Category: Competitive Advantage

In the hospitality industry, superior customer experiences play an important role in gaining customer loyalty and achieving a competitive advantage (Kandampully & Jaakkola, 2018). If guests feel well cared and their expectations are met or exceeded, it will result in a positive experience preserved in their memories (Slåtten and Mehmetoglu, 2010; Liu and Jang, 2009; Kim and Moon, 2009). As a result, it will lead to guest retention (Kim and Moon, 2009; Bowen and Shoemaker, 1998) and positive word-of-mouth about the hotel (Slåtten and Mehmetoglu, 2010; Liu and Jang, 2009). Those who receive superior guest experience are more likely to recommend or endorse a brand on social media, make recommendations to their families, friends to such that hotel. Consequently, the brand image of the firm is positively enhanced. (Frichou, 2018). Gentile, Spiller and Noci (2007) also claimed that a positive guest experience can establish a relationship between an emotional tie, firm’s brand and its customers, which results in the enhancement of customer loyalty and repeat purchases. Those are vital aspects of every business success. Besides, guests are willing to spend more if they believe and love the quality of service, which enables every business to keep the profits high.

Pine and Gilmore are one of the first researchers who present the concept of customer experience, stating that the physical environment, human interactions, and emotional characteristics are elements that emphasize the characters of the guest experience. Firstly, the physical environment enables a business to increase financial performance and improve the customer’s intention to experience again as well as gain customer satisfaction (Githiri, 2017; Magnini & Parker, 2009). When customers stay in a hotel, they tend to have a conscious and subconscious evaluation of the physical appearance of the interior designs of a hotel as well as the materials used in construction, artwork, and decoration. The interior schemes and the artifacts impact the evaluations of the guests on the overall quality and attractiveness of a hospitality setting (Nguyen & Leblanc, 2002). In a service setting, the ambient quality of the physical environment stimulates the guest to pursue the consumptions of service, resulted in their attitudes and evaluation towards the provider. Han and Ryu (2009) claim that fresh scent, relaxing music, comfortable temperature, low level of noise, and proper lighting harmonize with other conditions in a hotel would lead customers to have more preferable perceptions of a business and gain more positive experiences.

Secondly, the human interaction dimension, including employees and fellow guests, is another decisive impact on the guest experience. As the operation of any service consumption often takes place in the presence of customers, human interactions can have a substantial impact on the overall quality of customer experiences. According to PwC Future of Customer Experience Survey 2017, nearly 80% of American consumers report that speed, attitude, knowledgeable help and friendly employees are the most important elements in leaving a profound impression on guest experiences. Also, 46% of all guests will abandon a brand if the employees are not knowledgeable and caring. Positive interactions among customers, in service settings, have considered important to both consumers and companies, which enhances consumer satisfaction and enjoyment (Levy, Hudson and Getz, 2011). Besides, Pullman and Gross (2004) further argue that when superior experiences are created and the result is a consumer-employee mutual understanding and emotional connect, it is more likely that the high level of human interaction will create a loyal customer (Yuan & Wu, 2008).

Thirdly, Hu (2005) finds that the guest’s emotions in the hospitality industry are engaged in cognitive service quality evaluation and reflected on customer loyalty. He also demonstrates that emotions influence customer loyalty toward a hospitality setting and that guests emotions play a vital role in their decision-making process. They are often willing to pay a given rate and willing to return. In addition, customers with positive emotions will feel more satisfied with the service they have experience, and show greater loyalty and provide an exceptional word of mouth references. They also tend to spend more and encourage others to do the same (Mills, 2017). According to research published in the Harvard Business Review, 83% of customers tend to spend more money with the brand they feel more connected. Consequently, businesses that have a high level of emotional connection with customers are more likely to increase their profitability (Slåtten et al., 2010).

In summary, the physical environment, human interactions, and emotional characteristics are key elements in shaping the guest experience. Taking them into account in management allows you to create a competitive advantage.

United Parcel Service (UPS), the international package delivery company, grew out of a messenger service established in Seattle in 1907 by an enterprising 19-year-old named James E. ‘Jim’ Casey and his friend, Claude Ryan. Beginning with two bicycles, one phone, a tiny office in the basement of a saloon, and $100 borrowed from Ryan’s uncle, the two lay the foundation for what became a multi-billion dollar corporation involved in the flow of goods, funds, and information around the world.

Today, UPS is a global company with one of most recognized and admired brands in the world and they have become the world’s largest package delivery company and a leading global supplier of specialized transportation and logistics services. Since the beginning of United Parcel Service in 1907, many things have changed but the promise of the “best service and low rates” has stayed the same. UPS provides 15.6 million packages and documents each day in the United States and more than 220 other countries and area. UPS invests billions every year to upkeep a high level of customer satisfaction all the while keeping its own costs low. One of the biggest factors of their victory is owed to the scannable barcode label and the handheld computer, the Delivery Information Acquisition Device or the DIAD, where all the material and information regarding the package is stored. A web-based post sales order management system (OMS) operates global service order and inventory for critical parts fulfillment. From optimal routing, to tracking shipments two days delivery is guaranteed nationwide which in turn assist keep customer satisfaction high while keeping costs low.

UPS provides 15.6 million packages and documents every day in the United States and more than 220 other countries and territories. Technologies include DIADs, wired and wireless communications networks, barcode scanning systems, desktop computers, storage technology for the package delivery data and UPS’s central computer. As well as the company uses in house software for tracking packages, maintaining customer accounts and managing logistics, calculating fees and software to access the World Wide Web. And as well as include UPS mobile app for smart phones, Web based post sales order management system, Cisco system with tools for UPS customers to make shipment tracking and cost calculations.

UPS’s strategy is to provide the “best service and lowest rates’. One of the most visible forms of technology is the customer’s ability to track them package via the UPS website. However, technology also enables data to seamlessly stream throughout UPS and helps streamline the workflow at UPS. Thus, the technology expressed in the scenario enables UPS to be more competitive, efficient, and profitable. And the result is an information system solution to the business challenge of providing a high level of service with low prices in the face of mounting competition.

UPS’s information systems address the following strategic business objectives:

1. Deliver the best service, at the lowest rates. Their information systems allow them to supply the best service and the lowest costs through efficient and effect method. Customer get what they want, when they want it and they are able to provide it to them at lower costs.
2. Saving costs to improve service quality and expanding level of output. In June 2009 UPS launched a new Web based Post Sales Order Management System (OMS) that manages global service orders and inventory for critical parts fulfillment. The system enables high-tech electronics, medical equipment, aerospace, and other companies anywhere in the world that ship critical parts to quickly assess their critical parts inventory, determine the most optimal routing strategy to meet customer needs, place orders online, and track parts from the warehouse to the end user.
3. Improved decision making. Special software creates the most efficient delivery route for each driver that considers traffic, weather conditions, and the location of each stop. UPS estimates its delivery trucks save 28 million miles and burn 3 million fewer gallons of fuel each year as a result of using this technology. To further increase cost savings and safety, drivers are trained to use ‘340 Methods’ developed by industrial engineers to optimize the performance of every task from lifting and loading boxes to selecting a package from a shelf in the truck.
4. Competitive advantage. UPS is leveraging its decades of expertise managing its own global delivery network to manage logistics and supply chain activities for other companies. Its Supply Chain Solutions division provides a complete bundle of standardized services to subscribing companies at a fraction of what it would cost to build their own systems and infrastructure.
5. Operational excellence. UPS has maintained leadership in small-package delivery services despite stiff competition from FedEx and the U.S. Postal System by investing heavily in advanced information technology.
6. Customer and supplier intimacy. Customers can download and print their own labels using special software provided by UPS or by accessing the UPS Web site. UPS spends more than $1 billion each year to maintain a high level of customer service while keeping costs low and streamlining its overall operations. UPS uses an array of information technologies including barcode scanning systems, large mainframe computers, handheld computers, wireless networks, the Internet, and many different pieces of software for tracking packages, maintaining customer accounts, managing logistics and calculating fees.

If the technology were not available, they wouldn’t have the competitive advantage. These technologies provide value for customers to complete their tasks more efficiently. If the technology were not available, the process of providing information to customer will become slow. The customer cannot receive the information speedily. With other leaders in small parcel delivery such as FedEx and DHL, their operations would be lacking in comparison. Loyal customers would switch to something faster, more effective, and cheaper. Physical UPS offices would be very busy and the image the public has of the company would rapidly fall. UPS may not be able to offer the supply chain solution to other client companies. If these systems were not available then UPS will not be able to compete with others and it will not become the largest package delivery company as it is today.

So, in summary, United Parcel Service’s victory can be attributed to their mission to manage and continue to strengthen their core competencies. They strive to have reliable and timely distribution, affordable shipping expense, and excellent customer service. Through continually analyzing these core competencies, they have seen tremendous success throughout their history, establishing themselves as industry controller on a global level. They guide to provide high quality services while at the same time eliminate waste in their process, and thus their customer wellbeing rates are consistently impressive. This can be attributed to their highly skilled labor force and strategic training schedule. UPS provides packages faster and at higher affordable prices than their competitors. And they ensure all packages are only handled by qualified and talented employees and shipped in the quickest and secure manner, whether it is via ground freight, ocean freight, or airfreight. UPS has proven that effective application can allow a company to reach 8.2 million customers per day in 220 countries and areas across the globe. Furthermore, UPS showed that establishing durable relationships with customers leads to major increases in income, and in turn a largest market share.

References

1. Olear, M. (n.d.). Case Analysis of UPS Information Systems. Retrieved from https://www.studocu.com/en-ca/document/ryerson-university/business-information-systems-i/mandatory-assignments/ups-case-study/2808904/view
2. Warren, J. R. (1999, 20 9). United Parcel Service (UPS). Retrieved from United Parcel Service (UPS): https://www.historylink.org/File/1679

Chapter one. Introduction

1.1 Background of the Study

Competitive advantage positions a firm product or a service in a way that it outperforms its competitor’s product or service. According to Beadreau (2016), competitive advantage involves communicating and enjoying a greater perceived value to target market than a firm competitor can provide. Competition is at the core of the success or failure of any firm, competition determines the appropriateness of a firm’s activities that can contribute to its performance (porter 1985), Portal engineered the “Five Forces Model” to illustrate the theory of competitive advantage. Porter argues that the Five Forces define the rules of competition in any industry.

According to Brasina (2013) in current times of globalization, competitive business environment, market saturation, and increased consumer power the client becomes increasingly more definitive in terms of his needs. Possession of competitive advantage should deliver to a company a higher level of profit than obtained by its rivals (Black et al, 2012). Globally the oil multinationals continue to suffer stiff competition from new entrants in foreign as well as domestic markets. Competitive advantage ensures a firm not only can compete favorably, but also survives globally and local onslaughts on its market share (Yabs, 2010).

Strategic innovation is an important factor for organization, Competitive sustainable advantage, and financial performance (Nybakk & Janssen, 2012) strategic innovation is a plan to grow market share or profit through product and service innovation. According to Luecke and Katz (2003), innovation is the embodiment, combination or synthesis of knowledge in an original, relevant, valued new product or service. For innovation to take place creative ideas must be generated, seeded, and be realized into inventions and then the inventions must be transformed to something of marketable and of commercial value. Why is it so hard to build and maintain the capacity to strategically innovate? The reasons go much deeper than the commonly cited cause: a failure to execute. The problem with innovation improvement efforts is rooted in the lack of strategic innovation.

According to Agnolucci (2009), the oil industry worldwide has experienced constant volatility in pricing, operations, and a competitive business environment. Significantly. Regionally and locally organizations have challenges in achieving and sustaining competitive advantage over their competitors and have to employ new ways of maintaining their relevance this can only be attained by conjoining their strategy and innovation. According to Juma (2016) the top three oil marketers in Kenya Total, Vivo Energy, and Kenol Kobil lost a combined 20.6% market share in the first three months of 2016 to smaller oil markers and independent dealers. Competitive advantage grows market share or profits through product and service innovation, the area of strategic innovations and its impact on competitive advantage has been done in many sectors and regions in Kenya, there is no study done specifically for Oil marketing companies in Nakuru county it’s this motivation behind this study.

1.1.1 Strategic Innovation

Strategic innovation refers to the process undertaken by firms that totally changes the nature of competition within an industry as well as the gaining of competitive advantage by employing strategies different from their competitors(Afuah,2009). According to Gebauer et al (2012) strategic innovation is about the creation of new markets and leaps in customer value and reshaping the existing markets to achieve value improvements for customers. It can be said that strategic innovation is a fundamentally different way of competing in an existing business (Charitou & Markides, 2003). According to Govindarajan & Gupta, 2001). Strategic innovation makes value chains more efficient more transformative and expands market size (Govindarajan & Gupta, 2001). Strategic innovation can take the approach of process, product, market or technological innovation (Kiptoo & Koech,2019) The measures of innovation at the organizational level include financial efficiency, process efficiency, employees’ contribution and motivation, as well benefits for customers. In this study we shall focus on the following strategic innovation types and see how they relate with a competitive advantage: Process innovation, Product innovation, Market innovation, and technology innovations

Technological innovation is the process where an organization (or a group of people working outside a structured organization) embarks in a journey where the importance of technology as a source of innovation has been identified as a critical success factor for increased market competitiveness,

According to Baum (2001), Technological innovation influences organizational populations profoundly by disrupting markets, changing the relative importance of resources, challenging organizational learning capabilities, and altering the basis of competition. Its affected by research and development, benchmarking, and novial technology adoption.

