Relative Advantage of the Firm

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Table of Contents

Distinct offerings of the firm
Pricing
Works Cited

According to the case study, salton inc. enjoys a great advantage in relation to its suppliers placing it at a strategic advantage with its competitors. This strong relationship with suppliers places it at an upper hand in product development, innovation and branding. Further, the case illustrates that the firm has a strategic advantage due to product sourcing from the cheaper Asian markets, which provides it with the advantage of diversification.

According to Afuah, a firm gains competitive advantage over its rivals by establishing strong relationship with suppliers and in this case the firm has 50 different suppliers for its products and a long-term relationship with Markpeak ltd (291). Markpeak Ltd, which supplies the firm with 38% of its products, is a reliable and competent supplier.

According to Afuah, this advantage places the firm at a strategic market leadership position against its competitors and new entrants. By insisting on short-term supplier contracts, risk aversion is entrenched in sourcing for materials. In addition, the firm stresses on the importance of competitive bidding to gain an upper in sourcing for its products, placing it at an upper hand on margins position by ensuring that merchandize is of high quality.

In addition, high quality standards remained a priority (Afuah 292). However, competitors had the disadvantage of slow outsourcing, low volume purchases, translating to high costs and reduced profit margins placing it at a competitive advantage against its competitors. A clear marketing strategy and marketing mix is evident from the above case.

Customers on the other hand enjoyed high quality products, appropriately designed for their needs and wants. Further still, the company specialized in a wide range of quality kitchen, home, personal, and beauty care products.

Thus, the company’s brand name became a household name, an important concept in marketing. In addition, to beat her competitors, the company specialized in a wide range of products such as shower radios, and espressio/cappuccino products that placed the company’s brand at strategic places in homes serving as an advertising method.

Potential new entrants could find it difficulty to penetrate the market due to its strategic position in terms of branding, lowered product cost, good quality products, product differentiation, and good marketing power and unique marketing mix. The firm’s concentration in advertising and marketing, tailor-making products for its customers by addressing their needs and wants, and making the brand name common through superior marketing techniques provides it with a clear lead in the market share.

Distinct offerings of the firm

According to the case, the firm offers distinct products specializing in product differentiation, tailor made to meet customer needs and wants. This included healthier and more convenient foods coupled with product diversification. With innovative ingenuity, the food products met the market demands as it were, raking the company in huge profits (Afuah 297).

Further, to boost its sales, the firm produced another brand called juiceman. This brand was similar to the original product but with half the characteristics of the original brand. This made record sales. Product differentiation and flexible pricing mechanisms played an important role in gaining and maintaining a strong lead in the market share.

Brown asserts that firms have to adopt a unique marketing mix, adopt a unique hard selling concepts and competitive pricing to stay ahead in the market (chapter 2). These points to product diversification, product differentiation, and tailor made products to meet customer needs and wants.

Pricing

Evident from the case study, marketers did enough research in pricing their products in relation to the value obtained by stressing on the importance of flexible pricing techniques. Pindyck asserts that, “profit-maximizing price-cost margin is inversely related to the firm’s price elasticity of demand” (Pindyck 1). Pindyck further asserts that a firm producing products with interrelated demand must use joint pricing mechanisms for profit maximization by creating a profound effect on sales (Pindyck 9).

According to the above case, product diversification is evident, with innovative blending to meet customer needs with different prices and value. Afuah points out that the firm had excellent pricing techniques by creating a pricing strategy and mix, educating consumers, and providing a single price for any of its products through all its retail outlets (Pindyck 294).

Works Cited

Afuah Allan.Business Models: A strategic Management Approach, University of Michigan ® McGraw-Hill Irwin Boston Burr Ridge”, 2003.

Brown Alex. Working To End Horse Slaughter: 2010. Web.

Pindyck s. Robert. Microeconomics. 7 ed. prentice hall 2008.

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Relative Advantage of the Firm

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