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Core competence and strategic advantage
By Dr.Ashvini Ravi
Associate Dean – Academics
myBskool.com
4. SWOT UK - A CASE STUDY – SKODA
In 1895 in
Czechoslovakia, two keen
cyclists, Vaclav Laurin and
Vaclav Klement, designed
and produced their own
bicycle.
Their business became
Skoda in 1925
Skoda went on to
manufacture
cycles, cars, farm ploughs
and airplanes in Eastern
Europe.
Skoda overcame hard times
over the next 65 years.
These included
war, economic depression
5. By 1990 the Czech management of Skoda was looking for a strong
foreign partner. Volkswagen AG (VAG) was chosen
Volkswagen had a reputation for strength, quality and reliability. It
is the largest car manufacturer in Europe providing an average of
more than five million cars a year giving it a 12% share of the world
car market.
Volkswagen AG comprises
Volkswagen, Audi, Skoda, SEAT, Volkswagen Commercial
Vehicles, Lamborghini, Bentley and Bugatti brands. Each brand has
its own specific character and is independent in the market
6. Brand Positioning
Skoda UK”s management needed to assess its
brand positioning. Brand positioning means
establishing a distinctive image for the brand
compared to competing brands. Only then could it
grow from being a small player.
To aid its decision-making, Skoda UK obtained
market research data from internal and external
strategic audits.
7. 1. Strengths
Those potential factors inside the firm that make a
firm more competitive than its direct competitors;
2. Weaknesses
Both potential limitations and defects inside an
organisation and/or weak factors relative to direct
competitors;
8. SKODA – Strengths
Skoda has been in the top five manufacturers
in JD Power survey for the past 13 years
Top Gear survey voted Skoda the 'number 1 car
maker'. Skoda's Octavia model has also won the
2008 Auto Express Driver Power 'Best Car'.
9. Skoda concentrates
on owner experience
rather than on sales.
It has considered
'the human touch'
from design through
to sale.
Skoda knows that
98% of its drivers
would recommend
Skoda to a friend.
This is a clearly
identifiable and
quantifiable strength.
10. Skoda adopted a
strategy focused on
building cars that their
owners would enjoy.
This is different from
simply maximising sales
of a product.
As a result, Skoda's
biggest strength was
the satisfaction of its
customers.
This means the brand
is associated with a
quality product and
happy customers.
11. SKODA – Weakness
Skoda has only 1.7% market share. This made
it a very small player in the market for cars.
Out-dated perceptions of the brand.
Had an image of poor vehicle quality, design,
assembly and materials.
This poor perception also affected Skoda
owners
12. For many people, car ownership is all about image.
If you are a Skoda driver, what do other people
think?
Under Volkswagen AG ownership, Skoda changed
this negative image.
Skoda cars were no longer seen as low-budget or
low quality. I
13. Research In 2006 showed that Skoda still had a
weak and neutral image in the mid-market range it
occupies, compared to other players in this area, for
example, Ford, Peugeot and Renault.
This meant that, whilst the brand no longer had a
poor image, it did not have a strong appeal either.
14. Perceptions
In the past , the company had sought to correct
old perceptions and demonstrate what Skoda cars
were not.
It realised it was now time to say what the brand
does stand for
Skoda owners were known to be happy and
contented with their cars.
Skoda cars were great to own and drive.
15. 3. Opportunities
Those future factors outside that allow the
organisation to improve its relative competitive
position;
4. Treats
Those future factors outside that reduce the
firm's relative competitive position.
17. • Audi emphasises the technology through its strapline, -
'advantage through technology’
• BMW promotes 'the ultimate driving machine'.
Skoda UK discovered that its customers loved their
cars more than owners of competitor brands
18. Helped Skoda to differentiate its product range.
Allowed it to develop a strategy to strengthen the brand
and take advantage of the opportunities in the market.
It focused on its existing strengths and provided cars
focused on the customer experience.
The focus on ‘Happy Skoda customers’ enables
Skoda to differentiate the Skoda brand to make it stand
out from the competition.