Market innovation focuses on developing the mix of a target market, while determining how companies can serve the target markets best It is also described as progress in marketing mix Nevertheless, innovation and marketing must go hand in hand (Aksoy,2017). marketing innovation comprises of pricing strategies, promotion, and market orientations. A firm can develop new process either by itself or with the help of another firm (Polder et al.,2012). According to Kiptoo and Koech (2019). Process innovation is about improving the production and logistic methods significantly or bringing significant improvements in supporting activities such as purchasing, accounting, maintenance, and computing. Organization structure, production, and delivery forms metrics for process innovation. Product innovation involves the development and introduction of New products, Increasing Product portfolio, and Product enhancement.

1.1.2 Competitive Advantage

According to Porter (1985), Competitive Advantage describes the way a firm can choose and implement a generic strategy to achieve and sustain a competitive advantage. It addresses the interplay between the types of competitive advantage cost and differentiation and the scope of a firm’s activities and that value chain is the basic tool for competitive advantage diagnosis. Competitive advantage is obtained when an organization develops or acquires a set of attributes (or executes actions) that allow it to outperform its competitors(Wang,2014). Competitive advantage is a key theme in current strategic management because it forms the path for the survival of an organization.

Twin (2019) states that Competitive advantages are conditions that allow a company or country to produce a good or service of equal value at a lower price or in a more desirable fashion. These conditions allow the productive entity to generate more sales or superior margins compared to its market rivals. Comparative advantage and differentiation advantage are the two-broad metrics for competitive advantage. Comparative Advantage a firm’s ability to produce a good or service more efficiently than its competitors, which leads to greater profit margins, creates a comparative advantage. Rational consumers will choose the cheaper of any two perfect substitutes offered. Differential Advantage a differential advantage is when a firm’s products or services differ from its competitors’ offerings and are superior.

Advanced technology, patent-protected products or processes, superior personnel, and strong brand identity are all drivers of differential advantage. These factors support wide margins and large market shares. Reed et al (2000) suggest two models of competitive advantage: The market-based model which focuses on cost and differentiation and contends that the environment excludes out firms that are inefficient or that do not offer products for which consumers are prepared to pay a premium price, the second model is the firm resources model driven by internal firm’s factors.

Koufteros et al (1997) describe a research framework for competitive capabilities and define the following five dimensions: competitive pricing, premium pricing, value-to-customer quality, dependable delivery, and product innovation. The empirical literature has been quiet, and consistent in identifying price/cost, quality, delivery, and flexibility as important competitive capabilities (Tracey et al,1999). This paper will use cost structure, branding, the quality of product offerings, the distribution network, intellectual property, and customer service, and superior personnel as metrics to measure competitive advantage.

1.1.3 Oil Marketing Companies Operating in Nakuru Kenya Pipeline Company Depot.

There are more than fifty oil marketers operating in Nakuru Kenya Pipeline Depot a key government strategic infrastructure in terms of petroleum storage and delivery which averages three million liters of petroleum sales daily. The Oil marketing companies store and draw products from the facility for the local market consumption as well as the export market where the product goes to Uganda, South Sudan, Congo and Rwanda. The Top 6 companies at the depot in terms of the last 6-month average market share for 2019 were; Total Kenya (9.1%), Royal Energy (7.4%), Vivo Energy (6.72%) Kenol Kobil,6.4% Stabex internal (6.2%) and Hass Petroleum at 4.1% the lest of the 60% is shared by the lest of the Oil marketers. This study will data from a sample of 10 oil marketing companies from the 52-number population of oil marketers to study the effect of strategic innovation on the influence of completive advantage.

1.2 Statement of the Problem

The market share for oil marketers has never been stable due to the dynamic nature of stiff competition within the industry, Data from PIEA Kenya and the ministry of Petroleum shows fluctuations in market share shifts unpredictably among the Oil marketers. Only very few marketers who position themselves through strategic innovation can sustain competitive advantage, and maintain and grow their market share. Many studies have been done in other sectors to get the relationship between strategic innovation and its influence on competitive advantage eg Kariuki (2017) studied the Effects of Innovation Strategy in Enhancing Competitive Advantage among Commercial Banks in Kenya where he found out that there is a significant impact of innovation on the competitive advantage of commercial banks in Kenya.

Nyambura (2014) studied the effect of Strategic Innovation on the performance of mobile Telecommunication Firms in Kenya where she recommended the study of the same in other industries. This paper, therefore, wants to explore the gaps that are there between the effect of strategic innovation and competitive advantage among Oil marketers operating in the Nakuru Kenya Pipeline facility.

1.3 Objective of the Study

The General objective of the study is to establish the effect of strategic innovation on the competitive advantage of oil marketing companies in the Nakuru Kenya pipeline depot.

1.3.1 Specific Objective of the Study

1. To establish the effect of strategic process innovation on the competitive advantage of oil marketing company in the Nakuru Kenya Pipeline Company depot
2. To determine the effect of Market innovation on the competitive advantage of oil marketing companies in operating in the Nakuru KPC depot
3. To investigate the effect of strategic product innovation on the competitive advantage of Oil marketing companies operating in the Nakuru KPC depot
4. To analyze the effect of Technological innovation on the competitive advantage of oil marketing companies operating in Nakuru KPC depot.

1.4 Research Hypothesis

1. Ho1: Strategic process innovation does not have a significant effect on the competitive advantage on oil marketing companies operating in the Nakuru KPC depot.
2. Ho2: Strategic market innovation does not have a significant effect on the competitive advantage on oil marketing companies operating in the Nakuru KPC depot.
3. Ho3: Strategic technological innovation does not have a significant effect on the competitive advantage on oil marketing companies operating in the Nakuru KPC depot.
4. Ho4: Strategic Product innovation does not have a significant effect on the competitive advantage on oil marketing companies operating in the Nakuru KPC depot.

1.5 Significance of the Study

This study will be significant to several stakeholders, to start with Oil marketing companies will benefit from the study, Other organizations will benefit from the finding and future scholars will also benefit.

1.6 Limitation of the Study

This study is likely to have several limitations to start with their might be a challenge of non-response since OMCs are very secretive, to deal with this limitation the researcher will obtain an introductory letter showing that the research is purely for academic purposes.

The second challenge would be financial constraints and the researcher will work under a strict budget

1.7 Scope of the Study

This study will be done in Oil marketing companies in operating in Nakuru KPC depot and the objective is to study the Effects of Strategic innovation on the competitive advantage of OMCs operating in Nakuru KPC depot the time scope of the study will be from February 2020 to June 2020. the methodology of the research will be descriptive and explanatory research design type

1.8 Organization of the Study

This study is organized into three sections. Chapter one focuses on the background of the study, then the statement of the problem then after that the General and Specific objective of the study limitation of the study, and the scope of the study. Chapter two consists of a literature review, an empirical literature review, a summary of the Empirical literature review, and a conceptual literature review. Chapter three contains the research design, the population of the study, samples and sampling techniques, data collection, validity and reliability, data analysis data presentation, and ethical considerations.

Research Proposal

Purpose of the Study

The purpose of this research is to know the reasons of why Nike Inc. is successful, and why it’s chosen ahead of all others organization. In addition, what are the variables that give Nike a “competitive advantage” or a lead over other sport companies. Moreover, to figure out those factors that makes Nike Inc. the leader in its industry, and how do they execute their plans.

Research Question

Why do customers prefer Nike Inc. over other sports organizations?

Scope of the Study

This research presents and analyzes the variables or the aspects that gives Nike Inc. a competitive advantage over their competitors in the same industry.

Relevance of the Study

Nike Inc. is one of the most successful organizations in the world. As an innovative company Nike Inc. produces great products that satisfies customers needs. In the sports industry there is fierce competition, as there are many corporations and organization such as Nike, Adidas, and Puma. However, Nike finds a way to be the most significant one, as they have a step ahead of all these competitors. Why? How? Those are the answers that the researcher (me) wants to find out. Nike execute their plan in a really efficient way, as their goal is to sustain competitive advantage. In this research the researcher (me) will find what variables that gives Nike such advantage.

Research Design

Data collection method used in this research is interviews with customers who bought something from Nike Inc. In addition, asking them why did they choose Nike Inc. over other shops. I am doing this study to know why customers in general prefer Nike over Adidas or Puma, and what do Nike have that others do not. Moreover, this study helps people to recognize and know the reasons of why Nike Inc. Is a special at what they do.

Executive Summary

The research focuses on the excellence of execution of a company like Nike Inc. They set the tone in the industry, as they are the leading organization. Nike Inc. has a competitive advantage over other organizations. They produce quality products that include technological touch. In addition, innovation plays a huge role within the organization, as they depend on it to develop their products. Nike’s reputation in the society is respected among people. Nike Inc. is a 1st class corporation, and that allows Nike Inc. to have a valuable brand name that customers would respect and it in perspective. Nike Inc. sponsor the best athletes in the world such LeBron James, Cristiano Ronaldo, Roger Federer, and Tiger Woods. That helps in the marketing segment because customers would buy products that these athletes wear because they inspire them in different type of ways. In this research there is a question and hypothesis to try to figure out why Nike Inc. is Special Corporation and why it is preferred among people.

Key Words:

• Product Quality
• Competitive Advantage
• Brand Name
• Role Models
• Innovation

I. Introduction

i. Brief about the organization

Nike Inc. is an American corporation that manufactures, develops, and designs sportswear, clothing, and footwear. Phil Knight and Bill Bowerman founded Nike Inc. On January 25, 1964. The word Nike comes from the Greek language, which means “goddess of victory.” Nike Inc. sponsors the best athletes and soccer teams in the worlds, and takes pride of being the ultimate force in the sports industry. Nike Inc. mission is “To bring inspiration and innovation to every athlete in the world.” Nike has more than 700 stores in 45 different countries. Nike’s headquarter is located in Beaverton, Oregon. Nke has more than 48,000 employees.

ii. Broad problem area

Customer’s satisfaction is an important factor of making organizations successful. Companies seek to deliver the best possible goods and services to satisfy customers needs and wants. To do that, an organization needs to deliver quality products that meet with the customers’ expectations. In every industry there is competition between companies as both have similar goods and service and goals and objectives. Their strong market position depends on their strong portfolio. According to the sports industry, Nike Inc. is the leading corporation in the sports manufacturing and designing industry.

iii. Research Question

Why do customers prefer Nike Inc. over other sports organizations?

II. Theoretical Framework

My dependent value is purchasing from Nike Inc. and it is influenced by three independent variables, which are product quality, brand name, and imitating role models.

According to Businessdictionary.com, it defines product quality as “The group of features and characteristics of a saleable good which determine its desirability and which can be controlled by a manufacturer to meet certain basic requirements.” Product quality can be differentiated among people because every person might have his or her own definition of quality. In addition, it defines brand name as “Word(s) that identify not only a product but also its manufacturer or producer.” Nike, Apple, Pepsi etc. are all examples of brand name. Imitating a role model means that a person tries to copy another persons actions and appearance because they look up to them as motivators.

There are three independent variables, and those variables play a huge factor because they are influceing the dependent variables, which is purchasing from Nike Inc. Every variable affects the decision making of the customer who wants to buy a product from the sport industry. Usually, it depends what is the customers mindset because every customer has his own views.

Based on the literature review, this schematic diagram that has the research theories will analyze and summarize the hypothesis that will either be accepted or rejected.

i. Hypotheses:

1. Product Quality is an important factor of why customers prefer Nike Inc. over other organizations.
2. Brand Name plays a huge role on customer preference when it comes to selecting Nike Inc. rather than other competitors.
3. Customers are buying products from Nike to imitate sponsored role models.

III. Research Approach and Methodology

i. Approach

The research is qualitative, where I am gathering information that shows customers beliefs and understandings. The purpose of the study is to know why Nike Inc. is a successful organization, and what are the variables that they have that gives them a competitive advantage over other sports companies and organizations. In addition, how will those variables will affect the decision making of the customers. The type of investigation in this research is correlation, as purchasing from Nike (dependent variable) is influenced by the independent variables. Because its correlational, the study setting is non-contrived where the study is done in a natural environment.

ii. Methodology

• Time horizon

The time horizon is Cross- sectional, because the data is gathered only once.

• Participants:

The participants are random customers (individuals), as the data is gathered from those individuals seen in a Nike Store.

• Data collection methods

The Data collection method used in this research is interviews and questioners with random customers. Interviews enables the researcher (me) more flexibility to ask any type of question. The interview was face-to-face interview where I interviewed customers directly. Structured interviews were used, where I asked 4 customers the same questions, and letting them to elaborate and take as much time they want. By elaborating and giving their reasons that gives me plenty of data because they’ll be able to express themselves more. In addition, 10 questioners where handed to customers to answer. In questionnaires it helps me to gather efficient data and information I need to gather. Closed-ended questions were asked to customers, to get reliable answers rather than false answers given from those customers

• Procedure

The researcher “which is me” went to a Nike Branch in Mall Of Emirates and Interviewed 4 random customers who purchased something from that store. Customers were interviewed face-to-face, and had to answer the research question, which is why do they prefer Nike over other sports stores, because they bought something from Nike Store before asking them. I didn’t ask customers who were wondering around the store because they won’t give me the answers I need, as they did not purchase anything from Nike Inc. Customers that were interviewed were the ones who purchased something, and those are the ones who could answer the research question. The questioners were handed to the customers who did not buy something from the store because I wanted to get different kinds of opinion from the ones who did not buy products from Nike. Those people answered some questions about the preferences and why do they think Nike Inc. is special.

