Porter’s proposition of achieving long term sustainable growth

Questions:

1. Porter (1985) suggests that there are two essential routes to achieving long term superior performance: to be the lowest cost producer, or to differentiate products/services in such a way as to offer consumers greater added value in comparison with competitors. Discuss and evaluate this contention, and the role of marketing in creating added value?

2. Kotler and Armstrong (2012, p. 267) describe brand equity as “the differential effect that knowing the brand name has on customer response to the product and its marketing”. With reference to a brand of your choice critically analyse the strategies that have been employed to create brand equity?

Introduction: Businesses aim at achieving higher level of profitability and also the sustained performance so that they can achieve long term growth. Long term sustainable growth has been the emphasis of majority of the businesses because they knows that success over the short term period is not important, rather long term business growth is essential. In pursuing long term business growth, they consider the adaptation of large number of business strategies. In this context, Porter (1985) suggests about the strategic implication to businesses in achieving long term superior performance and sustained growth. This can be achieved through either pursuing low cost strategy or it can be through differentiating the products and services from that of the competitors. The analysis is therefore focused towards analysing this contention by Porter, and it also assesses the role of marketing in adding value (Papp, 2001).

Analysis of Porter (1985) Proposition of Achieving Long Term Sustainable Growth: An analysis of the proposition as made by Porter (1985) indicates that businesses can achieve long term sustainable growth by way of focusing towards either of the two strategic options as available to them. The long term sustainable growth according to him can be achieved by becoming the low cost producer, and this has been an important strategy available to businesses. The position of low cost producer can be achieved by businesses through putting efforts towards achieve efficiency in respect to all the major areas of their business operations. The benefit of becoming low cost producer is that it will allow businesses in meeting out the needs and expectations of their customers in a positive manner in an efficient manner. This will ensure better level of satisfaction to them, and ultimately improved profitability performance to the organisation. However, this low cost strategy is highly difficult to achieve because it requires extreme level of efficiency on the part of all the employees within organisation. They need to focus towards performing the organisation’s processes in a cost efficient manner. It is mainly the employees that are responsible in allowing organisations in achieving the position of low cost producer in a highly efficient way (Porter, 2008).

In order to accomplish the position of low cost producer, it is essential that the businesses should perform the production process or their service delivery process in bulk so that they can achieve cost efficiency in their processes. Economies of scale is essential in pursuing this strategy of low cost products or services, and this can therefore be possible to the well established seller of products and services. There are various such examples of companies in different sectors that have considered the application of this strategy of low cost producers. In respect to airline industry, the companies such as Ryanair, Southwest Airline etc have successfully adopted this strategy of becoming the low cost provider of services. They have achieve sustained growth opportunities because they have occupied the top most position in the industry, and this is therefore likely to ensure them the attainment of higher level of sustainable long term growth. This low cost producer strategy is therefore highly effective from the point of view of allowing businesses in making significant level of impact in their industry, and thereby in making sustainable long term growth opportunities for themselves (Armstrong, 2006).

Low cost strategy as a means of achieving sustained growth

Apart from the strategy of low cost producer, Porter (1985) indicates that the alternative available to businesses is mainly the differentiation strategy. Businesses that do not look for pursuing the low cost strategy can consider the adaptation of differentiation strategy. This has also been an important strategy from the point of view of achieve long term sustainable growth by businesses. This differentiation strategy as suggested by Porter (1985) implies that it is concerned with making significant level of differences in the products and services as offered by businesses. This differentiating factor is likely to ensure businesses in achieving competitive position to them in front of their competitors. The resulting impact is the better possibility to them in sustaining long term growth and development. As for instance, there are various such examples of companies that have pursued this strategy of differentiation and this has resulted into not only the attainment of competitive level of advantage to them, but it also ensured them long term sustenance of higher growth in their business. The example of such companies includes Apple Corporation which has been a US based electronic product manufacturing company. The company has differentiated itself from that of its competitors by way of integrating innovation in its business processes which allows it in delivering highly innovative products and services to their customers and they are significantly different which cannot be imitated by others. This differentiating factor has brought significant level of growth and development to Apple, and it has achieved the leading position in the industry (Kotler and Keller 2008).

Role of Marketing in Creating Added Value: Marketing has been an important activity that is required to be carried out by businesses. This activity involves creating adequate level of awareness within the target audience concerning the products and services as offered by businesses so that they can be positively persuaded to buy the offerings as made by the company. Role of marketing is therefore crucial and this is mainly because it is the way through which larger targeted audience can be attracted towards the products and services as offered by business. As a result, it is highly essential that businesses should focus towards performing this practice with higher efforts and contribution so that it accounts for the addition of value to them in their business processes (Ungson and Wong, 2008).

Conclusion

The analysis of the proposition by Porter (1985) indicated that businesses can positively accomplish longer term success in their business performance by way of either considering the low cost producer strategy or they can look at differentiating their products and services offerings so that their consumers are provided with something extra which can become a source of competitive advantage to it in sustaining long term growth and success. The role of marketing is also identified as significant in creating value for the organisation.

