Strategic Marketing: Planning and Control, Third Edition

Such advantages are underpinned by the previously summarised generic

sources of competitive advantage (Porter) and Figure 8.5 illustrates this

concept.

158 Strategic Marketing: Planning and Control

Potential sources of

competitive advantage

1 Product performance

2 Perception of product

3 Low cost operations

4 Legal advantage

5 Alliances/relationships

6 Superior skills

7 Flexibility

8 Attitude

Generic strategy

broad/narrow focus

Cost leadership

Differentiation

Figure 8.5
Generic strategy
and potential
competitive
advantage

■ Experience and value effects

Perhaps it is to state the obvious to say experience and ability to create

value are closely linked and a major factor in successful marketing strat-

egy. In considering these factors, two useful models are presented below.

The experience curve denotes a pattern of decreasing cost as a result of

cumulative experience of carrying out an activity or function. Essentially,

it shows how learning effects (repetition and accumulated knowledge)

can be combined with volume effects (economy-of-scale) to derive opti-

mal benefits (Figure 8.6). With experience, the organisation should pro-

duce better and lower cost products. The main influence of experience

effects has been to promote a high volume/low cost philosophy aiming at

a reduction in unit cost. However, in today’s competitive business world,

organisations can’t simply rely on a ‘big is beautiful’ strategy based on

economy-of-scale and market share. It is important to recognise the import-

ance of learning effects on factors such as product quality and service

levels. Such factors hold the key to future success and greatly influence

the ability to ‘add value’ to product offerings.

Eventually, cost and learning effect will display diminishing returns

and an optimum level is reached. However, the process never stops. The

advent of new technologies may mark a shift in experience and offer new

challenges. For example, the large monolithic market leader could be in

danger as newer, more forward thinking competitors readily embrace

new technology and the subsequent benefits it brings to today’s business

environment.