IV. The quality of the products give Nike Inc. a competitive advantage

Nike Inc. has been in the sports industry for a really longtime. Nike Inc. always tries to fulfill the customers’ expectations and wants, which developed a relationship between Nike and customers. Nike produces different types of products such as sports wear and sports shoes. Nike takes pride of their products that they produce, which they use different type of technologies to make it better. Through the years, technology developed massively and Nike used it to develop their products and make them special and unique. In addition, Nike is innovative in a lot of ways, as they try to evolve their products to the better. Their quality of their products is astonishing because they deliver the goods the best way possible. Customers have different definitions of the quality of a product. Some may say how long it could last. A year. A two. And so on. Others look at the material used in the product and how valuable it is. Some might view a product by its appearance and whether it looks good or not. Customers really focus on the quality of the products available, because they want to get satisfied from that good or service. Nike has it all, Life span, materials, appearance when it comes to their products. For instance, the new Nike Running Shoes is super light, and made from leather. The shoes look really attractive, the material is used is very good, and it lasts for long, if the person takes care of it. Such things make customers go ahead and buy those products because of their quality. Nike Inc. has a large fan base from all over the world. Why? Because they produce products that are well developed by using technologies. By producing a high product quality, that give Nike a competitive advantage over competitive such as Adidas and Puma. When a corporation has a competitive advantage over others that means they are the leaders in the industry. Those corporations are steps ahead, and customers would prefer them to others. Customers from Nike Store expressed their opinions on the product quality of Nike products. All of them had greats past experience with the products that are produced by Nike. Most said that the lifespan of the product is astonishing as it stays for a long time. In addition others said that the products appearance is out of the world. Moreover others hinted that the products are comfortable to use especially those who bought football products. The new Hypervenom shoes are so comfortable as if someone is playing with no shoes.

V. Brand Name plays a huge role on why Nike Inc. has a competitive advantage

Whenever someone says Apple, the first thing that comes to his or her mind is IPhone, which is the best selling phone in the world. Brand name plays a huge role in general of why customers buy goods and services from a particular place. Customers take in perspective the Brand name, as it defines their image in the society. In 2013, Nike achieved the Climate Counts award for the 6th time in a row because Nike Inc. is the number one company that produces apparels and accessories. In addition they won the C.K.Prahalad Award for being the best company in the industry when it comes to its sustainability and innovation. Last but not least, Fast Company names Nike Inc. as the number 1 company as the most innovators in their products. Nike has the best brand name in their industry because they produce the best quality of products. That gives Nike Inc. a competitive advantage over other organizations. How? A customer who is need for a new sport shoes, he’ll surely take in perspective the brand name of the store before buying from that particular store. Customers will eventually know that the most unique place to buy from is Nike Inc., and that gives Nike a step ahead of all companies. Some may say how does Nike Inc. have a good Brand name? The answer is simple, Brand name depends on two things the product quality and its reputation in the society. Without those two aspects a company cannot build a brand name that will affect the decision of the customer. Customers that I interviewed in Nike Store really cared about the Brand Name about Nike, as they care about their personal appearance. In addition, they all agree that Nike’s reputation is well respected because they work hard to try to satisfy the need of people, which is very important. Also, they acknowledge that Nike are the best in the business because they know that Nike won several awards and it has a lot of fan base because they are the best in what they do. In the interviews and questioners all bought up brand name because they care about their image in the society. In addition, there is trust that links both parties as, customers trusts Nike to produce the best products possible, and Nike trust customers to buy those products and use them. Nike’s brand name is always taken under recognition and Nike knows that so they work hard to improve and produce products that will help to develop their brand. Reputation is immense for Nike, and they do a good job to sustain it.

VI. Customers purchase products to imitate role models

Every person has a role model, that he or she looks up too because those figures motivate them. Nike sponsors the best athletes and sports teams in the world. Nike sponsor football teams such as Barcelona, Man.Utd, and Juventus etc. Those big clubs have a huge fan base, so they buy their products from Nike because they manufacture and design them. When a teenager is a fan of a particular athlete or team he or she would buy what they’re wearing to imitate them. In football Nike sponsor Cristiano Ronaldo who is currently one of the best players in the world. There are a lot of Cristiano Ronaldo fans all around the world, so they would buy his products that he wears from Nike. Same in basketball, Nike sponsor LeBron James who is the best player in the world, all LeBron fans including me would go and buy his products. That started from the 1990’s for Nike because of Michael Jordon. Nike sponsored Michael Jordon, and Jordon was the best player at that time because he transformed the game of basketball. In addition, he was a figure and an icon in the black community and the American society as a whole. People would tune in and watch basketball just to watch Jordon play. Teenagers, kids, and also men wanted to imitate Michael Jordon because he was a hero. Nike opened a line called Air Jordon where they produce all products that Jordon wears with his famous logo. To imitate Jordon and to be like him, customers purchase those products. Nike sponsors a lot of athletes who themselves inspire millions of people. I interviewed a women u bought products to her son, she said to me that her son is a huge LeBron James fan, as he loves basketball. She bought the new LeBron 11 shoes, and she also said her sons role model and inspiration in sports is James, so it was a gift for him because he passed this year in high school. Role models influence teenagers and they try to imitate them in many ways, how they look, dress, and even the way the play the game. Nike sponsor those athletes, and the supply them the best shoes and clothes etc. to preform at a top level. Kids also buy those products because they think that if they actually buy those shoes they will eventually preform like they player they like. Sponsoring is tough job because Nike has to choose the right athlete to represent Nike Inc. and themselves in the best way possible. As a result, Nike Inc. does a spectacular job because they sponsor the best athletes in all sports.

VII. Conclusion:

This research was done too identify why customers prefer Nike Inc. over other sports organizations. In addition, to classify the variables that gives Nike a competitive advantage over competitors. The hypothesis was product quality, brand name, and imitating sponsored role models are important factors of why customers prefer Nike Inc. over other organizations. According to the interviews and the questioners given to the customers, the hypothesis is accepted. Customers gave the same answers that the hypothesis theories assumed. In the interviews, three customers who did buy products from Nike gave the exact answers as the hypothesis, which are the product quality, and the brand name. The last customer was a teenager, and he answered me by saying “I bought this new Nike Hypervenom because I am a huge Neymar fan.” That shows that there are customers that are affected by their role models. For further researcher, it is recommended to study more about the customer’s mindset on buying products, and to focus more on the psychological aspect of the decision-making. I faced several limitations as I wanted to know from the company itself how are they are able to sustain such advantage; however, employees couldn’t help me with that because they are limited with information. In addition, I wanted to get interview with the one of the managers of the store but I could not because he was not there when I came. For future search, I think other organizations should be studied to check why they are producing products like Nike. In addition, comparing the differences between those corporations. For instance check why are Puma are not as the same level as Nike Inc., and what are the things to do to reach that level. I leaned a lot from this research paper, as I discovered a lot of new things about Nike Inc. and how great and special they are as an organization.

Introduction:

Being the world’s largest coffee company both in terms of sales and market share, Starbucks Coffee Company (hereinafter referred to as “Starbucks”) has managed to position itself as a distinguished and successful provider of high-quality coffee products, attracting millions of customers worldwide. The company, which was founded in Seattle in 1971 as a mere roaster and retailer of whole bean and ground coffee, tea, and spices, first entered the market as a seller of brewed coffee in 1985, when Howard Schulz, former employee, and current CEO, realized the huge potential of selling brewed specialty coffee. After opening eleven stores in the Seattle area, Starbucks began its expansion first in the northern United States and then across the rest of the country. Global expansion did not occur until Starbucks’ initial public offering (IPO) in 1992, further highlighting Mr. Schulz’s intention to turn Starbucks into a truly global company. Its first international store opened in Tokyo in 1996, followed by Singapore and the Philippines. In the early 2000s Starbucks expanded into other key markets, covering most Asian countries and also moving to European, Italian and Latin-American markets. Today Starbucks has 16,635 stores in 50 countries of which 8832 are wholly owned stores and 7803 are licensed stores. By forming alliances with major coffee producers and retailers as well as acquiring emerging competitors, Starbucks has managed to extend and eventually consolidate its market position in recent years. The company is also following hot trends in the coffee market, such as single-serve coffee or the delivery of ready-to-be-served coffee to luxury hotel rooms. Moreover, Starbucks has realized that emerging markets, most prominently China, have huge untapped potentials that need to be exploited if the company wants to gain and maintain a competitive edge over competitors. The aggressive expansion strategy that Starbucks is currently pursuing in China can thus be understood as a clear message to competitors that it will not render the number one spot in the global coffee market without a fight. In fact, Starbucks’ future could not look any brighter. With third quarter (2011) sales figures exceeding the five percent threshold in both the USA and internationally, and new shops opening in China almost on a daily basis, the company seems to have chosen the correct strategic path for the upcoming years. In the words of Starbucks CEO Howard Schulz, “Starbucks has never been healthier, more connected to customers and partners, or better positioned to go after tremendous business opportunities that lie ahead”.

Digital strategy:

While Starbucks has more than 75 million customers a month, this number includes just 15 million shoppers in the retailer’s rewards program. The majority of its customers visit the coffee company one to five times a month. With that in mind, Starbucks is turning its aim towards developing digital relationships with these occasional shoppers and has launched a new labor routine, which it believes will benefit service to these sometimes shoppers.’We know that many of these customers, largely those with whom we don’t have a digital relationship, do not visit as frequently and have a low awareness of either new product introductions or many of our great core offerings,’ said COO Rosalind Brewer during the company’s second quarter 2018 earnings call. Over the past year, only one in four of these non-Starbucks Rewards occasional customers were aware of the retailer’s new offerings and key promotions compared to twice that of its frequent Starbucks Rewards customers. What’s more, the customers make up nearly 50% of the volume sold in the afternoon, making them ‘a material part of our current afternoon challenges,’ according to Brewer. To this end, Starbucks is shifting its marketing strategies in the afternoon to hone in on these shoppers. And to develop a digital relationship with them, the coffee guru needs occasional customers to sign up. To start this progression, Starbucks now requires customers to provide their email addresses, first and last names, and ZIP codes to access the free Wi-Fi Starbucks’ cafes provide. “We are widening the aperture of our digital flywheel through a range of customer interaction touch points, including opening up Mobile Order and Pay to all customers, leveraging Wi-Fi sign-up in our stores, and reinventing Happy Hour through the use of the single-use digital coupon,’ said president and CEO Kevin Johnson. Starbucks will also cut the number of time-limited offerings by nearly 30% versus a year ago, shifting from singular offerings to more personalized offers per customer at the right time. “Our new approach to marketing will be centered on meaningfully strengthening customer relationships by increasingly targeting our offers to each customer,’ said Brewer. This approach includes the retailer’s new Happy Hour program, which will be used to sign up shoppers for direct digital relationships and to promote a variety of beverages throughout the year. Last year, Starbucks’ Happy Hour program was a ‘ten-day one-and-done’ offer available to everyone. Now, shoppers need to sign up for the benefits and the program will be ongoing. “What that means is that we won’t just be doing Frappuccino for ten days in May,’ said EVP and global chief strategy officer Matthew Ryan. ‘We will be able to use this very well-known device we have called Happy Hour to promote a variety of afternoon products across the year, using it not just in May, but across the year to bring customers back into our stores on an ongoing basis. Over time, we get to know customers, what they respond to, and repeat, and we’re able to personalize and do things that we could do with the Starbucks Rewards customer right now, with a much broader segment of customers. “Brewer noted the one-to-one offer will leverage Starbucks’ personalization capabilities, but other benefits include ‘more predictable and efficient scheduling of partners. “Ergo, Starbucks also launched the first change in its deployment routine in five years in February, during its second quarter. The retailer dubbed the new labor routine ‘Deployment 2.0′ and Brewer described it as moving the retailer from a one-size fits all deployment plan to a dynamic store-specific deployment solution that will continue to evolve with the business.’

‘It considers an individual store’s product and channel mix data by day-part, assigns responsibilities by role, and deploys baristas to productions positions, thereby balancing work to optimize customer connections,’ she said. ‘It is that unlock, the time for our partners to connect directly with our customers, that will help us deliver a better experience in our stores overall. “Previously, the company used the same deployment plan in all stores. Now Starbucks can look at its routine by store-specific data, using visual digital data rather than a spreadsheet approach like it was before. She also noted Starbucks believes this launch contributed to comp improvement over the quarter. Global, Americas, and U.S. comparable store sales increased 2%.’What we know about the occasional customer in the afternoon is that they don’t shop with us as frequently, and they’re not aware of our offerings as our Starbucks Rewards customers,’ said Brewer. ‘What we also know about our business in the afternoons, is that we have used our afternoons to train our new partners that were just joining as baristas, and we have heavy routines in the afternoon. And so what we learned from managing our peak in the morning and managing routines, we’re applying that to the afternoon so that we apply the right kind of labor when the customers are in the store.

