Managing sustainable competitive advantage Flashcards
Which three criteria should a good SCA meet?
(1) Customers care about what the SCA offers
(2) The firm does it better than competitors
(3) The SCA is hard to duplicate and substitute
What are the three market-based sources of SCA? And how do they make barriers for competitors?
Brands, offerings and relationships (BOR)
They are used to make a SCA hard to copy.
Brands: It is difficult to duplicate a brand since brand images reside in consumers minds.
Offerings: It can be difficult to offer the same as a firm if a given firm has cost benefits, performance advantages or access to distribution channels.
Relationships: Relationships with customer leads to trust, commitment and interpersonal bonds which is difficult for to imitate.
BOR are additive and often work synergistically to give a firm a strong position in the market place
What is meant by customer equity? And what are the main arguments for using the customer equity approach?
The total of the discounted lifetime values of all customers.
It is also equal to the BOR equity stack = Relationship equity + brand equity + offering equity (Do you also understand it in this way Marte?)
(1) BOR equities are often the primary source of SCA
(2) A firm needs to track, measure and report on customer equity to make the right decisions
(3) Effective customer equity system represents a SCA in their own right
Decompose the BOR equity stack: How to determine the relationship, brand and offering equity?
Relationship equity: Add to or subtract from the value provided by a firm’s offering (e.g., the difference between the price a customer would pay for a glass of branded beer and having the same beer served by his or her favorite bartender)
Brand equity: A set of brand assets linked to a brand, its name and symbols that add to or subtract from the value provided by a firm’s offering (e.g., willingness to pay for a unlabeled beer vs. branded beer)
Offering equity: The core benefits of an offering, stripped of brands and relationships (=price and performance only) (e.g., how much will I pay for an unlabeled beer? = blind taste test)
Why can customer-centric accounting be beneficial for a Customer Equity Perspective?
In customer-centric accounting, customers are considered a financial assets, which should be measured, managed and maximized.
BOR equities are a primary source of SCA –> makes it possible to take it into accounting in Management Accounting
How can you determine whether a BOR investment has the desired outcome?
Marketing experiments: Is there a direct causal relationship between a specific BOR investment and outcomes?
In the perfect world:
*Treatment and control group, where you give the treatment group a certain treatment. Should be equal expect from treatment (=parallel trend assumption)
However, in the real world natural experiments are often the only choice. Use natural variation of shock to business (–> the estimated effect is not as strong as causality)
