Interview Summary

In an interview on the Cambridge Marketing Podcast, Kiran Kapur and Alastair Pride discussed the concept of competitive advantage. Pride, a course leader specializing in strategy, defined strategy as the method for achieving objectives, which are established following a thorough environmental analysis. He outlined Michael Porter's three fundamental forms of competitive advantage—cost, performance, and specialism—and stressed that organizations should begin by analyzing their own strengths rather than their competitors. Using examples from the airline, hotel, and consumer goods industries during the COVID-19 pandemic, Pride illustrated how businesses could pivot by leveraging their core competencies in drastically changed markets. He concluded by highlighting the critical role of analytical skills and data interpretation, referencing tools like Porter's Five Forces, in successfully identifying and maintaining a competitive advantage.

Interviewee Background

Alastair Pride was introduced as a college fellow and course leader at Cambridge Marketing College, with a noted specialism in business and marketing strategy.

 

Key Points

  • Strategy was defined as the mechanism that achieves an organization's objectives.
  • Competitive advantage was described as what an organization is good at and was equated with the potential for growth.
  • Pride identified three primary forms of competitive advantage, based on Michael Porter's theory: cost, performance, and specialism.
  • He argued that the process of identifying competitive advantage should start with an internal analysis of the organization's own strengths, not with an analysis of competitors.
  • It was explained that even in severely disrupted markets, companies could survive and thrive by pivoting and applying their core competitive advantages to new opportunities.
  • The best indicators of a strong competitive advantage were identified as a consistent track record of success and a high relative market share.
  • Pride emphasized that strong analytical skills and the ability to interpret data were essential for defining and managing competitive advantage.

 

Interview Transcript

Transcripts are auto-generated.

 

Announcer (00:01):
The Cambridge Marketing Podcast with Kiran Kapur, brought to you by Cambridge Marketing College. See their range of courses and apprenticeships at marketingcollege.com.

Kiran Kapur, Host (00:13):
Today we're going to be talking competitive advantage, and I'm joined by college fellow and course leader, Alistair Pryde. Alistair, your specialism is very much strategy, so let's start with what is strategy for marketing.

Alistair Pryde (00:26):
Hi, Kiran. Thanks for having me on. Yes, strategy. It's the thing that achieves objectives. It's also probably the most used and abused word in the business lexicon, but it actually does a very, very specific job. Once an organisation has defined its objectives, strategy is what achieves them.

Kiran Kapur, Host (00:55):
So we start with an objective. So we're going to have to pull out the difference between objectives and strategy. So give me an objective.

Alistair Pryde (01:02):
So in actual fact, we can start before objectives because it's got a direct bearing on what competitive advantage is. What we have to start with is environmental analysis. And that's understanding the operating environment of an organisation. Is it in a healthy economy? Are there plenty of opportunities to be exploited? And in short, is there a potential for growth? Competitive advantage is a synonym for growth. Once all those things have been understood, we can start to set objectives. And these are things like how many sales are we going to make? What kind of market share are we going to capture? How many new customers are we going to develop? And things like that.

Kiran Kapur, Host (01:54):
So we're into a sort of growth mindset. So where do I start with competitive advantage? Do I literally look at what my competitors are doing?

Alistair Pryde (02:02):
That's a good question. No. What I always advocate is your competitive advantage is the thing that makes you good at what you do. Michael Porter tells us that there's actually three basic forms of competitive advantage, which he defines as cost, performance, and specialism. So you either have an advantage that you can pass on to your customers via cost because you're a low cost operator, and that will come from efficiencies in your manufacturing or your production system, or you have a performance advantage in that you can do something that no one else can, or you have a specialism advantage in that you operate in a niche area and there are no alternatives for customers in that market segment. That's competitive advantage in a nutshell, but simply put, it's what makes you good at what you do.

Kiran Kapur, Host (03:01):
So in fact, I don't necessarily start with my competitors. I start with me as in my organisation.

Alistair Pryde (03:07):
Absolutely. You start with you. Competitive advantage obviously then has bearing on what your competitors are doing, but you start with you, Kiran. Yes, absolutely. So

Kiran Kapur, Host (03:19):
What happens in a marketplace where things have changed dragically? So if I was, I don't know, an airline, I'm a low cost airline, I compete on cost basis, but at the moment, my marketplace has just disappeared. What do I do with competitive advantage then?