Mission and Vision:

Starbucks Coffee’s corporate mission is “to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time.” This mission statement reflects what the company does to keep its business running. It is clear that target consumers are given the emphasis on this corporate mission. The following components of Starbucks’s corporate mission statement influence strategic management in growing the business:

• inspire and nurture the human spirit
• One person, one cup, and one neighborhood at a time

NEW MISSION: provide a great work environment with diversity and treat each other with respect and dignity. Apply high standards of excellence in purchasing, roasting and a fresh delivery of our coffee. Develop customers all the time.

Starbucks Coffee’s corporate vision is “to establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.” This corporate vision statement has the following components relevant to the business:

• Premier purveyance
• The finest coffee in the world
• Uncompromising principles
• Growth

New Vision: To become a national company with values and guiding principles that employees could be proud of

Strategies: Business strategy of Starbucks:

Starbucks’ business strategy is based on the following four pillars:

1. Offering ‘third-place’ experience. Starbucks stores are effectively positioned as a ‘third place away from home and work, where people can spend time in a relaxed and comfortable environment with their friends or alone. Customers are even welcome to get their work done in a Starbucks store. All company-owned stores in the US and most company-owned stores abroad offer free Wi-Fi. “Starbucks stores are meticulously designed to make customers stay longer, buy more, and return for another visit.”
2. Selling coffee of the highest quality. Starbuck’s business strategy can be classified as product differentiation. Accordingly, the coffee chain giant focuses on the quality of its products and customers pay premium prices for high quality. Excellent customer service as one of the solid sources of Starbucks’ competitive advantage further increases the attractiveness of the coffee retailer.
3. International market expansion with a focus on emerging economies is one of the key elements of Starbuck’s business strategy on a long-term perspective. The share of the company’s revenues from the China/Asia Pacific (CAP) global market segment increased to 14% in 2018 from 7% in the previous year. In total, 2719 new Starbucks stores opened during the last two years.
4. Integrating technology into various business processes. “Starbucks is adamant when it says that the purpose of new technology is not just to improve its website or to process payments quicker for people who are waiting in line”. The coffee chain achieves technology-related value addition via integrating technology into a wide range of business processes and procedures such as new product development, communication of the marketing message, completing sales and monitoring customer satisfaction. The most notable examples for value creation via technological integration by Starbucks include the launch of the Mobile Order & Pay feature, which allows customers to buy without getting in line, the launch of the voice ordering app and “sending text message notifications to customers in the Seattle area when their mobile orders are ready”.

Tools to be used for strategy implementation:

BCG Matrix:

The BCG Matrix was applied in order to explore the growth potential of Starbucks’ four major product categories. The matrix divides product categories into four segments based on their market share (x-axis) and market growth (y-axis). Since it was impossible to find accurate and up-to-date market share figures for Starbucks’ product categories, the matrix was modified according to what sales growth categories portray (y-axis) and how profitable they are (x-axis). Consequently, categories were allocated to four distinct portfolio segments:

1. Stars: product categories that display high sales growth and substantially contribute to overall profits.
2. Question marks: product categories that display, high sales growth, however only contribute little to overall profits.
3. Cash cows: product categories that display low sales growth but still contribute substantially to overall profits.
4. Dogs: product categories that display low sales growth and contribute little (or nothing) to overall profits.

Product-Customer Analysis

The Product-Customer Analysis was applied to highlight the relationship between Starbucks ’different product categories and customer groups. The analysis highlights which customer groups prefer which product categories, and what they value most in each product category. For Starbucks, this information can be important if the company has to decide which product lines to develop or discard.

PESTEL analysis

The PESTEL analysis was applied to evaluate the macro environment to which Starbucks is exposed. It helps the company to better determine external factors that might have an influence on the company’s performance in the global coffee market.

Originally, the PESTEL analysis has been designed to evaluate macro-environmental influences on industries in certain countries. However, since Starbucks is operating in a global environment, the PESTEL analysis was fine-tuned to determine the macro-environmental influences on the coffee industry within a global context. The analysis evaluates six macro-environmental variables:

1. Political Environment: are there any governmental regulations that would inhibit Starbucks in the global coffee market?
2. Economic Environment: has the recent economic crisis had any effect on the disposable income of customers?
3. Social Environment: how has the social attitude towards coffee changed over the years? How far developed is the coffee culture?
4. Technological Environment: what key technological changes in the production and consumption of coffee have taken place over the years?
5. Ecological Environment: how important is environmental stewardship in the industry?
6. Legal Environment: how stringently are intellectual property rights enforced?

Starbucks SWOT Analysis:

Starbucks Coffee operates in various industries that impose different challenges in growing the business. The variety of these industries has increased over time, as the company develops more products to complement its core coffeehouse business. For example, Starbucks Corporation’s marketing mix or 4P indicates that the company has expanded its product offerings to include tea, food, and merchandise, in addition to coffee. In the context of the SWOT analysis model, this condition creates a challenging business environment where the company needs to use different sets of competencies that match various industries. Strategic consideration for the internal and external factors shown in this SWOT analysis can help increase Starbucks Coffee’s success in competing against various coffeehouse firms and other food services businesses, such as Dunkin’ Donuts, McDonald’s, Burger King, and Wendy’s.

Starbucks Coffee’s Strengths (Internal Strategic Factors)

This component of the SWOT analysis model deals with the internal factors that the company can use as strengths to address weaknesses and protect the business against competition. In this case, Starbucks Coffee’s main strengths are:

• Strong brand image
• Extensive global supply chain
• Moderate diversification through subsidiaries

Starbucks Corporation has one of the world’s strongest and most popular brands. The company has a growing population of loyal customers, which adds to the stability of the coffeehouse business. In the SWOT analysis model, the extensive global supply chain strengthens Starbucks by supporting its operations. For example, the company has a global network of suppliers that are carefully selected based on criteria pertaining to quality, such as the quality of Arabica coffee beans. Also, the company gradually diversifies its business, such as through the acquisition or development of subsidiaries like Ethos Water, Seattle’s Best Coffee, and Teavana. Diversification minimizes the effects of market and industry risks. The internal strategic factors identified in this part of the SWOT analysis of Starbucks Corporation show that the business has strengths that promote resilience through diversification and a global supply chain.

Starbucks’s Weaknesses (Internal Strategic Factors)

Business weaknesses are identified in this component of the SWOT analysis. Weaknesses are internal factors that reduce or limit business capabilities. Starbucks Corporation’s weaknesses are as follows:

• High price points
• Generalized standards for most products
• Imitability of products

Starbucks has high price points that maximize profit margins but reduce the affordability of its products. This internal strategic factor is a weakness because it limits the company’s market share, especially in areas with relatively lower disposable incomes. Also, this SWOT analysis considers generalized standards a weakness that limits the flexibility of the coffee and coffeehouse chain business. For example, the company’s generalized standards for its crafted beverages reduce these products’ cultural alignment with local target markets and associated consumer preferences. In addition, many Starbucks products are imitable. For instance, small local competitors could develop beverages that are not the same as but similar to the company’s products. Even the design and ambiance of the company’s cafés are imitable. This business environment condition empowers competitors. The internal factors in this part of the SWOT analysis of Starbucks Coffee Company show that the business must develop strengths to reduce the adverse effects of imitation and the influence of high price points on the company’s market share in the global industry.

Opportunities for Starbucks Corporation (External Strategic Factors)

This part of the SWOT analysis model focuses on external factors that present opportunities for business growth and development. In this case, the main opportunities available to Starbucks Coffee Company are:

• Expansion in developing markets
• Business diversification
• Partnerships or alliances with other firms

Starbucks Corporation can increase its revenues through expansion in developing markets. This opportunity draws attention away from the U.S. market, where most of the company’s revenues are generated. Also significant in this SWOT analysis is business diversification, which can improve Starbucks’s long-term stability. For example, through higher diversification, the company can reduce its dependence on its current industries, thereby improving overall revenue growth opportunities. Diversification is currently a minor growth strategy as shown in Starbucks Corporation’s generic competitive strategy and intensive growth strategies. The industry environment also presents the opportunity to strengthen the company’s presence and market share through partnerships or alliances with other firms. For instance, alliance with major retailers improves the distribution and market share of the company’s consumer goods, such as ready-to-drink coffee. The external strategic factors in this part of the SWOT analysis show that Starbucks can improve its industry position by developing its operations to exploit the opportunities in the global industry environment.

Threats Facing Starbucks (External Strategic Factors)

Threats against the business are identified in this part of the SWOT analysis. Threats are external factors that reduce or limit business performance. In this company analysis case, the following are the main threats relevant to Starbucks Coffee Company:

• A competition involving low-cost coffee sellers
• Imitation
• Independent coffeehouse movements

Starbucks Corporation competes against a wide variety of firms in the international market. For example, the company competes against major restaurant chains that offer low-cost coffee products. This external strategic factor threatens Starbucks because such competitors can reduce the company’s market share by competing based on low prices. Also, this SWOT analysis considers imitation as a major threat to the coffeehouse business. In light of the company’s weaknesses, the threat of imitation involves firms that try to copy the taste, look and feel of Starbucks products. In addition, the industry environment is subject to independent coffeehouse movements. These movements are sociocultural efforts that support the operations of small independent local coffeehouses and oppose the expansion of multinational coffeehouse chains. Such socio-cultural trends influence consumer perception and purchasing behaviors, as shown in the PESTEL/PESTLE analysis of Starbucks Corporation. Successful marketing campaigns and branding strategies are needed to counteract the effects of these trends. This part of the SWOT analysis of Starbucks Coffee Company identifies external strategic factors that impose challenges to international expansion and market penetration.

Business model: American restaurant chains typically favor one of two business models: the standard retail business model or the franchise model. Starbucks (SBUX) has historically used the standard model. To this day, the majority of its net revenue is generated by the retail locations the company owns. While this business model typically hinders domestic expansion, Starbucks conquered this hurdle in the late 20th century, before the domestic coffee industry flooded with large-scale vendors Plus, Starbucks has targeted highly populated areas with large volumes of foot traffic. However, our globalizing world has spurred an economic trend toward expansion into emerging markets. Starbucks is accommodating this trend by loosening its licensing agreement requirements, using pieces of the franchise model to rapidly expose itself to developing markets’ share. This business model has allowed Starbucks to be the first coffee firm to put retail locations in each of the BRIC nations and many more. During FY2013, 23% of Starbucks’ revenues originated outside of the United States, compared to Dunkin’ Donuts’s (DNKN) 3% international revenue stream. While Starbucks’ margins are slimmer than those of Dunkin’s franchise model, Starbucks enjoys a larger global presence and more control over its day-to-day operations via the retail model.

Starbucks’ (SBUX) main cost driver is its price per pound of coffee beans. The two most consumed coffee beans are Arabica and Robusta blends, which Starbucks sources from numerous continents to keep up with demand. Arabica is the most consumed coffee bean species due to its milder flavor compared to Robusta. Starbucks primarily purchase Arabica beans because the weaker flavor mixes more easily to create the 30 blends used across all product platforms.

Starbucks’ massive market capitalization allows it to leverage economies of scale. Unfortunately, there are no accurate dollar amounts available concerning the cost Starbucks pays to produce one cup of regular coffee. Amateur speculative estimates range from $0.20 to $0.75. Starbucks’ cost structure is relatively straightforward, resembling those of typical “high-end” fast-casual restaurants, such as Panera (PNRA) or Chipotle (CMG). This means slim margins attributable to industry competition (SBUX’s 2013 profit margin is 0.06% due to an unfavorable litigation outcome involving Kraft Foods). Healthy companies in this industry boast strong operating cash flows and high capital expenditures attributable to kitchen maintenance and vertical integration efforts. Cash flows from financing activities differ at the firms’ discretion. Starbucks has recently been repurchasing its own shares and paying dividends to increase returns to investors. Others seek capital to fund international expansion attempts and capital expenses.

Segmentation, targets, and positioning:

Starbucks segmentation, targeting, and positioning comprise marketing decisions directed at identifying appropriate groups of people among the general public as future customers for the business and targeting this segment via positioning products and services that resonate well with their needs and wants. In simple terms, segmentation, targeting and positioning refer to deciding whom to sell to, and positioning products and services accordingly.

Starbucks Coffee uses the following types of positioning:

• Mono segment positioning. The coffee chain giant targets the premium customer segment only i.e. individuals who are willing to pay extra for the quality of products and services
• Adaptive positioning. Due to the tendency of increasing consumer health awareness, Starbucks Coffee developed coffee beverages with fewer calories such as Chai Tea Latte (103 calories) Caffey Misto (63 calories) and Iced Americano (11 calories)
• Standby positioning. Certain Starbucks beverages such as Frappuccino had to await changes in the market for a certain period of time to find demand.

The attractiveness of Starbucks in the Market:

• Mainly, customers get attracted to Starbucks because it provides various flavors of coffee and also we can see Starbucks is located at high-traffic areas.
• The employees of Starbucks treat customers in a friendly way which makes the customers happy and satisfied Starbucks has great growth opportunities in the Tea and Fresh Juice products mix. They should build up these products along the same line of their coffee that results in making the customers to visit the place again
• It also provides a good ambiance where we can hang out with friends and enjoy ourselves.
• But, the main drawback is the price of the coffee they are serving to the customers as few of them think it is way too costly.

