1 Summary of Which Competitive Advantage(s)? Competitive AdvantageMarket Performance Relationships in International Markets

Introduction

Kaleka and Morgan (2017) conducted a study to evaluate the elements of competitive advantage among exporters in the UK. Specifically, they looked at the factors that affect competitive advantage and which types of competitive advantage yield the best results. The authors focused on price, product and service quality in relation to performance among international firms. The framework for analysis included how customer value logic affects value creation and value capture. This paper describes the objectives of the study, the methodology used, and the findings.

Objectives

The main objective of the study by Kaleka and Morgan (2017) was to fill a gap in the research on competitive advantage resulting from a lack of focus on the types of competitive advantage that affect performance outcomes and the contingency factors that play a part in determining these outcomes. The researchers began by asking two questions upfront: When does competitive advantage lead to superior performance in export markets? How can exporters best capture the value they create? (Kaleka & Morgan, 2017, p. 25). They showed that existing models of firm performance are inadequate for answering these questions because they offer only a broad picture of the antecedents of market performance (Kaleka & Morgan, 2017, p. 25). For that reason, a number of assumptions about the relationship between performance and advantage are routinely left unexplored by researchers. Kaleka and Morgan (2017) aimed to investigate those assumptions. The two questions they used to guide their study were: (1) Which types of competitive advantage lead to superior export market performance? (2) What contingencies may affect these relationships?

After reviewing the relevant literature on competitive advantage, value capture, and market performance, the authors noted that their study sought to add to the current body of literature by advancing a detailed framework connecting the literature streams on competitive advantage and value creation and appropriation (Kaleka & Morgan, 2017, p. 27). Secondly, the authors aimed to contribute to current literature by highlighting the role of symmetries and asymmetries in achievement of competitive advantage while simultaneously drawing attention to the market performance effect of symmetric and asymmetric combinations of pairings of price, product, and service advantage (Kaleka & Morgan, 2017, p. 27). Thirdly, the study aimed to contribute to existing literature by identifying the roles of a set of relevant firm-controlled and external environmental factors in transforming price, product, and service advantages into exporter performance in international markets (Kaleka & Morgan, 2017, p. 27).

Methodology

To provide a framework for the study, the authors focused on value and the ways in which consumers perceive it. As value creation is one of the main goals of a business, it stands to reason that value is an important metric that should be understood from the perspective of the consumer. Customer value logic was thus at the heart of the authors framework, for, as they explained, the key stage in [the] process of value creation and capture is when customers develop perceptions of the value of the firms offering, as they explicitly or intuitively compare its offering with those of competitors (Kaleka & Morgan, 2017, p. 27). To define the process of value creation and capture for firms and customers, the authors created a figure that expresses the process visually. That process begins with a firm developing a value offering and marketing it. Customers then develop perceptions of that value offering and compare it to other options in the market. At this point, the businesss positional competitive advantage is established. Customers then offer money in exchange for value offering and the firm captures value from the exchange, while customers do as well because of the use they obtain from the firms value offering. The business then focuses on even more ways to create more value offerings.

The theory of the authors is that environmental factors affect the transformation of positional advantage to actual sales and market share in the overseas markets through influencing customer needs and purchasing power (Kaleka & Morgan, 2017, p. 28). They hypothesize that contingencies render the firms extraction of financial rents ambiguous and, in doing so, contribute to weaknesses in viewing competitive advantage as a sustainable strategic goal (Kaleka & Morgan, 2017, p. 28). In other words, if firms do not understand how contingency factors affect value capture, they cannot maximize their ability to create greater value offerings.

With that framework, theory and hypothesis in place, the authors situated their study within the context of exporters in the UK durable goods industry. These were companies that sold goods through local retailers overseas. Both distributors and end-user customers were included in the study as customers.

The main assumption targeted in the study is the assumption that there is a direct positive relationship between competitive advantage and market performance (Kaleka & Morgan, 2017, p. 28). Because this assumption affects model-building and is rarely tested, the authors believed it was important to assess whether more specific competitive advantageperformance mechanisms [were] discernible at a lower level of aggregation (Kaleka & Morgan, 2017, p. 28).

To test this assumption, the authors randomly selected 887 companies from the Dun and Bradstreet Directory of UK exporting manufacturers from a cross-section of different industries. Surveys were mailed to these selected companies and 312 responses were returned, representing a 35.25% response rate. 30.2% of the sample were in the machinery (except electrical) industry; 25.9% were in the electrical and electronic machinery, equipment, and supplies industries; 14.6% were in the chemical and allied products; 12.9% were in the apparel and fabrics industries; 12% were from the rubber and plastics industries; and 4.3% were from the textile mills industry. The survey was directed to the executives of these companies. The executives were asked to select a single venture with which they were most familiar and to use that venture when answering the survey. In total 268 ventures were identified. Of these ventures, nearly half of them were ventures in the EU; 15% of them were in North America; less than 3% of them were in Japan; less than 5% of them were in other developed nations; less than 4% of them were in former Soviet Bloc states; slightly more than 15% of them were in developing countries; and slightly more than 8% of them were in recently industrialized nations.

