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Chapter Three: The Resource Based View and Marketing Strategy
Introduction
This chapter deals with the resources based view and its link to marketing strategies. The major constructs of the study such as marketing enabling environment, the marketing strategies, and firms‘ performances are discussed in relation to the firms‘ inside out perspective (resource based view). The reason for focusing on the resource based view in this research is that the researcher has taken the assumption that the macro environments are more or less similar to firms in the same industry in both domestic and in international markets.
In international markets, some countries are providing preferential advantages of export to developing countries such as Ethiopians and hence such factors can be regarded as opportunities instead of contributing factors for the low performances of Ethiopian textile firms. Hence, it is reasonable to examine the firms‘ own strategies, focus, and practice of marketing strategies in order to get deeper and contextual understanding of the gaps.
As a result, this chapter includes the conceptualization of RBV in this research‘s context, the enabling environments such as marketing assets and capabilities, marketing strategy formulation and implementation, firms‘ marketing performances, and finally the gaps in literatures.
Resource Based View Conceptualization
The resource-based view (RBV) emphasizes the firm‘s resources as the fundamental determinants of competitive advantage and performance. The principle behind this theory is that firms achieve sustainable competitive advantage by continuously developing existing resources and creating resources as well as capabilities in response to the dynamic market conditions (Peteraf & Barney, 2003). Besides, it attempts to emphasize on internal efficiency and effectiveness in utilizing the resources within the firm in order to explain the variances in performances.
Therefore, firms need to concentrate on their operation and utilization in order to achieve competitive advantage. In this regard, there are two assumptions in analyzing sources of competitive advantage (Barney, 1991; Peteraf & Barney, 2003). The first assumption is that each firm within an industry is heterogeneous with respect to the bundle of resources they control. Such argument considers a firm as a coordinated bundle of resources that the business has at its disposal or has access to , which are valuable, rare and inimitable (Lambin, 2008). Second, it assumes that resource heterogeneity may persist over time because the resources used to implement firms‘ strategies are not perfectly mobile across firms (Lambin, 2008). Besides, resource heterogeneity (or uniqueness) is considered a necessary condition for a resource bundle to contribute to a competitive advantage. Therefore, to the extent a firm is able to organize and exploit resources and capabilities (Peteraf & Barney, 2003) it creates and maintain in time, a supply of products/services that offer more value for the customer (Lambin, 2008) than its competitors.
According to RBV, enterprises need resources to improve their competitive position as well as be able to recognize, understand, create, select and modify their marketing strategies. In this regard, the theory extends an understanding of the resources that explain the alternative marketing strategies that an enterprise may consider. This theory advocates that enterprises engage the available resources (tangible, intangible and organizational capabilities) in order to produce products that meet customer needs (Bharradwaj, Clark and Kulviwat, 2005; Peteraf & Barney, 2003; Ferreira & Azevedo, 2008; Pearce & Robinson, 2005). This theory also analyses the resources and capabilities as key factors in business performance. According to Martin (2013), business performance has a direct relationship with the marketing activities an enterprise engages in.
Furthermore, the RBV theory further enhances business strategy formulation should capitalize on the inimitable resources the firm has in order to attain competitive advantage in the market. Such approach begins with identifying and classifying the firm‘s resources (Grant, 1991). Based on classification of resources the firm appraises its strength and weaknesses in relation to competitors. Then the firm needs to identify its capabilities; what it can do better than competitors and identifying the resources required for each capability (Agic, Cinjarevic, Kurtovic, and Cicic, 2016).
Marketing Assets and Capabilities
A significant proportion of the market value of firms today is based on intangible assets and capabilities that are shaped by the marketing function such as brands, customer and supplier relationships (Wu, 2010). From the resource based point of view, the internal firm assets and capabilities are keys to firm competitiveness. Such inside out looking of a firm has the basic assumption that the external environments are similar in most cases for firms in the same industry. And what makes one firm profitable and the other confusing and staggering is the availability of these resources and more importantly the utilization of these resources. Similarly, Wu (2010) suggest that assets and capabilities enable firms to execute their organizational processes effectively.
Hence, it can be generalized that the firms ‗resources and capabilities are both enabler and driver of their competitiveness in the markets. Hunt and Morgan (2012) further propose that comparative advantage in tangible and intangible resources result in competitive advantage to the firm, which, in turn, contributes to higher firm value.
The marketing assets and capabilities are jointly addressed in many literatures as their distinctions become blurred in some cases and unclear in other cases. However, in this study their basic differences and their relations are attempted to be scrutinized. Thus, marketing assets are conceptualized as the resources endowments the business has accumulated for factor costs and managerial support. In connection to this, Day (1994a) argues that marketing assets encompasses investments in the scale, scope, and efficiency of facilities and systems brand equity and the consequences of the location activities. On the other hand, capabilities are the glue that brings these assets together and enables them to be deployed advantageously (Day, 1994a) and they can also be hard for management to identify. Therefore, the basic difference between the marketing assets and capabilities is the inimitability, intangibility, and non-tradability of capabilities which instead is deeply embedded in the organizational routines (Agic et al., 2016; Grant, 1991).
Literatures claim that less attention has been paid to the capabilities by which firms deploy their marketing strategies. In reality, capabilities may be viewed at different levels in the firm, many of which cross different functional areas (Eisenhardt & Martin, 2000). However, capabilities relating to market resource deployment are usually associated with the marketing function (Danneels, 2008). In both cases, capabilities approach locate the sources of a definable competitive position in the distinctive, hard to duplicate resources the firm has developed (Wu, 2010; Boynton & Victor, 1991).