Decision:

• Starbucks has great growth opportunities in the Tea and Fresh Juice products mix. They should build up these products along the same line of their core coffee products.
• Also as consumer tastes and lifestyle shift towards more snacks and beverage options, Starbucks should tailor its menus and expand to give healthier products off.
• Coffee beans are a significant input into Starbucks’ value chain and there have been wide fluctuations in the market prices of high-quality coffee beans. Starbucks could mitigate this price volatility risk by implementing an effective hedging strategy like futures contracts to lock in their estimated quantity inputs at a low swing price so that the future costs can be managed to great extent.
• Further build and retain customer loyalty, by building on the beta concept of on-the-go home delivery.
• Their mobile apps business drove 10% of the sales in the US, so it would be recommended for further building to streamline ease of use and payment process which would help drive more customers, decrease wait time in stores and increase efficiency. Integrating Starbucks loyalty programs with mobile applications would also be recommended.

1. Introduction

1.1 Background of the study

In the recent years, the global economy has evolved to an economy of knowledge. All OECD (The Organisation for Economic Co-operation and Development) countries have moved from models based on labour, raw materials, and physical capital to economies of knowledge and intangible capital. In an ever-changing global marketplace, companies are looking for every opportunity to gain competitive advantage. Advances in technology, increasingly informed customers, information overload, new regulatory requirements, and liberalization of the world economy have created a common playing ground for all organizations making it more difficult for any organization to gain sustainable competitive advantage (DeGroote, 2012). Reacting to the changes in the organization, some studies (Ganguly, Nilchiani, & Farr, 2009; Overby, Haradwaj, & Sambammurthy, 2006) have suggested that an advanced competitive strategy that organizations should possess is their capability to sense any unanticipated change in the marketplace or customers’ preferences and then readily respond to them. This capability is termed Organizational agility, which is considered to be an important survival strategy for modern organizations in the current turbulent business environments. In 1992, Concept of Organizational agility was introduced by Robert Nagel and Rick Dove in IACCOCA institute. Organizational agility is the capacity of a company to adapt itself to the changes, often unforeseen, in its environment, and to exploit changes as opportunities of development and growth through fast and innovative answers.it helps the company to deal witch rapidly changing environment (Marhraoui & Manouar, 2017). It is fundamentally necessary for organizations facing changing conditions to use production factors to achieve the objectives of the organization, employees, and shareholders (Shahrabi, 2012). To address these issues, organizational agility requires firms to quickly manage their knowledge when responding to a changing environment, and the market environment in particular (Kodish, Gibson, & Amos, 1995). The knowledge management (KM) phenomenon has a strategic importance in developing unique capacities of organizations and in providing them with sustainable competitive advantage (Shannak, 2010). KM processes (KMPs) is getting more importance as a subject researching due to the potential role of KMPs in contributing to the success of organizations in general and educational institutes in particular. KM also assists in achieving organizational goals by allowing know-how and expertise to be easily shared and accessed (Mishra and Bhaskar, 2011) as well as it also helps the companies in identifying, creating, and developing in order to gain competitive advantage.

1.2 Research Gap and Rationale

Previous research studies that have been conducted by research scholars in different countries have research gaps, which are mentioned. First research gap of this study is clearly reflected by a study which has been conducted by Al-Qatawneh et al., (2019), the relationships among organizational agility, knowledge management, and competitive advantage were not pointed out and discussed in the previous research works fundamentally but in this research relationship among KM processes, organizational agility and competitive advantage will be stated clearly. Second gap of this study is contextual, there is not a single study has found more specifically on the educational/health care sector of X country regarding the relationship between KM, Organizational agility, and competitive advantage. Our research is further different from the old research works. Only few research works directly showed the relationship of Knowledge Management (KM) and Competitive advantage; the present research will connect the competitive advantage and knowledge management with the help of organizational agility as mediation.

1.3 Problem Statement

To address the prevalent gap, this research seeks to address number of the weaknesses of existing studies in number of methods, and thereby amplify, as well as make a range of new contributions to the extant literature. First, we are searching to make a contribution to the extant literature by examining the effect of KM on Competitive advantage in the context of the Educational/health care sector of X country. In addition, this study also checks the indirect effect of KM on competitive advantage through Organizational agility. This departs from most past studies that have investigated how KM systems effect on Organizational performance. Second, this first study offer new empirical evidence on the effect of KM and Competitive advantage via organizational agility. Finally, this study is conducted to provide recommendations to the organizations that lack of understanding regarding the strategies that can be used to improve the performance of the firm in today’s rapid and ever-changing globalized world.

1.4 Research Questions:

Based on the problem statement and gap, the current research designed to answer following questions.

1. Does Knowledge Management Processes impact on Competitive Advantage?
2. Does Knowledge Management Processes impact on Organizational Agility?
3. Does Organizational Agility impact on Competitive Advantage?
4. Does Organizational Agility mediate the relationship between Knowledge Management Processes and Competitive Advantage?

1.5 Research Goals:

The general objectives of the current study include:

• To fulfill the requirement of degree
• To know how to conduct the research
• To gain practical experience of the research
• To know about the technicalities of the research

The current study also has some specific objectives which are following:

• To determine the impact of Knowledge Management Processes on Competitive Advantage.
• To determine the impact of Knowledge Management Processes on Organizational Agility.
• To determine the impact of Organizational Agility on Competitive Advantage
• To check the mediating role of Organizational Agility between Knowledge Management Processes and Competitive Advantage.

1.6 Research Hypotheses

1. H1: Knowledge management has a direct impact on Competitive Advantage
2. H2: Knowledge management has a direct impact on Organizational agility
3. H3: Organizational agility has a direct impact on Competitive Advantage
4. H4: Organizational agility mediates the relationship between Knowledge management and Competitive Advantage

1.7 Importance of the Study

First, this research will be helpful to know how the KM processes affects the Competitive advantage of a business and how the Organizational agility plays mediating role between KM processes and Competitive advantage. Thus this research helps in the part of literature of KM, Competitive advantage as well as in the position of Organizational agility as a mediating variable. Second, understanding and knowing the KM processes as well as Organizational agility will be helpful for the employees to meet the organizational objectives. Third, Managers will also get benefits from this research by encouraging the knowledge sharing and agility into the organization they can enhance the overall organizational performance. Finally, Future researchers will get benefit by exploring more on other organizational variables as well as they can extend the study size in order to make generalizability and contribution into the existing literature. Finally, this research will also be helpful for the policy makers to consider the KM and Organizational agility while making organizational policies.

2. Literature Review

2.1 Knowledge Management process (KMP)

KMPs was represented by its 3 constituting components, namely, knowledge Transfer, knowledge Acquisition, and knowledge use. Many researchers mentioned this 3 main processes of KM (e.g. Pérez-López, & Alegre, 2012; Lin et al., 2012; Liao et al., 2011; Singh & Soltani 2010; Alavi & Leidner, 2001)

KM is a tool used by the management along with the set of practices, principles, and techniques for the purpose to utilize, create, transfer, and disseminate knowledge (Obeidat et al., 2016).

2.2 Organizational Agility

Organizational agility is the ability to sense, perceive and predict the changes in the environment of the organization. So, the organizations should be able to identify the changes and tackle with those changes for the prosperity and growth of the organization (Sharif & Zhang, 1999).

According to Holsapple and Li (2008), Organizational agility is considered as the result of integrated attentiveness to changes (opportunities and threats) in an environment (both internal and external) along with a capacity to utilize the resources proactively to that changes in a most suitable way.

2.3 Competitive Advantage

Competitive Advantage is providing a superior value than competitors in a market in any terms like product, price, product, after-sale services, etc.

According to Thatte (2007), Competitive advantage consists of unique capacities that set an organization apart from its competitors, therefore, such organizations have a competitive edge in the market (Thatte, 2007).

2.4 Knowledge management and Competitive Advantage

The debate among academicians and practitioners on sustainable competitive advantage and perceived organizational performance appears to have reached a crucial point. In contrast to the traditional organizational systems, modern workplaces are advocating the importance of organizational capabilities and knowledge-based systems. In current times, where there is active consideration of competitive advantage among organizations, generally at the same time, the traditional models of organizational dynamics are criticized by those who uphold theories that regard the resources and competencies of a firm as its principal source of competitive advantage. Knowledge is the core competence required to face business challenges of firms. Therefore, companies should not only acquire critical knowledge from both the external market and from their own internal organizations (Lee & Sukoco, 2007), but should also effectively and efficiently manage the knowledge stored within both the organization and individuals in order to enable the firm to generate, communicate, and leverage its intellectual properties (Gao et al., 2008). Knowledge management is the process of identifying, creating and developing knowledge in the company in order to gain competitive advantage (Alavi & Leidner, 2001). KM systems enhance the ability of an organization to sustain competitive advantage (Egbu, Hari & Renukappa, 2005).In the presence of hypercompetitive, complex, uncertain, and rapidly changing environment, KM becomes one of the most interesting and important concepts in management. Previous research studies (Al-Qatawneh, Al-Tarawneh, Al-Qatawneh, & Al-Adaileh, 2019; Cegarra-Navarro, Soto-Acosta, & Wensley, 2016; Obeidat et al., 2014; Andreeva & Kianto, 2011; Shannak et al., 2010) showed that knowledge’s importance as part of the organizational assets is increasing, as it has a positive effect on gaining competitive advantage and improving innovation that lead the organization to a superior performance.

Therefore, Following Hypothesis is formed

H1: Knowledge management processes has a direct impact on Competitive Advantage

2.5 Knowledge management and Organizational Agility

The changing conditions in which business enterprises operate today have created new challenges for contemporary organizations. One of the competitive strategies that firms possess is their capability to detect external unanticipated changes and opportunities or threats, and then reconfigure, assemble, and exploit its own resources, processes, knowledge, and relationships in order to respond quickly to external changes. To address the changing issues Kodish, Gibson, and Amos (1995) states organizational agility requires firms to quickly manage their knowledge when responding to a changing environment, and the market environment in particular. Van Oosterhout et al., (2006) indicate that the process involving the application of knowledge is essential for organizational agility because this knowledge process is essential to cope with market or demand changes that are unpredictable and uncertain. It is expected from knowledge sharing methods in the organizational departments that promote the organization’s ability for active and creative responding to the variable environment. Knowledge-sharing methods help to decrease costs, respond the customers’ needs, deliver the products and services, and improve business processes and market share (Law and Angi, 2008). Several researchers have found a positive relationship between KM and Organizational agility (Al-Qatawneh et al., 2019; Marhraoui & Manouar, 2017; Saha, Gregar & Saha, 2017; Salajeghe & Nasrollahpoor, 2016). Consequently, firms need to find ways not only to adequately manage the knowledge but also to ensure the development and subsequent sustaining of the organization’s agility in order to perform better in a competitive business world.

Therefore, the Following Hypothesis is formed.

H2: Knowledge management processes has a direct impact on Organizational agility

2.6 Organization Agility and Competitive Advantage

The changing conditions in which business enterprises operate today have created new challenges for contemporary organizations. One of the competitive strategies that firms possess is their capability to detect external unanticipated changes and opportunities or threats, and then reconfigure, assemble, and exploit its own resources, processes, knowledge, and relationships in order to respond quickly to external changes. This capability is known as an Agility of the organization that is described as an organization’s ability to discover new opportunities for competitive advantage, harness the existing knowledge, assets, and relationships to seize these opportunities, and to adapt to sudden changes in business conditions (Setia, Sambamurthy & Closs, 2008). Organizational agility is considered to be an important factor for organizational competitiveness in the current turbulent business environments (Overby, Bharadwaj & Sambamurthy, 2006). Competitive advantage can be established through the attributes of agility, which enable an organization to skillfully, rapidly, and efficiently respond and exploit environmental changes. For many organizations, their competitive advantage may depend on their ability to react to frequent unexpected changes. Success in this respect can be achieved through adopting agile practices and competencies. In turbulent times, the power of an organization depends on its proactive attitude, adaptability flexibility, quick responses, competence, and the capability to ensure strategic and effective actions (Meredith, & Francis, 2000). An agile organization, therefore, can gain competitive advantage by providing lower operating costs, satisfy customer requirements, rapid introduction of new products, and eliminating non-value-added activities. Only few studies have been conducted to check the effect of Organizational agility on Competitive advantage.

According to study conducted by Swafford, Ghosh, and Murthy (2006) state that business agility provides capability for an organization to contain changes in the marketplace, and exploit market opportunities with speed and dexterity in order to gain competitive advantage. Another study suggests that business agility is that unique capability that assures competitive advantage in a continuously changing and unpredictable environment (Nzewi & Moneme 2016). Other researchers also found a positive relationship of organizational agility on firm performance (Alegre & Sard, 2015; Shahrabi, 2012; Tallon & Pinsonneault, 2011). In addition, organizations can gain competitive advantage by leveraging on agility capabilities to sense and swiftly react to unpredictable changes, synergize all detected information to understand rivals’ competitive strategies and changing customers’ preferences and requirements.

Therefore, the following hypothesis is formed.