This is Skoda's unique selling proposition (USP) in the
motor industry
19. SKODA – Threats
Threats come from outside of a business. These
involve for example, a competitor launching
cheaper products. A careful analysis of the
nature, source and likelihood of these threats is a
key part of the SWOT process.
20. The UK car market includes 50 different car
makers selling 200 models. Within these there
are over 2,000 model derivatives.
Skoda UK needed to ensure that its messages
were powerful enough for customers to hear
within such a crowded and competitive
environment.
21. If not, potential buyers
would overlook Skoda.
This posed the threat of a
further loss of market share.
Skoda needed a strong
product range to compete in
the UK and globally.
In the UK the Skoda brand is
represented by different car
categories .
Each one is designed to
appeal to different market
segments.
22. • The Skoda Fabia is sold as a basic but quality
'city car‘
• The Skoda Superb offers a more
luxurious, 'up-market' appeal
• The Skoda Octavia Estate provides a family
with a fun drive but also a great big boot.
23. Pricing reflects the competitive nature of
Skoda's market.
Each model range is priced to appeal to
different groups within the mainstream car
market.
The combination of a clear range with
competitive pricing has overcome the
threat of the crowded market.
24. Another of its threats was the need to respond to
EU legal and environmental regulations.
Skoda responded by designing products that are
environmentally friendly at every stage of their life
cycle.
• Recycling as much as possible. Skoda parts are
marked for quick and easy identification when the
car is taken apart.
• Using the latest, most environmentally-friendly
manufacturing technologies and facilities available.
• For instance, painting areas to protect against
corrosion used lead-free, water based colours.
25. Designing processes to cut fuel consumption and
emissions in petrol and diesel engines.
These use lighter parts making vehicles as
aerodynamic as possible to use less energy.
Using technology to design cars with lower noise
levels and improved sound quality.
26. Skoda UK's SWOT analysis revealed the core
competence of Skoda to be :
• Skoda car owners were happy about owning a
Skoda
• The challenge was how to build on this and
develop the brand so that it was a
27. Skoda UK ‘s new marketing strategy based on
the confident slogan,
‘The manufacturer of happy drivers'.
28. The key messages for the campaign
•The 'happy' customer experience and appeal
at an emotional rather than a practical level.
•The 'Fabia Cake' TV advert. This showed
that the car was 'full of lovely stuff' with the
happy music ('Favourite things') in the
background.
29. Customers are able to
book test drives and
order brochures online.
An improved and
redesigned website which
is easy and fun to
use.Meant for a young
audience. It embodies the
message 'experience the
happiness of Skoda
online'.
30. SKODA – Conclusion
Skoda is a global brand offering a range of products
in a highly competitive and fragmented market.
The company must respond positively to
internal and external issues to avoid losing sales
and market share.
A SWOT analysis brings order and structure to
otherwise random information. The SWOT model
helps managers to look internally as well as
externally.
31. SWOT , Core competence and the Strategic
Advantage
The information derived from the SWOT analysis
provides the Core competence and the Competitive
Advantage.
It highlights the key internal weaknesses in a
business, it focuses on strengths and it alerts
managers to opportunities and threats.
Skoda was able to identify where it had strengths to
create a core competence and competitive advantage.
The structured review of internal and external
factors helped transform Skoda UK's strategic
direction by focusing on its Competitive Advantage
32. SKODA – Case study Summary
Shows how Skoda UK transformed its brand image
in the eyes of potential customers and build its
Strategic Advantage over rivals.
By developing a marketing strategy playing on
clearly identified strengths of customer
happiness, Skoda was able to overcome
weaknesses.
It turned its previously defensive position of the
brand to a positive customer-focused experience.
33. Skoda UK
The various awards Skoda has won demonstrate
how its communications are reaching customers.
Improved sales show that Skoda UK's new
strategy has delivered benefits.
34. SWOT
The SWOT framework was first described in detail
in the late 1960's
by Edmund P. Learned,
C. Roland Christinsen,
Kenneth Andrews, and
William D. Guth
in Business Policy, Text and Cases (Irwin, 1969).
