Marketing Strategy and Competitive Positioning pdf ebook

Figure 10.2 
Resource imitability ladder
Source : Adapted from Collis and Montgomery (1997) .
Cannot be imitated
Relatively
hard to
imitate
Relatively
easy to
imitate
Difficult to imitate
Can be imitated but at a cost
Easy to imitate
Legal copyrights and patents, unique locations,
unique physical assets
Brand image and reputation, customer loyalty, corporate
culture and employee motivation, networks and alliances
Physical capacity, plant and machinery
Unskilled workforce, undifferentiated products and
services, cash in hand

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CHAPTER 10 CREATING SUSTAINABLE COMPETITIVE ADVANTAGE
10.3 
Achieving cost leadership 
Porter (1985) has identified several major factors that affect organisational costs. These he 
terms ‘cost drivers’; they are shown in Figure 10.4 and each is reviewed briefly.
10.3.1 Economies of scale 
Economies of scale are perhaps the single most effective cost driver in many industries. Scale 
economies stem from doing things more efficiently or differently in volume. In addition, 
sheer size can help in creating purchasing leverage to secure cheaper and/or better-quality 
(less waste) raw materials and securing them in times of limited availability. 
There are, however, limits to scale economies. Size can bring with it added complexity 
that itself can lead to diseconomies. For most operations there is an optimum size, above 
or below which inefficiencies occur. 
The effects of economies of scale are often more pronounced in the manufacturing sector 
than in services. While manufacturing operations such as assembly lines can benefit through 
scale, the advantages to service firms such as advertising agencies are less obvious. They 
may continue to lie in enhanced purchasing muscle (for the ad agency in media purchasing, 
for example) and spread training costs.
10.3.2 Experience and learning effects 
Further cost reductions may be achieved through learning and experience effects. Learning 
refers to increases in efficiency that are possible at a given level of scale through an employee 
having performed the necessary tasks many times before. 
The Boston Consulting Group (BCG) extended the recognised production learning curve 
beyond manufacturing and looked at the increased efficiency that was possible in all aspects 
of the business (such as in marketing, advertising and selling) through experience. BCG esti-
mated empirically that, in many industries, costs reduced by approximately 15–20 per cent 
each time cumulative production (a measure of experience) doubled. This finding suggests