H3: Organizational agility has a direct impact on Competitive Advantage

2.7 Mediating role of Organizational Agility

Organizational Agility has been used as a mediating variable in many studies. In a study conducted by Mashkani and khodadadi (2016) suggested that Organizational agility is significant mediator between Organizational learning and Organizational performance. Cegarra-Navarro et al., (2016) indicated that organizational agility significantly mediates the relationship between KM and firm performance. Another study suggested that firm’s IT agility significantly and partially mediates the relationship between KM and Operational performance (Al-Qatawneh et al., 2019). In addition, researchers propose that organizations lacking in agility will be less able to adapt existing process and routines to reflect changes in the environment that new knowledge signals. Given that such adaptation influences directly firm performance, the study proposes the following hypothesis:

H4: Organizational agility mediates the relationship between Knowledge management processes and Competitive Advantage

2.8 Research Framework

Knowledge Management Processes

• Acquisition
• Transfer
• Use
• Organizational Agility
• Competitive Advantage

3. Research Methodology

This section includes detail on how the research will be carried out. This Section includes the approach, target population, sample size, sampling techniques, and data collection tools.

3.1 Sample and data collection

Data will be collected from 300 employees through self-administered questionnaires and using convenience sampling technique. According to; Rule- of -10 participants per item in the instrument being used makes a sufficient sample size. Number of items that will be utilized in the instrument will be 24. Consistent with the rule of -10 sample size of the research will be 240 (24 X 10) minimum, but to test above-mentioned mediating-regression model author kept the sample size up to 300 Whereby unit of analysis would be employee. Population will be comprises of education/healthcare sector employees. The target sample will be X-country companies or institutions.

4. Data analysis and Measure

SPSS version 20 will be used for the data analysis. Correlation will be used to explain the correlation among all the variables of the research. Cronbach Alpha technique will be used to measure the reliabilities of all the variables. Regression analysis will be conducted to examine the impact of knowledge management processes on competitive advantage, the impact of knowledge management processes on organizational agility and the impact of organizational agility on competitive advantage. The mediation regression analysis will be conducted to examine the mediation impact of organizational agility in the relationship between knowledge management processes and business competitive advantage.

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Introduction

Expanding market of small businesses in foreign countries seems to be a big challenge for firms to enter especially in such a highly competitive industry as wine.

Wine is a high-value segment in alcohol market under beer and spirit which accounts for around 17% or £114 Billon of total worldwide revenue share in 2017 and its sale volume is forecasted to slightly increase every year. Australia and France invested in wine the most followed by Switzerland, Portugal, Argentina, Italy, Canada, Denmark, United Kingdom, and Sweden, respectively (Statista, 2018). From those top 10 countries, Canada is an interesting market for wine exporters because Canada market is growing in the same direction as the worldwide market where sale volume has increased by 4% from 2016, and saw a slight growth every year (Passport, 2018). What’s more is consumers are highly demanding in this particular market all around the world. Products from traditional producers such as France and Italy are the most popular whereas new wines from Australia, New Zealand, and USA have also become preferable among wine drinkers (The Minister of Agriculture and Agri-Food, 2013).

One of the middle-sized businesses who is seeking to extend to an international wine market, Canada to be precise, is Seven Sister—a South African’s wine brand. Seven Sister is owned by an African business woman named Vivian Kleynhans. Seven Sister wineries are located near the Cape West Coast, Stellenbosch in the heart of winelands—a suitable location for planting grapevines. At the time, business is running efficiently as they sell products both domestically- South Africa-and-internationally-USA. Specifically, products have been sold in major national markets in South Africa, and 42 states across the USA. However, Seven Sisters winery has a dilemma growing its reputation in the wine community because it is difficult for a newcomer to win the loyalty among consumers who prefer existed brands (Mabaya et.al., 2014). Thus, establishing competitive advantage by building resource capability is the major factor to win over consumers’ heart.

The purpose of this report is to identify the organizational resources and competitive advantage for Seven Sister to develop a competitive strategy in order to settle down and set themselves as a well-known wine brand in Canada.

Organization Resource and Competitive Advantage

How resources create impact on competitive advantage

Gaining competitive advantage means performing a service, manufacturing a product, or offering a bundle of benefits that differentiates from competitors (Porter 1996). Small and medium-sized businesses are supposed to understand and analyze internal resources and external environmental as their competitive advantage(Galati, et. al., 2017). Supported by Barney (1991), the researcher suggested “firms obtained competitive advantages by implementing strategy to exploit their internal strengths, through responding to environment opportunities, while naturalizing external threats and avoiding internal weakness”. Together with the finding of Madhani (2010) who explained that to gain and sustain competitive advantage, one should be focus on resource-based view or RBV. Resource-based view is laid down as the theory which examines and clarifies the internal resource of organization, emphasizing on the capability in formulating strategy to approach sustainable competitive advantage. RBV divides categories of resources in two types which are tangible and intangible (Kamasak, 2017).

Tangible assets are physical objects that firms own or buy from suppliers; for example, land, machinery, equipment, and capital. Meanwhile, intangible assets are untouchable elements that firms particularly owned such as brand image, brand reputation, brand story, and trademark. Not only are tangible and intangible assets crucial in labelling each brand as distinctive, but also are heterogeneous and immobile resources vital to setting apart one’s competitive advantage. The concept of heterogeneous means diverse capabilities and other resources of firm which are uniqueness distinct from competitors such as Toyota who nominated themselves as expertise in car technology. They endorse the high technology by utilizing and deploying resources and capability into product model to competing with luxury cars. In fact, Toyota is able to charge the product in the higher price, but they insist to sell products at a lower price which is considered as a price advantage (Ukessays, 2016). Comparatively, immobile refers to resources that are dispossessed by other competitors (Brown, 2007). This group of resources is hard to obtain since the cost of developing, owning, and operating resource is high such as brand image, reputation, knowledge, and intellectual property. Regarding to Toyota, consumer perceive them as high-quality car brand sold in affordable price (Ukessays, 2016).

Based on Seven Sister tangible assets, they own a vineyard in South Africa where it is the best location to grow grapevines such as Chardonnay, Sauvignon Blanc, Merlot, Cabernet Sauvignon Blanc, and Pinotage/Shiraz. According to vineyard’s location, the climate and soil of Stellenbosch suits for the condition of planting Chardonnay which is widely accepted among wine drinkers (Atkin, 2017). Moreover, their winery is capable of producing wines by themselves. In other words, company’s facilities are ready to prepare for producing lots number of products to be sold in market (Sevensister, 2018).

In spite of tangible assets, Seven Sister has a touching story about brand’s founder, this remarkable origin thus became remarkable among consumers. In a way, the story has created a sense of authenticity which positively bolsters brand’s image and builds a warming perception towards consumers as a result. Additionally, the firm have good relationship with stakeholders and retailer with support to distribute product over the sea. Heritage Link Brands, the largest company in North America, is supporting Seven Sister to distribute product.

In term of brand heterogeneous and immobility, the owner combines resources and knowledge together for making signature wine’s taste (Mabaya et.al., 2014). The result of product, taste of tropical fruity flavour is unique from competitor. Also, the country of product origin as authentic South Africa’s wine does not mention for unique selling point by any competitors in Canada’s wine market.

How to sustain competitive advantage

Only the RVB concept is too board to establish competitive advantage. As explained in the argument from Jurevicius (2013), recognizing only the heterogenous and immobile resource in achieving competitive advantage are not enough for sustenance. As seen in Figure 1, this image illustrates VRIO resources which is vita criteria to find the competitive advantage. This argument is also supported by Ismail et.al. (2012) and Madhani (2010) that Valuable(V) – valuable resource which enhance strategic value to the firm, Rare(R) – resource which is difficult to find among the existing and potential competitors, Imperfectly Imitability(I) – resource or capability which difficult to imitate by other firms and significant cost advantage to firm to obtain, and Organization(O) – firms able to exploit the resource or capability. Those elements are essential measurements determining competitive advantage and sustainable performance.

Figure one. A resources bases view model (Jurevicius, 2013)

Comparing with the situation of Seven Sister, the value is the flavour of rich fruit with balancing between blueberry and vanilla. They provide various types of wine to consumers (Johnson, 2018). The taste of product is also rare resource; according to location of vineyards, summer fruits are collected to be ingredient of producing wine process which different from other brands. This capability of producing is imperfectly imitability which others cannot copy. As organizational exploited, the firm constantly express themselves as South African brand through the wine flavour.

The VRIO framework encourages firms to exploit resource and capture the value of brands (B2U, 2016). Another theory from Collis and Montgomery (1997) also supported that uniqueness of the resource and organization are offering to customer essential for creating a sustainable competitive advantage (Figure two).

Figure two. Advantage Creating Resource (Collis and Montgomery, 1997)

Competitive Strategy

Based on RVB, VRIO, and Advantage Creating Resource concepts, internal resources are important for brand to understand themselves of how to utilize unique resources and capabilities as a tool to cement a strong brand. Besides internal resources, competitive strategy supports the brand’s direction which basically used for winning competitors. Referring to the theory from Porter (1985), he encouraged brands to combine sustainable competitive advantage with the scope of activity that firms want to achieve. It leads to generic strategy below that firm would focus on the cost of product or brand differentiation. Overall decision depends on external factors which are target and market of firm’s interest.

Figure three. Competitive advantage (Proter, 1985)

After analyzing the scope of activities for achieving, brand must set the strategy to confront with competitors. Kotler and Singh (1981) developed five confrontation strategies as illustrated in figure four which are Frontal attack – direct attack to the strength of competitor, Flanking attack – attack the competitor weakness, Encirclement attack – cut off the competitor’s resource, Bypass Strategy – avoid competing with the competitor’s strength and Guerilla Tactic – weaken the competitor with unconventional attack. Those five confrontation strategies are used within firms that want to expand their market and aim to compete with local brands in market.

Figure four. Confrontation Strategy (Kotler and Singh, 1980)

Seven Sister’s Competitive Advantage and Competitive Strategy

Selected Seven Sister’s Resources for Establishing Competitive Advantage

As mentioned earlier of Seven Sister’s internal resource, they own lots of valuable resource which are miles apart from local competitors in Canada wine market. From figure five, the graph illustrates brand shares of wine market, most of them are brands from Canada, France, Australia, and, Italy. The top ten brands in the market claim the location of vineyards and brand equity as uniqueness for competitive advantage (Passport, 2017).

Figure five. Brand shares of Wine in Canada Market (Passport, 2017)

From the finding above, Seven Sister owns valuable resources and assets which able to enhance and gain competitive advantage. Due to combination of RVB, VRIO, and Advantage Creation Resource concept which encourages firms to identify internal resource to create competitive advantage and sustainable, Seven Sister’s resources can be identified as below.

Seven Sister utilize the capability of wine making into wine ingredients to create new taste. Seven Sisters adapt local ingredients which is topical fruits marinated with grapevine. The result is consumer will taste the topical flavor and wonderful depth (Johnson, 2015). Furthermore, Chardonnay grapevine is originated in many countries, but growing Chardonnay in Stellenbosch is claimed to possess the highest quality comparing with other places. Thus, the rareness of product ingredients and capability of producing wine’s skill are the competitive advantage.

Not only internal resource but also the external factor is the element to be considered as Barney (1991) statement. Target consumer in Canada who are possibility to be consumer in the future chooses product from quality and taste (Winebusiness, n.d.). Regarding to Canadian’s consumers preference on figure Five, image seeker, engagement newcomer, and enthusiast are the potential consumer for the brand. They are highly knowledge group; hence, they make decision base on information, knowledge, and review. The functional benefit tends to be the factor for them for deciding rather than emotional (Winebusiness, n.d.).

Figure six. Consumer Segment (Winebusiness, n.d.).

To sum up, the emotional of the sisterhood should be reducing for bring up as the competitive advantage the authentic wine from Stellenbosch in South Africa with tropical fruity taste must be rise as competitive advantage. Brand’s country of origin can certainly play a major role in distinguishing themselves from other brands as well. According to the statistics of wine market in Canada, no brands from South America have been listed in the ranking. This paves a tremendous opportunity for Seven Sister to gain such a lead over competitors. In other words, the country of origin and product itself will be used for sustaining competitive advantage and developing competitive strategies.

Creating Competitive Strategy

Related to the Competitive Model for Porter, broad target is suitable the competitive scope because Seven Sister’s is appropriate with every wine drinker. The difference of competitive advantage are acceptable for Seven Sister because this is from South Africa which different from other players in market. Competing against other wine brands by engaging in a price war might be a smart choice for Seven Sister nonetheless as there is an undeniable limitation in the production cost.

As a result of all factors’ combination, Bypass Strategy is the most suitable strategy to confront with other competitors in Canada’s wine market. Avoiding competing in a strong competitive arena would be more beneficial for the brand than going against others directly mainly because Seven Sister is a newcomer in the wine. Its reputation is unheard of the respective market. Resorting to the uniqueness of the brand and position themselves in the new area is an adequate direction for this brand.

Both competitive advantage and strategy lead to new marketing strategy which is ‘Authentic fermentation from South Africa’

Conclusion

Being distinctive from competitors is the best way to stand out over the crowd. Based on the resource-based view, VRIO, and advantage-creating resource theories, internal resources compounded with external environment opportunity are important factors for the firm to identify and recognize its uniqueness which is exceptionally useful in gaining competitive advantage. Furthermore, sustaining the competitive advantage is necessary for the firm to maintain their value, uniqueness and identity. Setting a competitive scope and thriving for competitive advantage are the direction for the brand to evolve itself in the right way. Most importantly, to be in the right position, choosing the right competitive strategy is an integral part of the brand to move forward.