Thus, the integration of marketing assets and capabilities is the challenge of modern managers in the globe because those resources which are made up by the combination of assets and capabilities are cultivated slowly which sometimes limit the ability of the firm to adapt to change (Ferreira & Azevedo, 2008). Hence, management‘s task in the dynamic market is to determine how best to improve and exploit these firm specific resources (Hilda, Hope, and Ijeamaka, 2016). Such an argument may lead to the conclusion that to the extent managements are optimally integrating these firms‘ specific resources, their businesses become competitive and relevant in the market. And failure to do so lead to stuck in the middle where neither the competitiveness nor the future to stay in the market becomes certain.
By the same token, the strategic importance of capabilities lies in their demonstrable contribution to sustainable competitive advantage and superior profitability (Hilda et al., 2016; Day, 1994). However, in times of turbulence the challenge of developing new capabilities comes to the force (Barney, 1991). Thus, in time of turbulence the utilization of capabilities becomes challenging and necessity at the same time due to the applicability of those capabilities for adapting environmental changes by firms (Boynton & Victor, 1991). Figure 8 below shows the different types of capabilities.
The Marketing Strategy
Marketing strategy was earlier in chapter one defined as the total sum of the integration of segmentation, targeting, differentiation, and positioning strategies designed to create, communicate, and deliver an offer to a target market. In this regard, marketing strategy is operational zed as formulation which consists of the segmentation, targeting, positioning and differentiation sub strategies and implementation which consists of applying the common marketing mix (4ps) in order to realize the aforementioned marketing strategy formulation sub strategies. Hence, the details of marketing strategy formulation and implementation are presented in the following paragraphs respectively. This follows that marketing strategy, consisting of market segmentation, targeting, positioning, and differentiation, is presented first.
Market Segmentation Strategy
It is hardly possible to design a single product or a marketing mix that will satisfy all the customers in a market (Sarin, 2010). This necessitates marketers to divide the market in to relatively similar segments where consumers in the same segment have similar needs to satisfy and consumers in different markets are heterogeneous (Kotler & Armstrong, 2012). Thus, market segmentation is the sub-dividing of a market into homogeneous sub-sets of customers, where any sub-set may conceivably be selected as a market target to be reached with a distinct marketing mix (Fifield, 2009). Similarly, a market segment consists of a group of customers who share a similar set of needs and wants (Kotler & Keller, 2009). These segments serve for the companies as where to begin assessing needs and wants based on which products are produced. Due to the existence of varied needs and wants, only rarely does a single product or marketing approach appeal to the needs and wants of all buyers (Kotler & Armstrong, 2012). Therefore, the search for something special, something different, something that reinforces their own sense of identity as a person, as an individual, as a professional buyer separate an organization from the ‗herd‘ (Fifield, 2009).
Thus, segmentation attempts to isolate the characteristics that distinguish the buying behavior of a certain group of customers from other groups, or from the overall market (Boone, 2001). Such distinct group of customers may form segments of a market and depending on company specific criteria the company may consider additional criteria to further segment the market when needed. This implies that a marketer needs to categorize the market on the basis of both its characteristics and its specific product needs (Kotler & Keller, 2009). However, the argument is not that the marketer does not create the segments (because segments naturally exist) it is to mean that there exists a need to identify the segments and decide which one(s) to target instead. .
Chapter One: Introduction
1. Introduction to the Study
1.2 Statement of the Problem
1.3 Research Objectives
1.4 Rationale of the Study
1.5 Importance /Benefits of the study
1.6 Delimitation of the Research
1.7 Limitations of the Research
1.8 The Research Contributions
1.9 Organization of the Thesis
Chapter Two: Reviewing Related Literatures
2.1 Introduction
2.2 Conceptualization of Strategy
2.3 The Hierarchy of Strategy Formulation
2.4 Typology of Firms
2.5 Ansoff‘s Matrix
2.6 Marketing Strategy
2.7 Textile Industry in Ethiopia
2.8 Chapter Summary
Chapter Three: The Resource Based View and Marketing Strategy
3.1 Introduction
3.2 Resource Based View Conceptualization
3.3 Marketing Assets and Capabilities
3.4. The Marketing Strategy
3.5 Marketing Strategy Implementation (Marketing Mix Strategies)
3.6 Marketing strategy and firm performance
3. 7 Gaps in the Literatures
3. 8 Summary
Chapter Four: Research Methodology
4.1 Introduction
4.2 Research Paradigm
4.3 Research Design
4.4 Defining the population
4.5 Case Selection Technique
4.6 Unit of Analysis
4.7 Use of Theory in Data Ccollection and Analysis
4.8 Operationalization of the research constructs
4.9 Data Sources
4.10 Data Analysis
4.11 Methodological Considerations
4.12 Personal Involvement
4.13 Ethical Issues
4.14 Chapter Summary
Chapter Five: Data Analysis and Discussion
5.1 Introduction
5.2. Objectives of the Study
5.3 General Descriptions of the Case Companies
5.4 Within Case Analysis
5.5 The Cross Case Analysis
5. 6 The Links Among the Research Constructs
5.7 Revisiting the Conceptual Framework
Chapter 6: Conclusions and Implications/ Recommendations of the Research
6.1 Conclusion
6.2 Implications of the Research Findings
6.3 Recommendation for Future Research
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MARKETING STRATEGIES OF TEXTILE COMPANIES: THE CASE OF SELECTED MEDIUM AND LARGE ETHIOPIAN TEXTILE COMPANIES