Alistair Pryde (03:36):
Right. Well, that's a great question. Yes, and I'm smiling here because over the last 12 months, we've seen a lot of change in the operating environment, haven't we? And the airline is a great example because if you are an airline and you have a fleet of aircraft that are designed to carry people around across the world on business, leisure trips, seeing family, friends, colleagues, that kind of thing. And let's say for example, travel is stopped. It's very easy to think that your operations have to come to a complete stop too, but we're talking about competitive advantage and it isn't the case that just because the world has turned on its access, organisations stop being good at what they're good at. They're still good at what they do. It's just the case that they might not be allowed to do what they do, but they can find other things to do.

(04:42):
And the airline industry is a perfect example because we've seen over the last 12 months, up to 90% of scheduled commercial routes being cancelled and equipment lying unused on the ground. But instead of flying people, large airlines like Virgin Atlantic, Lufthansa, United and American, amongst others, are switching to cargo only flights, taking the seats out of the planes and supporting the change in the infrastructure that's required in the courier industry because everything's being shipped now, ordered online, the supply chain has turned on its head and extra capacity is required. And the fantastic thing about this is these organisations that were good at operating flights, the logistics, the ground arrangements, they're using their core competitive advantage to continue operations and they're enjoying the benefits of still being good at what they do.

Kiran Kapur, Host (05:53):
So what you're basically saying is don't throw the baby out with the bath water. If you've worked out what you're good at, you should be able to rebalance that. So I was wondering out some other industries like hotels, for example.

Alistair Pryde (06:04):
We've got a couple of other industries that over the last 12 months have done that thing. So the word of the year last year was pivot and every time I heard that used, I smiled because it was a word of the moment, but actually it was a synonym for applying your competitive advantage elsewhere. It's what marketers do. So they respond to these changing market conditions, the change in environment, sometimes very extreme. And organisations like hotels, for example, they learned to adapt to. There was a huge surge, for example, in people that had to work from home, but not everybody has the facility to work from home. You might have a lack of bandwidth or peace and quiet and the hotels, they managed to pivot too. They are good at, they understand their competitive advantage. They're hosts by their very nature. They're used to hosting people and making them feel comfortable.

(07:14):
Those people, their customers, their requirements had changed, but they still needed a safe space, peace and quiet, facilities like broadband and refreshments and a clean private area in which to do what they wanted to do. It might be different. It might not be having meetings or having a meal or hanging out with the kids and watching a movie. Instead, it's doing their day's work and the hotels changed their check-in and check-out times to operate in a way that helped the workforce that was now working from home continue in this changed world.

Kiran Kapur, Host (07:58):
Yes. And other hotels I think have moved into helping things like key workers and making a lot of corporate social responsibility around that, but finding a way of saying, "This is what we do and here is still an advantage that we can have".

Alistair Pryde (08:14):
Yeah. I mean, it's the very best of what we can do as an organisation is to take this competitive advantage and pivot to the new opportunities that have appeared in the marketplace and exploit them. And it's really important because when circumstances change the way they have done recently, it's very easy to throw one's hands up in the air and simply declare the end is now, woe is me, our business is broken. But successful businesses are resilient and when there's turbulence in the economy, that's followed by a stabilisation. And what happens is we start to see these resilient companies slowly adjust to use the word pivot, but that's only possible because they understand their competitive advantage and they know what it is. And as the late great Jack Welch said, "If you don't have a competitive advantage, don't compete."

Kiran Kapur, Host (09:27):
How does a company work out its competitive advantage?

Alistair Pryde (09:31):
Usually people vote with their feet and usually the measures are very simple. It's sales, it's market share, it's your audience's response to the product that you're offering. A track record of success is the best indication of competitive advantage. I'm reminded of the old James Bond theme, no one does it better. If you've got a long history of success in a market segment, that's competitive advantage. People are responding to what you do. The other key measure is, of course, relative market share. Unless you're a monopoly, you will have competitors and determining how your competitors fare in the same space is the next best measure of competitive advantage because customers are selfish. They will buy and consume on the basis of what best suits their needs. And whether their driver is price or quality or performance or newness, they will vote with their fate and that's the best indication of competitive advantage.

Kiran Kapur, Host (10:57):
So you also have a great example, I think, in the skincare world of Unilever pivoting and then pivoting again. And again, it was all based on their own competitive advantage as to what they were good at.