Abstract:

Small- and Medium-sized Enterprises (SMEs) have performed an important role in national development upon their support on both the traditional even modern sector. They have experienced an increase of competitiveness, particularly since the Indonesian government deals with the ASEAN Economic Community (AEC). The agreement encouraged SMEs to escalate their innovation and creativity to be able to survive amid intense competition. This research aimed to find an explanation about factors influencing the business competitiveness of SMEs and the effect on performance. The respondent’s SMEs in Kudus City are represented by the embroidery business owners that since three years before they have experienced a decrease in profit. They expressed their response to research variables such as competitiveness, orientation, adaptability, internal resources, and performance. The use of Structural Equation Modeling (SEM) was intended for examining the variables relationship and direct/indirect influence from the exogenous variables to endogenous variables by AMOS software. The results demonstrated that the entrepreneurial orientation did not affect competitive advantage, meanwhile the adaptability to business environment and internal resources affected SMEs business position positively. Finally, the entrepreneurial orientation of business owner, SME’s competitive advantage, and internal resources (financial, physics, human, and nature) effect on business performance direclty.

Introduction

Small and Medium-sized Enterprises (SMEs) drives a prominent contribution to economic growth of many countries through their traditional and modern sectors. This small industry supports growth through poverty alleviation (job creation, serves various needs, and the ability to survive with products/services innovation, income distribution, and its contribution to national income. SMEs grow in large number, but were not bankable yet or they have no sufficient guarantees in funding despite of their good character and business performance. Moreover, in accordance with capital problems, they also face obstacles of human resources, business networks, unpredictable business environment, infrastructures, and access to the market, whereas low competitiveness takes effect on business sustainability.

Entrepreneurs ought to take advantage of these opportunities aggressively while managing any risks (Covin and Slevin, 1989). They should be able to adapt to business uncertainty that forces them to generate a long-term plan and strategic decision-making. Their success is a consequence of the ability to adapt to the environmental changes, whereas the ability then affect the basic company’s strategy. To implement a strategy that improves business efficiency and effectiveness, a company’s internal resources should be well-managed which contributes to its competitive advantage through production cost reduction (Seddon et al., 2017).

The competition raised since the government assigned the AEC (ASEAN Economic Community) and ACFTA (ASEAN-China Free Trade Agreement). Moreover, SMEs in Central Java, especially in the embroidery business in Kudus City, have a problem regarding innovation. The models didn’t experience significant changes for the last 3 years or the models are not able to meet the market trend. Accordingly, it impacts on the requests decline, which directly affects the profit. This phenomenon needs special attention to have the industry still grows with high competitiveness.

Theoretical framework

2.1 Entrepreneurial Orientation

Entrepreneurship is a pioneer in achieving sustainable economic growth and highly competitive advantage. Regarding literature of entrepreneurship, orientation as considered as the most common construct that include proactiveness, innovativeness, and risk-taking. Innovativeness is the ability to apply creativity in order to solve problems and opportunities to enhance and improve living standards. Risk-taking is an action that is oriented to the opportunities in uncertain decision-making. Subsequently, proactiveness is a condition where the leader is capable of identifying opportunities, problems, needs, and changes in the future (Uhl-Bien et al., 2007).

Entrepreneurial orientation (EO) drives an important role for a company to improve and be an acceptable meaning of business performance. It is recognized as a corporate benefits strategy to be able to compete more effectively in the same marketplace This construct is measured by four dimensions: internal locus of control, need for achievement, extroversion, and self-reliance (Affendy et al., 2015). The combination of these four dimensions is believed to improve business competitiveness and performance.

2.1.1 The Effect of Entrepreneurial Orientation on Competitive Advantage

Discussion about strategy content (the generic strategies) in strategy-making processes, entrepreneurial orientation seems to be a critical construct to explore. It is considered as the first of designing and implementing competitive strategies. Hence, studying competitive strategy and entrepreneurial orientation is challenging research (Lechner and Gudmundsson, 2014). Notice that entrepreneurial orientation has emerged as a possible solution to the problems that businesses faced in order to achieve the sustainability of competitive advantage (CA). Thus, understanding of entrepreneurial orientation, especially in SMEs context has a great impact on strengthening business competitiveness. The three dimensions of entrepreneurial orientation (innovativeness, risk-taking, and proactiveness) also have a significant influences on the competitive advantage (Jantunen et al., 2005).

2.1.2 The Effect of Entrepreneurial Orientation on Performance

Since entrepreneurial orientation has been recognized as a strong predictor of company performance in the past research, some research has also argued that entrepreneurial orientation does not affect performance at all. It is often considered as a predictor of competitive advantage and business growth. Due to competition in the present era, SMEs face increasing pressure derived from competition from across the world. They face increasing difficulty to maintain and improve business performance in time unless they can actively manage these pressures properly (Affendy et al., 2015).

2.2 Adaptability

Adaptability is the competence to adjust companies’ approach or actions in response to changes in their external environment. It is a precious skill for individuals and businesses to compete with others (Ismaeel and Blaim, 2012). The challenge with strategic adaptability is that they essentially have to plan for the unexpected. Naturally, they can’t anticipate changes or problems that their research and intuition don’t reveal. However, they can establish a standard system or method to respond to change within the business.

To increase competitiveness, entrepreneurs should increase innovation, invest in technology, and use market-based management. The business environment has a large influence on economic development. Stable political and economic conditions will improve a very significant business climate, indicated by the increasing number of small businesses and more innovative products that will be offered. The conclusion is that the better the company adapt to its environment, it will impact on the increase of competitive advantage (Covin and Slevin, 1989).

It is difficult to evaluate the key factors in business success or failure, where some researchers report increased usage of non-financial measures to evaluate performance in the last years (Hoque, 2004). However, business performance can be measured and judged from various perspectives, Ruekert and Walker Jr (1987) proposed a three-dimensional of performance consisting of effectiveness, efficiency, and adaptability. Effectiveness is recognized as the products and services’ success in comparison with those competitors (Ruekert and Walker, 1987).

Efficiency is recognized as a degree (a result of comparing product/service outputs to a set of inputs resources). Meanwhile, adaptability refers to success in responding to dynamic change (Mouzas, 2006). Explicitly, effectiveness is correlated with nonfinancial goals, efficiency is highly correlated with achieving profitability, and adaptability is correlated with adaptation to change (Miller et al., 2012).

2.3 Internal Resources

The term of resource is derived from three main constructs; capabilities, competencies, and resources, that have been widely analyzed in the strategic management literature, resulting in difficulties to generalize conclusions across studies. Internal resources refers to the internal company environment (a set of company internal factors which in turn affect the success of business operations). The company has full control over these factors as the opposite of the external environment. However, it is also important for a company to recognize threats outside (Barney, 1991). A better understanding of threats outside the company leads to create a strategy that maximizes its resources and minimizes weaknesses.

The good governance of internal resources and operations management is one of business key success factors. Therefore, leadership has an important role to a company as a significant internal factor (Momoh et al., 2010). The leadership style and other management styles also impact on organizational culture (Kuratko et al., 2014). Some areas which are typically recognized as in internal factors are (Abdullah and Hamdan, 2012): The financial resource like funding, investment, and income sources; Physical resources such as location, facilities, and equipment,; Human resources such as employees, target audiences, and volunteers; Access to natural resources, patents, copyrights, and trademarks; Current processes like employee programs, software systems, and department hierarchies.

2.3.1 The Effect of Internal Resources on Competitive Advantages

The underlying competitive emphasis on most industries appears to have shifted from being product-market based to being more resource-based (Etemad, 2009). In line with the resource-based theory, bundles of resources, rather than industry-wide structural characteristics or the product-market combinations chosen for their deployment (eg strategic conduct), lie at the core of a firm’s competitive advantage (Kuratko et al., 2014).

The primary idea is that a firm possesses and exploits its resources and capabilities in order to make it unique from others. Unique ways of combining and applying innovation resources (product development capabilities), human resources, brand label capital or functional experience (production, marketing, sales, etc.) are examples of such capabilities. This ability is in turn usually seen as a collection of routine production that is socially complex and therefore tends to oppose imitation. In particular, the non-tradable resources and capabilities (perfect immobile) which develop and accumulate within the firm are the central concern of the resource-based theory (Kozlenkova et al., 2014).

2.3.2 The Effect of Internal Resources on Performance

Certain types of resources owned and managed by companies potentially produce competitive advantages, which makes the company’s performance superior (Gupta and Kumar, 2013). The company’s internal resources such as knowledge, skilled employees, machines, and capital are the basis for achieving superior performance. The relationship between company resources and competitive advantage is strongly influenced by elements such as assets owned by the company. Companies that want to implement strategies that can improve efficiency and effectiveness must be able to manage their internal resources that cover all assets, capabilities, organizational processes, information, and knowledge.

The RBV literature (resource-based value) shows that internal resources possess a long-lasting competitive advantage. Entrepreneurs as a corporate resource catalyst have been researched over the past decade (Jackson et al., 2014). Their success is a reflection of business quality, a form of collaboration between personality attributes such as entrepreneurial enthusiasm and attitude, general human capital, industry, and specific company experience, as well as learning from previous business experience. Thus, the founder’s attributes are the most central resources in business in order to achieve its competitive advantages (Chandler and Hanks, 1994; Clancy Dollinger, 1995; Heru Priyanto, 2012).

2.4 Competitive Advantage

Competitive advantage is perhaps the most widely used term in strategic management, nevertheless, it remains poorly described and operationalized. Competitive advantage does not equal to superior performance because it is a relational term that is context‐specific. It has several meanings, including the emphasis on the superiority of resources and company expertise. Another definition emphasizes excellence in performance achievement. Companies that pay attention to performance and strive to improve their performance have the opportunity to achieve a good competitive position. The position becomes the company’s capital to continue competing with competitors (Johnson et al., 2008).

The evidence of competitive advantage is the company’s superior position both in the industry and the marketplace (Irfan et al., 2014), where superiority depends on how customers look at it. For example, a company able to make superior products, but if customers do not see it as a superior product, the company will not grow into a competitive advantage and make its products better than competitors.

2.5 Performance

The freedom of the owner or manager in making decisions, taking the initiative, and setting policy strategies that affect business performance. Prahalad (1990) state that business can be superior if company management capable to consolidate its technological and production capabilities into competence, which gives strength to every individual in the organization to always adapt to the ever-changing market opportunities (Prahalad et al., 1990). Businesses will be able to maintain long-term advantages if they have the ability to create products with low cost (low cost) and faster manufacturing time compared to competitors (Morrison et al., 2003).

Competitive advantage is seen as something that can be used in corporate strategy in order to improve company performance. Competitiveness sees the company as a whole consisting of many activities carried out by the company in designing, producing, marketing, handing over, and supporting sales (Porter and Kramer, 2006). Companies that have a higher level of competitive advantage will also have better business performance (Etemad, 2009).

Discussions

The respondents were the managers of the embroidery industry in Kudus Regency which consists of 122 companies. They were asked to express their perception through a questionnaire and subsequently analyzed by structural equation modeling (SEM) supported AMOS software. The research model investigated the effects of entrepreneurial orientation, adaptability, and internal resource on competitive advantage and the influence on business performance.

Table 1: Hypothesis Testing Results.

Hypothesis

CR and P-value

Entrepreneurial orientation (EO) has a positive influence on competitive advantage (H1)

1,499 : (0,134)

H1 rejected

The adaptability of the business environment has a positive effect on competitive advantage (H2)

2,020 : (0,043)

H2 accepted

The company’s internal resources positively influence on competitive advantage (H3)

6,379 : (0,000)

H3 accepted

Entrepreneurial orientation has a positive effect on company performance (H4)

2,302 : (0,021)

H4 accepted

The company’s internal resources positively influence the company’s performance (H5)

6,045 : (0,000)

H5 accepted

Competitive advantage positively influences company performance (H6)

2,343 : (0,019)

H6 accepted

The following discussion explained the results of hypothesis testing from table 1.

3.1 Hypothesis 1

The results did not support the hypothesis which stated that entrepreneurial orientation has a significant effect on competitive advantage. Nevertheless, the results showed an influence direction in accordance with the hypothesis. The explanation is that in an industrial cluster there is uniformity or at least similarity in terms of the resources owned by each company. They owned almost the same information, employee skills, technology, raw materials, and even capital.

The existence of the similarity factor is possibly the cause entrepreneurial orientation had no significant influence on competitive advantage. The phenomenon that occurs in this study is that there is almost no innovation process that occurs so the existing competitiveness is being low.

3.2 Hypothesis 2

The results corroborated the findings of (Andriyanto and Nurjanah, 2015). Competitive advantage could be achieved if the business actors and their teamwork (employees) had an ability to understand the customer’s wishes well, able to recognize the development of competition carefully and have a good working relationship with their suppliers. So that companies can get information, and recognize trends and relationships within an organization’s external environment, where this adaptability process could help the management in planning future actions.

3.3 Hypothesis 3

This research is in line with research conducted by (Jiang et al., 2012), which proves that the company’s internal resources significantly influence competitive advantage. Companies that were able to manage their internal resources well enable companies to implement the right strategies forming competitive advantage. Internal resources were able to provide superior company performance.

3.4 Hypothesis 4

The results of this study are in line with research conducted by Avlontis and Salavou (2009) which shows that entrepreneurial orientation has proven to have a positive and significant influence on company performance (Avlonitis and Salavou, 2007). Likewise with research conducted by Witjaksono (2009) which also shows the same results regarding the influence of entrepreneurial orientation on company performance (Witjaksono, 2009). The ability of company leaders to implement innovation, proactive and have the courage to risk-taking create more innovative products and achieve a wider marketplace. The condition helps the company to improve performance.