35. 1. Strengths
Those potential factors inside the firm that make a
firm more competitive than its direct competitors;
2. Weaknesses
Both potential limitations and defects inside in an
organisation and/or weak factors relative to direct
competitors;
36. 3. Opportunities
future factors outside that allow the
organisation to improve its relative competitive
position;
4. Threats
those future factors outside that reduce the
firm's relative competitive position.
37. Phase 1: Detect strategic issues
1. Identify external issues - factors that management
cannot directly influence.
2. Identify internal issues relevant to the firm's
strategic position.
3. Analyse and rank the external issues according to
probability and impact.
4. List the key strategic issues factors inside or
outside the organisation that significantly impact
the long-term competitive position in the SWOT
matrix.
The steps in the common three phase
SWOT analysis process
39. High impact low probability
meteor hitting the earth and destroying mankind
World war III or Z
Attack by aliens
40. High impact high probability
Global warming
Depletion of fossil fuel
Economic crisis
Attack by virulent viruses( ebola, HIV)
41. Phase 2 – formulate and select strategy
5. Identify firm's strategic fit given its internal
capabilities and external environment.
6. Formulate alternative strategies to address
key issues.
42. Strategies that combine:
a. internal strengths with external opportunities
are the most ideal mix,
but require understanding how the internal
strengths can support weaknesses in other areas;
43. b. internal weaknesses with opportunities
must be judged on investment effectiveness to
determine if the gain is worth the effort to buy
or develop the internal capability,
44. c. internal strengths with external threats
demand knowing the worth of adapting the
organisation to change the threat into
opportunity;
45. d. internal weaknesses with threats create an
organisation's worst-case scenario. Radical
changes such as divestment are required.
47. Phase 3: Implement and monitor strategy
10. Develop action plan to implement strategy;
11. Assign responsibilities and budgets;
12. Monitor progress;
13. Start review process from beginning.
48. Strengths would include:
A strong brand name.
Customer loyalty
Good Market share.
Good reputation.
Expertise and skill.
50. Opportunities could include
A growing market.
Weak competition
Increased consumer spending.
Selling internationally.
Changes in society beneficial to your company
51. Threats could include
Strong and heavy Competitors
Cluttered market
Government policy eg taxation, laws.
Changes in society not beneficial to your company
52. Which one of the following is a true definition
of SWOT?:
Strengths, Wishes, Opportunities and Tests
Strengths, Weaknesses, Opportunities and
Threats
Skills, Work-tasks, Openings and Tests
Strengths, Weaknesses, Organisation and
Threats
54. Which one of the following is the true
distinction between aspects of SWOT?:
S and O are internal factors whereas W and T are
external factors.
S and T are internal factors whereas W and O are
external factors.
S and W are internal factors whereas O and T are
external factors.
S, W and O are internal factors, whereas O is an
external factor.
56. In an Organisational context, which two of the
following are strengths?
1. New machinery or equipment
2. Lack of computing expertise
3. A new or developing market
4. Competitors developing new products or
services
5. A new product or service
6. Location of the business in respect to the
market place
7. Extra competitors in the main market area
58. In an Organisational context, which two of the
following are weaknesses?
1. The location of a business in respect to the market
place
2. A big increase in labour costs
3. An unstable workforce
4. The possibility of cheaper raw materials
5. Government grants offered for new market
development
6. ISO 9000 Quality' or 'Investors in People'
accreditation
7. A poor after-sales service record
60. In an Organisational context, which two of the
following are Opportunities?
1. 'ISO 9000 Quality' or 'Investors in People'
accreditationAA
2. A big increase in labour costs
3. A poor reputation
4. A poor after sales service record
5. An unstable work force
6. The possiblity of purchasing an effective
competitor
7. The relaxation or abolition of international tariffs
62. In an Organisational context, which two of the
following are Threats?