Based on anecdotal evidence, the authors concluded that competitive advantage is a subjective construct that often means different things to different people. Therefore, to measure competitive advantage, the authors relied on measurements of three specific dimensionsprice, product and service advantage.

For price advantage, those surveyed were asked to compare their value offerings with competitors in terms of cost of goods sold and selling price to end-users.

For product advantage, those surveyed were asked to compare their value offerings with competitors in terms of product uality, design, and packaging.

For service advantage, those surveyed were asked to compare their value offerings with competitors in terms of product accessibility, technical support and after-sales service, and delivery speed and reliability while providing a reflective rating in terms of overall service quality and overall satisfaction with the service offering (Kaleka & Morgan, 2017, p. 33).

Those surveyed also provided data on sales volume, market share, and revenue from products introduced during the past three years in comparison with their main competitors in the specific market (Kaleka & Morgan, 2017, p. 33).

The researchers confirmed through assessment of scale reliability and validity tests that common method bias was not an issue of concern in the study. The researchers conducted regression analysis to statistically evaluate the results of the surveys.

Conclusion and Findings

The findings showed that very nearly every firm that took part in the survey believed itself to have competitive advantage in terms of product and service advantage but that when it came to price advantage the firms viewed themselves as having only a marginal advantage when compared to competitors. The ventures that the firms chose to select when providing responses tended to be high-performing ventures. After conducting regression analysis, the researchers found that only price and service advantage paths to market performance were significant (Kaleka & Morgan, 2017, p. 34). The researchers thus concluded that the findings were consistent with their theory and that achieving competitive advantage is far from sufficient to guarantee an exporting firm an increase in sales (Kaleka & Morgan, 2017, p. 34).

Additionally, the researchers found that performance is influenced more when one competitive advantage is more developed than another. By focusing the business on developing one specific competitive advantage, the business tended to perform better. At the same time, the researchers concluded that asymmetric achievement of productservice advantage has a more positive effect on market performance when the asymmetry errs toward service advantage (Kaleka & Morgan, 2017, p. 35). Overall, the researchers drew two important conclusions from the findings: one being that avoiding placing emphasis solely on product advantage and complementing it in a balanced way with service advantage seems to be a recipe to strong market performance; the other being that achievement of a clear service advantage contributes to satisfactory performance, but an unbalanced combination of product and service advantage has a negative effect on performance (Kaleka & Morgan, 2017, p. 38).

The findings show that overseas customers want a high-quality service at a low-cost price and that if a company can satisfy this demand, the firm will perform very well in its industry. Nonetheless, the researchers also offered this caveat: there is no indication that a product perceived as high quality will necessarily sellon its own or under various contingencies (Kaleka & Morgan, 2017, p. 38). For this reason, the researchers believed themselves to be justified in their framework, which highlighted the importance of the act of exchange and points to an array of factors potentially affecting the relationship between the variables. Price advantage is not to be underestimated in overseas markets when it comes to value creation and capture.

There is thus a need to update models of quality and satisfaction in industries. Companies place a great deal of emphasis on product advantage, but that contributor alone does not necessarily lead to better competitive advantage or to greater market performance. The main take-away from the study is that positive customer perceptions do not always translate into sales and superior market performance. There is some nuance and discretion needed when applying a model, particularly with respect to the service component of a value offering. Service should be just as important if not more important in the competitive advantage concept as product advantage. However, it infrequently ranks as a top consideration among executives. Emphasizing service quality could improve distributorship overall, according to the researchers.

The researchers do note the limitations of their study, particularly the use of cross-sectional data, self-reported data and the sample, which consisted entirely of UK firms. The nuances of understanding competitive advantage might be more deeply understood if a single case study approach were to be used. The researchers note that more understanding is needed of the relationships between price, product and service advantage. Every customer and industry and overseas market is likely to have more variables that should be considered when developing a model to help executives form a competitive strategy. The building blocks for such a model may be found in the findings and conclusions of this study, but more precise focus should be undertaken in future research so as to clarify and deepen this understanding. All told, the study is helpful for drawing attention to a much ignored assumption of relationships when it comes to developing competitive advantage strategies. However, the study does show that this understanding can be achieved through statistical analysis. At the same time, closer scrutiny is needed to shed increased light on various industries and how superior market performance can be obtained.