3.5 Hypothesis 5

The results of this study succeeded in supporting the hypothesis that the company’s internal resources directly affect the company’s performance. The results of this study indicate that the performance of embroidered SMEs in Kudus Regency has the ability to increase their potential to improve company performance. The resources consist of many factors that the manager have to recognize and use it as effectively as possible.

3.6 Hypothesis 6

The results of this study are supported by the results of research conducted by Gupta and Kumar (2013) which suggests that competitive advantage has a significant influence on business performance (Gupta and Kumar, 2013). Kumar et al. (2011) and Boulianne (2007) also states that competitive advantage has a positive effect on performance (Boulianne, 2007; Kumar et al., 2011). Similar results are obtained from research conducted by Othman et al., 2015, competitive advantage has a positive influence on performance (Othman et al., 2015).

The results of this study are also supported by the results of previous studies by Kumar and Pansari (2006) where competitive advantage has a positive and significant effect on the company’s marketing performance (Kumar and Pansari, 2016). If a business does not have a unique or different value, then the level of sales, profits and the level of visiting consumers in a business may not be able to increase superiorly (Mariadoss et al., 2011).

Some managerial implementations of the results of this study are expected to contribute to the development of embroidery businesses in Kudus Regency in terms of internal resources as follows: Technology; Employee skills; The ability of the company; Capital; Information; and Human resource knowledge.

Company performance becomes a variable that is influenced by all variables. The most influential variables are internal resources of 0.882, competitive advantage of 0.184, entrepreneurial orientation of 0.109, and business environment adaptability of 0.027. The following are indicators that affect company performance: Sales growth; Customer growth; Profit growth; and Market growth.

Competitive advantage was affected by all other variables. The following were indicators that affect competitive advantage: Uniqueness; Not easily replaced; Competitive prices; and Not easily imitated.

Entrepreneurial orientation becomes important in this study. The following indicators influence the orientation: Proactive; Innovation; and Risk-Taking.

The following indicators were in the context of Adaptability, such as the Ability to understand customers; the Ability to work with suppliers, and the Ability to understand competitors.

Conclusions

The results of this study can provide answers to the research problem. Based on the results of the study, there are six processes that can be used to improve company performance, namely:

First, company performance can be enhanced by entrepreneurial orientation, including by innovating products, having the courage to take risks, and having a proactive attitude. Entrepreneurial orientation carried out will have a direct influence on the company’s performance.

Second, company performance can be improved by adapting to the business environment, namely by understanding customers, understanding competitors, and working with suppliers. Adaptation of the business environment will have a direct influence on the company’s performance.

Third, company performance can be improved by utilizing internal company resources, including capabilities, information, knowledge of human resources, capital, technology, and employee skills. Companies that are able to utilize their internal resources well will be better at improving their company performance. The company’s internal resources will have a direct influence on the company’s performance.

Fourth, company performance can be improved by entrepreneurial-oriented ways, where the entrepreneurial orientation that is carried out will increase the company’s competitive advantage. Competitive advantages possessed will improve company performance

Fifth, the company’s performance can be improved by adapting to the business environment, where the adaptation of business environment will improve the company’s competitive advantage. Competitive advantages possessed will improve company performance.

Sixth, the company’s performance can be improved by utilizing the company’s internal resources, where the maximum utilization of the company’s internal resources will improve the company’s performance. Competitive advantages possessed will improve company performance.

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Costco is one of the leading wholesale clubs in the U.S. They have a lot of rivals in the industry, but they come out as the second in the wholesale industry following Walmart. They have opened and are still opening stores in other countries. They have expanded their brand name around the world in order to promote their products and services. They have managed to gain the loyalty of a lot of customers and sustained a good relationship with them. They have a lot of resources that are valuable, rare, costly to imitate, and organized to exploit. The Three highly important resources that Costco has are their employees, their private label Kirkland signature, and distribution plants and specialized machinery. These resources are a good source of competitive advantage for Costco and will help them stay ahead in the wholesale industry because they offer good products and services that others cannot compete with.

A great resource that Costco has is its employees. They are very valuable to the company and are a great asset. Most of them are very well trained which leads to them being able to have better and faster production for the company, thus providing more for customers. Also, their employees seem to stay with Costco since they are well compensated. This helps a lot with production since employees tend to work harder if they are benefiting from their job and they don’t need to waste time on training new staff because if they prevent any turnover, they wouldn’t need to hire more people to replace the past employees. Which makes them very rare since most employees in this industry are not well trained. Trying to hire the right employee can be hard because not everyone is qualified for the job. Then again it is not hard to imitate these employees. Employees come and go all the time in this industry so it’s all about the training that is given, and anyone can perform the job well. A company can offer a Costco employee a better pay rate and have them work for them or they can just train their employee better. So, it is a good asset to have, but it only gives them a small edge on the competition since it can easily be copied. Therefore, the employees at Costco are great and are loyal to Costco, but I do not think they are a great competitive advantage for the company. They should keep doing what they are doing with them but do not need to focus on this aspect of the company.

Costco began their own private label ‘Kirkland Signature’ in 1995 and since then they have used this brand to provide lower price items than the national brands. According to their recent Form 10-K, this brand allows them to maintain lower prices while also maintaining their margins high thus making it a high-value resource. As of 2017 about 25% of Costco’s annual sales are from Kirkland brand products, and according to company executives this percentage is growing (The Wall Street Journal). Though this is not a rare choice since most grocery stores have their own private label. What makes it somewhat rare is that Kirkland Signature Brand Products accounts for nearly 30% of all private label sales in the United States (The Motley Fool). Though many grocers have their own private label many times these brands are perceived to be “generic” as in lower quality but in the case of Kirkland, Costco has made it their mission to make this brand as good if not better than the name brand. According to The Wall Street Journal, they give a brand-name supplier a chance to make a Kirkland brand version of their product but if it doesn’t come to fruition, they will go forward with making their own products. This would be difficult to imitate by other grocery stores unless they have the power amongst suppliers as Costco does. Costco has also organized themselves to take advantage of this strategy by telling its employees to “play fair ball, but hardball” with suppliers. Thus, being able to have the upper hand in negotiations and when not appeased able to use their own brand.

A valuable asset that Costco has is its capability to use their distribution plants and specialized machinery to produce and distribute their products at a rate that other companies cannot easily imitate. These distribution plants and machineries are used to allow Costco to resupply their warehouses at a constant rate in order to meet the demand of their customers. It is very expensive to get a hold of these resources and capabilities; a company will need to spend anywhere between $100 to $200 million just to cover the cost of the distribution plants with the specialized machinery. These assets for Costco are rare since their distribution plants and machineries are customized to help them manufacture and distribute their wide range of products. The fact that their distribution plants and machinery are rare and specifically made for them makes it hard for new companies to find and imitate.

Due to the cost and how rare these assets are for Costco it would still cause trouble for competitors such as Sam’s Club. Warehouse stores such as Sam’s Club would have a hard time covering these costs to imitate Costco because they already have their own distribution plants and machinery that is already tailored to their needs. It just wouldn’t make sense for Sam’s Club to scrap what they already have and waste their time and money researching Costco’s distribution plants and machineries when what they are doing would most likely work better for their organization. With the ability to easily supply their warehouses with their quality products at an impressive rate and offer low prices, Costco is able to beat out their competitors.

It is known worldwide that Costco is the second leading in the wholesale industry. They have branched out in many different countries and their brand name is well known. Costco has a few important resources that it offers as stated above are its employees who are assets to the company and tend to stay at the company because of the benefits and they are treated well. The Kirkland signature that offers a wide variety of items. Lastly its distribution plants and specialized machinery that help Costco distribute their products at a fast rate.

According to our analysis the resource that seems to give Costco their competitive advantage is their Kirland brand Signature products. Recommendations regarding their Kirkland Signature resource would be to keep expanding the private label brand since overall the desire for this type of product is growing while maintaining high standards for these products since the customer is paying a membership to enter the store and procure them. Focus on economic developments and when it is most lucrative create products that would lower prices for the customer. Keep employees that negotiate with brands aware of the products that have been developed and are being developed to maintain bargaining power. These recommendations will allow Costco to gain a sustainable competitive advantage over other competitors in the industry.

The world’s largest social networking site, Facebook, was created in a college dorm room at Harvard in 2004 by 19 year old Mark Zuckerberg and three of his other pals. A site which was initially created for college students to socialize online became the world’s largest social networking site having billions of users and revenues. A website which is more popular than Google is seen to be the ‘most transformative social change’ in the recent history by Zuckerberg, which made him the world’s youngest billionaire because of it. Overcoming the first-mover advantage of Myspace, who was an early leader in social media, was the first thing Facebook did before it became the global phenomenon. Myspace’s success attracted the attention of News Corporation, which later got acquired by them in 2005. After Myspace became a publicly owned company, its revenues and profitability became more pressing issues and their business model started shifted on generating more revenues by focusing on ad-heavy markets. Later in 2008, Myspace declined in its business which laid off 45% of its staff. Facebook remained a private company until Microsoft purchased $240 million equity stake and a Russian investment group added $200 million, which gave Facebook less pressure to produce bottom-line results than Myspace that allowed them to pursue a different business strategy to make more users first and profits later. Facebook pursued a global strategy due to which it has more than 70% of its users outside the Unites States. Facebook displaced Myspace from being the most popular social networking site in 2008 but faces new challengers in social media space like Google, LinkedIn, Pinterest and Twitter.

Facebook and Myspace are the social networking sites that allows users to create public profile on the website and to connect with other users which were introduced in 2004 and 2003 respectively. The users find it interesting because they offer a lot of benefits and services like connecting them with their friends, new people and they can even share their thoughts, opinions and interests on them. Before Facebook became a worldwide sensation, it had to overcome the first-mover advantage held by Myspace. Before the Facebook was introduced, Myspace was popular in the social networking business as many people were new to having access to a site like that which had new contents and could connect with friends and find new friends through it too and even its success attracted the attention of News Corporation in which they acquired Myspace for $580 million in 2005. After being publicly owned company, Myspace focused more on a few ad-heavy markets to grow revenues and profits rather than increasing more users. They also kept on redesigning their website which made them to lose its user data base and they also started getting off because there were too many bugs and issues. On the other hand, Facebook pursued a different business strategy: more users first, profits later, which was a global strategy. As Facebook’s strategy was to gain more users first, it made its website simple, better and easy to use and they didn’t keep on changing its designs so people got used to it and started to use it.

As the main motive pursued by the Facebook was more users first and profits later, it focuses on lowering the cost and affordability of its product which leads towards increment of the users of Facebook. Facebook also focused on the differentiation strategy by providing its users with better features in its product like ‘news feed’ which is at the heart of user’s homepage and provides regular updates of friends’ posts, photos, events, etc., ‘timeline’ which allows users to paint a complete life story on his or her profile and ‘graph search’ allows users to query in that portion which is connected and filled with other users. For the focus strategy, Facebook serves its customers with the taste, size and design of the product that could best match with the customer’s need and requirements.

Facebook also follows the intensive growth strategy to sustain in the market. It uses the market penetration strategy to maximize its current market share by making alliances with telecommunication companies to increase the number of users using the company’s social media service through the Facebook mobile app. For the market development strategy, Facebook coordinates with the governments of different countries to allow their citizens to have access to online social network which emphasizes in the growth of Facebook in the global market.

The competitive challenge should be pointed out properly to formulate strategies. Facebook’s main competitive challenger was the first-mover advantage of Myspace as they were already in this online social networking business with many of its users when Facebook was just starting. But Facebook slowly increased its customer as at that time their main focus was to increase customers first and earn profits later, so, they were able to overcome that challenge. This challenge turned into its competitive advantage in the long run. Right now, Facebook’s main competitive challenge is to maintain its competitive advantage for having a huge customer base. If only Facebook had no edge over its competitors, it would have been hard for Facebook to sustain in the market as it earns money from its large number of users. So maintaining this challenge, Facebook staying in this online social networking business is its biggest competitive challenge. Therefore, this is how Facebook became the number-one social media company, and not Myspace which enjoyed a first mover advantage.

After analysing the case along with the strategies used by Facebook I think the strategy followed by Facebook seems very fine to me because of the strategy that they used they have gained a lots of users around the globe. More than 70% of Facebook’s users are outside of the Unites States and its bringing billions in revenue and gaining popularity in the world. So, I think Facebook has a good strategy. Only three recommendations that I would like to give to Mr. Zuckerberg are:

1. Be aware of the rapid increment in the growth, development and obsolescence of current technology because the Facebook platform can get outdated any time, so it needs to act accordingly and adapt to the new updates in the distribution of the services they provide, exclusively since what they offer are highly technology amplified.
2. To start focusing more on sustaining large number of users they have and less on increasing the number to grow because focusing on sustaining their large number of users will help them to gain more loyal customers who stay active on their site around the globe and those loyal users will benefit the company more by influencing other users to be in it together which will be a win-win situation for both Facebook and its users.
3. Acquire what they have invested in for so long. Their enormous customer base has yet to explore a lot of opportunities. As social networking has highly influenced many people’s loves, Facebook needs to capture as many opportunities as possible that is present in the absolute number of users they have online.