Introduction: Brand equity is an important concept that indicates about the value of having well known brand. There are various kinds of products and services available in the market, and at the same time, there are various providers of those goods and services creating adequate level of substitution effect to the buyers. Amidst such market comprising of large number of brands, it is highly essential that the good brands should aim at distinguishing themselves from that of others in order to better serve their customers. The concept of brand equity is applicable in this type of situations whereby various types of brands are available in the market which makes it difficult to the customers in selecting any one of them (Kotler and Armstrong 2008). This section of analysis is therefore aimed at analysing the concept and role of brand equity, and also evaluates a brand that has created brand equity through adapting a range of strategies for the same. The brand as selected for analysis is Apple Corporation.

Challenges of achieving the low cost strategy

Brand Equity and its Importance: Brand equity as identified above is an important concept that describes the value of being a well known brand name. Businesses aim at establishing themselves as the well established brand so that they can create differentiation within their customers and easily identify their target customers. As indicated by Kotler and Armstrong (2012, p. 267), brand equity is the differential effect that knowing the brand name has on customer response to the product and its marketing. This signifies that there can be differential effect that could be created through building brand equity whereby businesses can target their customers easily through establishing themselves as the well reputed brand. With respect to the importance of building a brand, it is highly essential that businesses should focus themselves as creating a well known brand because there are wide availability of brands in the market and in order to achieve sustainable growth and development, it is highly essential that businesses should establish themselves as the most reputed brand. As it is highly important to establish oneself as the best reputed brand, an analysis indicates that it is extremely difficult to establish oneself as the reputed brand because of the existence of large number of challenges and difficulties in the process (Kotler, 2012).

Strategies used by Apple in Establishing Brand Equity: An analysis of the case of Apple Corporation indicates that the company has been highly successful in establishing itself as the most reputed brand. This is evident from the fact that Apple has occupied the leading position in the industry, and its customers are always ready in paying premium prices for the electronic products and services offered by the company. This development of brand equity is ensured at Apple through the highly focused strategy of the company which has been to focus only towards the quality factor, and at the same time, aiming to achieve innovation in its processes as carried out within the organisation. The core focus of the company towards quality and innovation has been the most significant factor that has contributed towards the development of good brand equity in case of Apple. The smart phones as offered by Apple in the name of iPhones have been able to revolutionise the market and this is all because of the brand equity as developed by the company over the years (Griffin, 2007).

An analysis of the case of Apple indicates that the core products and services as offered by the company are easily distinguished within its customers. The customers of the company can easily identify the offering as made by Apple over the other products as available in the market. Its customers see its product as that of the premium quality products, and they are always ready to pay premium prices for them. This has been the powerful impact of the brand as developed by Apple and all this is because of the ability of the company to provide innovative products on continuous basis. The company has been able to manage a differentiating image of offering premium class electronic gadgets to its customers, and this is turn has resulted into separate identification of customers for its products. Apart from this, an analysis of Apple strategy in creating brand equity is also evident from the management and leadership style that has been followed across the organisation (Griffin, 2008).

The previous CEO of Apple i.e. Steve Jobs was highly innovative and it is his innovative determination that has allowed Apple in creating itself as a separate brand. The strategy that has positively supported the development of a premium factor in respect to Apple brand is also the pricing factor. The pricing strategy of Apple has been highly significant which has positively contributed towards establishing itself as the most reputed brand in the industry. Customers of Apple’s products are always ready to pay premium prices for the products and services of the company, and this has been the most significant factor which identifies that Apple has been successful in creating a brand equity that allows its customers in differentiating its offerings from that of its competitors. Thus, the strategy of Apple is identified as highly significant from the point of view of creating positive level of brand equity by the company. This strategy has been significant in allowing Apple in differentiating itself from that of its competitors (Chernev 2009).

Conclusion

A critical analysis of brand equity strategy has been carried out in the context of Apple Corporation and the performance of analysis indicated that there has been significant level of strategies being considered by the company in creating itself as the most reputed brand. The continuous level of focus of the company towards achieving innovation in the activities it carries out has enabled the company in becoming the most premium provider of quality electronic products to its customers. Apart from this, the strategy of charging higher prices has also accompanied the company’s desire of creating premium brand in a positive manner.

References

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Chernev A (2009) Strategic Marketing Management, 5th Edition. Brightstar Media.

Griffin, R.W. (2008). Management. (9th ed.), Cengage Learning.

Griffin, R.W. (2007), Fundamentals of Management, 5^th ed., Cengage Learning.

Kotler, P. (2012), ‘Kotler On Marketing’, Simon and Schuster.

Kotler P and Armstrong G –(2008) Principles of Marketing, 13th Edition. Prentice Hall.

Kotler P and Keller K L (2008) A Framework for Marketing Management. Pearson Education.

Papp, R. (2001). Strategic Information Technology: Opportunities for Competitive Advantage. Idea Group Inc (IGI).

Porter, M. (2008), ‘Competitive Strategy: Techniques for Analyzing Industries and Competitors’, Simon and Schuster.

Ungson, G.R. and Wong, Y. (2008), ‘Global Strategic Management’, M.E. Sharpe.