References

Kaleka, A., & Morgan, N. A. (2017). Which competitive advantage (s)? Competitive

advantagemarket performance relationships in international markets.Journal of International Marketing,25(4), 25-49.

2 Summary Harwick

Introduction

Harwick (2016) discusses the plausible claim that Bitcoin or cryptocurrency in general could supplant the international monetary...

Way Forward

The best way forward for IKEA, based on the reporting of Rangan et al. (2014) is for the company to consider what it needs to do to secure a competitive advantage from region to region and develop a sustainability guideline for each region. Customer value may differ from place to place. For instance, it might not be so much of a problem in the Indian market to replace solid wood with particleboard; but in other regions it might hurt the brand. The company should survey consumers and engage in cultural education to understand what is at stake in each market. Where it can find that consumers are not particular about solid wood, it makes sense to use particleboard.

In other regions, it may make sense to own forests outright, if it can manage them with minimal investment. In still other regions, it may make more sense to use crtification standards as a rule for dealing with the wood supply chain. A differentiated strategy thus might be the best way to move forward to address both growth and sustainability issues. The key to this strategy will be to ensure that the supply chain demands are satisfied while sustainability issues are addressed. Using sustainability certification in regions where it can be had without much trouble will help to show that the company is meeting its sustainability initiatives.

Another consideration is the cost that economic sanctions and war could have on the companys outlook. This risk should be managed and could be managed if the company owns its own forests outright. It would not have to worry about leases and it would not have to worry about negotiating with suppliers. It could ensure that it uses sustainability practices and while there is a cost with maintaining forests, it also means that it can focus more on growth. With its own forests, it is also better situated to arrange for a combination of solid wood and particleboard. Additionally, if there are more lockdowns in the future, supply chains the world over will be disrupted as they were in 2020. IKEA would be much better off owning its own forests and it could even sell wood to other companies, because wood would be in high demand as it was in 2020 through 2021. The lockdowns showed that people become more interested in fixing up their own homes when they are spending more time in them, so it would situate IKEA ideally to have its own forests so as to meet demand during these times. Since COVID looks to be something that will continue for the foreseeable future, it makes the most sense for IKEA to acquire its own forests and be ready to take advantage of these global supply chain problems in advance.

IKEA could additionally position itself to grow by acquiring its own forests if there is a global conflict among nations. Requiring supplies during such a time would place constraints on IKEAs growth strategy. By focusing on obtaining and managing its own forests, it manages the risk that could develop through global conflict. Global conflict coupled with lockdowns related to virus spread would potentially cripple IKEAs supply chains. Therefore, the best strategy to improve growth and to meet sustainability objectives would be to invest in owning and managing its own forests in all markets and regions. It could then use its research on local consumer value preferences to further differentiate its strategies in specific regions. But the biggest risk of allmaintaining supply chains and the sustainability issues involved in this riskwould be addressed by becoming vertically integrated. Supply shipping costs would be reduced substantially, which would help to offset costs related to managing forests. It would be a great way for IKEA to cement its position, solidify prospects for growth even in difficult times, and manage its own sustainability endeavors.

Using recycled wood makes no sense for IKEA because of the logistical and cultural issues involved in dealing with this process. Also depending upon certification-following suppliers does nothing to address the risk involved in supply chains during difficult times. Using particleboard is an option to consider where it will not harm customer value and value capture. However, the best option going forward is for IKEA to own and manage its own forests as this addresses both its need for growth and for sustainability. Vertical integration thus makes the most sense based on the report by Rangan et al. (2014).

Conclusion

IKEA is in a good position to take advantage of its own future with respect to growth and sustainability. As growth and sustainability are linked for IKEA, it is important to arrive at a strategy that combines the two. Various sustainability issues, such as how to acquire wood from sources that do not violate workers rights and that do not harm local forests (which in turn would harm local populaces and add to the climate change problem), need to be addressed. Some options for IKEA going forward are to use cheaper particleboard in place of solid wood, which would reduce global wood waste; another option is to use recycled wood. IKEA could also rely more heavily upon supply sources that conform to certification regulations. However, the best option for IKEA is to simply buy its own forests and manage them itself. This would remove risk of having to depend upon other suppliers particularly during difficult times when supplies are in high demand or when lockdowns have disrupted supply chains. War could be a problem in the future and this would also put pressure on supply chains. Therefore, it makes the most sense for IKEA to obtain its own forests and manage them near manufacturing plants. This would represent significant cost, but that cost would be offset by reductions in having to depend upon suppliers. Vertical integration thus presents itself as the best option for IKEA. Based on the report by Rangan et al. (2014), IKEA should invest in vertical integration and this would allow it to pursue differentiated strategies down the…