Alistair Pryde (11:10):
So as we know, Unilever are one of the biggest conglomerates on the planet and the number of brand names under their control is, well, I don't think we have enough time to list them. But when the pandemic started, like many other large FMCG operations, Unilever concentrated on staples, making sure the supply chain was robust, concentrating on brands that had long shelf lives and could be distributed easily. Another consequence of the pandemic was obviously the advice to stay at home. And initially people were wearing and using less makeup, less lipstick, less mascara. And of course, as a result, there was a reduced need to remove the mascara, the lipstick, the makeup that you had applied, and skincare cleansing products all saw a significant fall in demand, but as the pandemic endured and the stay at home advice continued, people started to miss the treatments they were having, the visits they were making to spas and other clinics and demand for skincare product grew exponentially and the demand for high quality skincare products grew exponentially.

(12:49):
And interestingly, I was speaking to a student just yesterday that works for a high end skincare manufacturer and they have witnessed exponential growth over the last eight months because of the inability their customers have to visit spas and clinics and they're demanding newer, higher quality skincare products and treatments, the price of which made my eyes water. I didn't realise actually people spent as much as they did on that, and new combinations of skincare treatment as well. So I'm sorry to use such an old expression, old fashioned expression that is, but it really is the case that as one door closes, another one opens and organisations that have a good understanding of their competitive advantage, they are attuned to their operating environment and closely monitor and analyses the changes, will be able to respond to changes in the market like this. None of the examples that we've discussed, whether it's the airlines, the conglomerates or the hotels are fundamentally doing different things.

Kiran Kapur, Host (14:13):
So if I wanted to do some competitive strategy analysis, what skills and tools do I need, Alistair?

Alistair Pryde (14:18):
The skills you need are analytical skills. I mean, we're talking about your operating environment and we encourage students to think about that in a macro sense and a micro sense. Now, the macro side of things are the big ticket items that you can't change, world politics, economics, the fact there's a pandemic that they're beyond your control. Then you have micro external issues over which you may not actually have any control or much more control, but they're closer to your realm of understanding and you can do things within your own organisation to respond to them. So your analytical skills are highly important here and your data gathering skills as well. Some of the people listening to this will be fortunate enough to work in industries where there's a high level of regulation. They may not think that they're lucky for having that level of regulation, but with regulation comes analysis, comes scrutiny, and the availability of data, generally speaking, is more wide.

(15:31):
There's a more generous level of data, which gives them insight into their industry. There will be others listening to this who find it very difficult to come by data, but that's what we're talking about. We're talking about analysis and we're talking about interpretation of data and the things that you need to analyse in order to define your competitive advantage and control it are things like suppliers, competitors, and rivalry within the industry you operate, what alternatives exist in the minds of your consumers to the products and services you provide. There'll be a lot of people listening to this who also recognise that I'm basically describing Porter's Five Forces model to give it its name and recognise it. But the analysis of that micro external environment is the sort of headline skill you need to understand competitive advantage, to answer your question directly.

Kiran Kapur, Host (16:38):
So it really is having the analytics, the ability to look at data and analyse data that will actually help you with your competitive advantage.

Alistair Pryde (16:46):
Yes. And turning that data into information. So you need to start with that raw data and then interpret it and say, "What does this mean?" Most industries have competition within them and recognising what advantage you have over that competition is extremely important and there will be measures that you can use to define that. You have to do it objectively, you have to do it dispassionately, especially if there is a threat of a new entrant, and that speaks to something else that's very important to understand, which are the barriers to entry to your marketplace. If you're dealing in a highly specialised product or service, there will be skills and resources you have access to, experience, knowledge, and maybe even highly complex, expensive capital equipment, which means that not anybody can just start up as a competitor to you. The example I always give here is nuclear submarines.

(17:57):
I can't decide tomorrow to build a nuclear submarine. So if I'm in the business of building a nuclear submarine, I can be relaxed in the knowledge that a new competitor won't spring up anytime soon and without prior warning.

Kiran Kapur, Host (18:16):
Yes, that's an extreme example, but I take your point.

Alistair Pryde (18:21):
It's always the extreme ones that stick in the mind.

Kiran Kapur, Host (18:23):
Absolutely. Love it. I think that's great, Alistair. And what you're explaining is very much that marketing isn't just all the colouring department. There's an awful lot of data and analytics that should go alongside what we do.

Alistair Pryde (18:36):
Absolutely. We sometimes need the calculator as well as the crayons.

Kiran Kapur, Host (18:41):
I think that's a great note to end on. Alistair Pryde, thank you very much indeed for your time and for explaining competitive advantage to us.

Alistair Pryde (18:48):
Thanks very much, Kiran. It was a pleasure.

Announcer (18:50):
The Cambridge Marketing Podcast from Cambridge Marketing College, training marketing and PR professionals across the globe.