM Magazine

Keith Walley

Volume 10 · Number 3 · 1998 · 186–189

however, practical considerations do not allow the majority of companies to adopt this strategy. Most companies that have the desire and the resources to compete globally already do so. Those companies that do not have the resources are simply not able to compete on this scale, so for most companies this is not a realistic strategy !


Core competencies A final key competitive principle is that competitive advantage has to be based on an organisation’s core competencies, and this too needs some explanation. First, Zairi advocates “deploying resources and expertise only in core activities that reflect the strengths of the organisation”. However, this is not strictly true, for if a particularly attractive strategic opportunity has been identified, it may be propitious to develop new core competencies. These may require deploying resources and expertise in activities which are not currently strengths, but which should become strengths in the future. A second point may only be a pedantic slip, but it could have serious implications for anyone using the discussion to manage resources. It is stated that, core competencies “… add value which benefits the end customer”. In fact, core competencies are those things which a company does well vis-à-vis the competition, but which may not be valued by the end customer. When core competencies are valued by the end customer they are more usually referred to as “capabilities” (Stalk et al., 1992). In this situation a manager who invests resources in core competencies rather than capabilities may not build the competitive advantage desired.

while this paper focuses on differential advantage, companies actually compete in terms of products (and services) as well as costs, so the latter must not be ignored. Second, this and the original paper have explicitly addressed three sources of differential advantage: (1) time-based competition; (2) being a global competitor; and (3) having a focus on core competencies. But, because most companies have sought competitive advantage from these sources already, then they offer a reduced potential for actually delivering competitive advantage. Consequently, readers are advised to seek other sources of competitive advantage for corporate success in the future. Finally, it is possible to conclude that a good understanding of competition is essential if practitioners are to implement the practices and principles of TQM, so as to maximise the competitiveness of a company’s products and services.

References Deming, W.E. (1995), The New Economics for Industry; Government; Education, MIT, Cambridge, MA. Guasch, J.L. and Weiss, A. (1980), “Adverse selection by markets and the advantage of being late”, Quarterly Journal of Economics, pp. 456-66. Kerin, R.A., Varadarajan, P.R. and Peterson, R.A. (1992), “First-mover advantage: a synthesis, conceptual framework, and research propositions”, Journal of Marketing, Vol. 56, pp. 33-52. Porter, M.E. (1985), Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, New York, NY. Stalk, G., Evans, P. and Shulman, L.E. (1992), “Competing on capabilities: the new rules of corporate strategy”, Harvard Business Review, pp. 57-69.

Conclusion This paper extends a discussion which appeared in Total Quality Management Magazine, Vol. 8 No. 1, by Mohammed Zairi concerning competition. A model was introduced based on the concept of the extended product in order to help TQM practitioners manage the competitiveness of their products, before a discussion was initiated which sought to develop a number of issues raised in the original paper. In conclusion, however, readers are advised to remember a couple of points. First,

Thwaites, D., Walley, K. and Foots, S. (1996), “Systematic management of differential advantage – a case study from the chemical industry”, Industrial Marketing Management, Vol. 25, pp. 209-22. Walley, K., Thwaites, D. and Dowson, P. (1994), “A framework for the systematic identification, prioritisation and exploitation of marketing assets”, Proceedings of the Marketing Education Group Conference, Marketing: Unity in Diversity, Vol. II, University of Ulster, pp. 966-75. Zairi, M. (1996), “Competition: what does it mean?”, The TQM Magazine, Vol. 8 No. 1, pp. 54-9.

189

This article has been cited by:


1. Martti Tapio Lindman. 2007. Remarks on the quality of the construction of business concepts. European Business Review 19:3, 196-215. [Abstract] [Full Text] [PDF]