1. Competitors developing new products or services
2. A big increase in labour costs
3. New machinery or equipment.
4. Lack of computing expertise
5. An unstable work-force
6. The possibility of purchasing an effective
competitor
7. A poor after sales service record
64. Which two of the following are an acceptable
strategy to use after a SWOT analysis?
1. A focus on Opportunities to overcome Weaknesses
2. A Focus on Strengths to take advantage of
Opportunities
3. A focus on Strengths be used to offset Threats
that hinder achievement of objectives and pursuit of
Opportunities
5. A focus on overcoming Weaknesses to take
advantage of Opportunities
6. A Focus on overcoming Threats to offset the
effects of Weaknesses
7. A focus on Weaknesses to offset threats that
hinder achievement of objectives and
66. When can SWOT analysis be used in a complex
Planning process?
At the beginning and at the end
At the beginning
At the end
At any time during the process
69. Organisational Resources
Tangible and Intangible
Physical, Human and Organisational
Physical- Technology, Plant, access to raw material
Human – Training, experience….
Organisational- Systems and structures
Mere resources don’t make an organisation capable
70. Organisational Behaviour
Usage of the resources
Leadership, culture and climate, power, values….
Hardware- resources
Software- Behaviour Yin and Yang
S & W
71. S & W
Strength is an inherent capability which can be
used to give Strategic Advantage
Weakness is an inherent limitation which creates
strategic disadvantage
72. Synergistic Effects- 2 + 2 = 5 (or 3 ?)
2 or more strengths – synergy
2 or more weaknesses – Dysergy
Eg – Samsung mobiles - good product
range, reasonable price , good promotion and good
distribution
Ambassador – poor product range and substandard
promotion
73. When conducting the SWOT Analysis of your
company, you will end up with a list (preferably
long) of strengths.
Some of these strengths are valid but may not
provide any value to your customer.
The useful strengths that add value to your
customer solution and showcases your capabilities
better than those of your competition are
called core competencies.
74. Scenario
Your product is far superior than your
competition's product; though a strength, it is
not a core competency.
The competition can reverse engineer (copy)
and improve your design to improve their value
position in the market.
The competition may be in a reactive mode, but
they will overcome that with their own core
competency of rapid reverse engineering
75. what is your core competency?
It could be innovation, better development teams,
better research to determine true customer needs,
etc.
You have to really analyze your strengths to
determine the root cause of your strength.
Likewise you can start to fend off the
competition's core competency by making your
product more "copy proof". If they have a difficult
time reverse engineering your product, you have
just neutralized their core competency of rapid
reverse engineering.
76. Core Competencies
All S & W combine to give synergy and manifests
as Competency
Competing with rivals
Also known as embedded knowledge
Can do something which others can’t
Popularised by Prahlad and Hamel
77. 3 tests of core competence
1. Provide potential access to a wide variety of
markets
2. Should make a significant contribution to the
percieved customer benefits
3. Should be difficult for competitors to imitate
78. Eg of Core Competencies
optics, imaging
miniaturisation
Stick tape
engines
project management
Design and technology
Online product search
Strong reputation
One stop shop for IT consulting
79. Eg of Core Competencies
Canon- optics, imaging
Sony – miniaturisation
3M- Stick tape
Honda – engines
Reliance – project management
Apple - Design and technology
Amazon- Online product search
Tatas- Strong reputation
Infosys- One stop shop for IT consulting
80. Some questions to ask when analyzing (not
compiling) your core competence
What are some advantages created by a strength
or combination of strengths?
What value do these strengths add to my product
or service that is unique or difficult to imitate by
the competition?
Which of the four elements of marketing strategy
(product, price, promotion and placement) or what
combination of the four elements is driving a
perceived customer benefit?
What are the main contributors to that element?
Does the customer value the strength or
combination of strengths in the form of
repurchase, loyalty, positive word of mouth, paying
more or going out of their way to buy your
product?
81. Conclusion
SWOT to identify the important strengths
Important Strengths become Core Competencies
Core competencies can be leveraged
for Strategic Advantage
