DEFINING COMPETITIVENESS: A HOLISTIC APPROACH
Mapping the competitive environment of an
organization helps to form a sound basis for
business strategy development.
Defining
Competitiveness:
A Holistic Approach
Rainer Feurer and Kazem Chaharbaghi
Management Decision, Vol. 32 No. 2, 1994, pp. 49-58
© MCB University Press Limited, 0025-1747
Introduction
Business strategies are formulated to determine the way
in which organizations can move from their current
competitive position to a new stronger one. This can only
be achieved by improving an organization’s competitiveness. A universal and exact definition for competitiveness
does not exist. As a result, competitiveness means
different things to different organizations. Some
organizations view competitiveness as the ability to
persuade customers to choose their offerings over
alternatives while others view competitiveness as the
ability to improve continuously process capabilities. In
other words, core competences as well as capabilities that
drive such competences are considered to form the
essence of competitiveness. However, these factors are
interrelated and difficult to quantify, thereby reducing the
potential of their application in the process of strategy
development. There is a need for a holistic definition of
competitiveness which makes it possible to determine the
competitive position of an organization in a measurable
form. Such a measurement should allow a comparison of
the competitive position of an organization against that of
its competitors.
This article proposes a framework for defining
competitiveness in a way which enables the measurement
of an organization’s competitive position through a
49
mapping process of its business environment. In doing so
it will:
● Redefine the concept of competitiveness by
integrating the notions of customer values,
shareholder values and an organization’s ability to
act and react within its changing competitive
environment.
● Introduce the concept of sustainable competitiveness and demonstrate the conflicting nature of the
factors which determine an organization’s
competitiveness.
● Develop a concept which enables mapping the
competitive position of an organization and its
competitors.
● Construct a framework for measuring competitiveness.
● Demonstrate the way in which the competitive
position map can be used in the development of
business strategies.
Redefining Competitiveness
In determining a definition for competitiveness it is
important to question the raison d’être of an organization
and the key players who determine its survival. Many of
the current definitions of competitiveness are mainly
based on the capabilities and offerings of an organization
in relation to the competitors[1-3]. In other words, the key
players are the organization, its customers and
competitors. No account is given to the shareholders who
provide the necessary capital base and influence
the business objectives. Furthermore, the current
definitions also view competitiveness as a static concept
(i.e. how competitive an organization is at a particular
moment in time) and little consideration is given to its
sustainability.
Figure 1 provides a conceptual framework which can
be used to develop a definition for competitiveness.
The assumptions employed by this framework are:
● For an organization to exist there has to be a
demand for its offerings.
● The ultimate goal of an organization is to make a
profit in order to satisfy its shareholders and
achieve continuous profit growth while fulfilling
the interest of other stakeholders such as
employees.
● Competition arises when several organizations
strive to make a profit by satisfying the same
demand.
The above considerations imply that the nature of
competition is determined by both the way in which
customers value the offerings and the way shareholders
50
MANAGEMENT DECISION 32,2
Customer value can therefore be considered as the benefit
perceived by the customer in relation to the demanded
price. It can be expressed as:
Figure 1. Conceptual Framework for Defining
Competitiveness
Customer
values
Nature of
competition
Shareholder
values
Revenue
Return
Offerings
Capital
Customers
Organization
under consideration
Shareholders
Competitors
Key:
Organization under
consideration
Competitors
Benefit
Price
Customer Value =
Figure 3 illustrates the relationship between the
perceived benefit and price. This figure shows that there
is a threshold which separates the competitive sector
from the non-competitive sector. The threshold represents
what the customers are prepared to pay for the benefits
they receive. The offerings which lie at the bottom of the
threshold line are those that cannot be differentiated from
the offerings provided by the competitors. These
offerings compete on the the basis of lower price whereas
the offerings which reside at the top of the threshold line
compete on the basis of differentiation.
value the profit potential in relation to the competitors.
As a result, the organization and its competitors will
constantly strive to match and improve their capabilities,
offerings and potential in order to increase the level of
customer and shareholder values (see Figure 2)[4].
Another dimension of competitiveness is the
organization’s ability to act and react within its
competitive environment which requires financial
strength to make the essential investments in technology
and people.
There is a range of strategic options available for an
organization to achieve a competitive advantage.
Examples of these offerings are represented by the three
arrowed lines leading to the positions A, B and C shown
in Figure 3. Any of these strategic options will place an
organization in a position above the competitiveness
threshold thereby increasing the value of its offerings in
the eyes of the customers. Any strategy which will
reposition an organization along or below the threshold
line does not culminate in a competitive advantage.
Organizations will therefore have to go through a process
of continuous change in order to improve their market
position as well as maximizing their potential for making
a greater profit level as they are competing with other
forms of investment opportunities in attracting the
necessary funds provided by their shareholders.
The concept presented in Figure 3 not only incorporates
the generic strategies of cost leadership and differentiation[6] but also proposes a wide range of hybrid cost
leadership-differentiation strategies for achieving a
competitive advantage.
Customer Values
An organization is competitive in the eyes of its
customers if it is able to deliver a better value when
compared with its competitors. Superior value results
through lower prices for equivalent benefits or
differentiated benefits that justify a higher price[5].
The position of the threshold line is by no means constant
as organizations constantly strive to enhance their
competitive position. Figure 4 gives two examples of the
way in which the position of the threshold line may
change.
Figure 3. Competitive Threshold
Figure 2. Components of Competitiveness
Benefit
Customers
Organization
Competitive
sector
Shareholders
B
C
Th
re
s
l
ho
d
li n
Possible strategies
e
Differentiated
products
Offerings
A
Capabilities
Ability to
act and react
Cost leadership
B
Differentiation
C
Hybrid
D
Non-competitive
strategy
E
Non-competitive
strategy
D
Potential
Customer
values
A
Shareholder
values
E
Commodity
products
Non-competitive
sector
Price
DEFINING COMPETITIVENESS: A HOLISTIC APPROACH
51
between the shareholder values, financial strategy of an
organization and the characteristics of return on
investment over time. In this figure two scenarios have
been considered: short-term maximization of return on
investment and long-term maximization of the
cumulative return on investment. Figure 5 clearly
demonstrates that if competitiveness is to be sustained
then it is essential to achieve an appropriate balance
between short-term and long-term considerations.
Figure 4. Competitive Velocity Map
Benefit
Original position
of threshold line
Price
From this figure it can be seen that the competitive
environment of an organization should be regarded as a
velocity map as opposed to a position map. This is
because in order to retain a competitive advantage,
organizations should change their competitive position
faster than the rate at which the threshold line changes its
position. The dynamic nature of the threshold line also
implies that the customer values do not assume a fixed
level.
Shareholder Values
An organization is competitive in the eyes of its
shareholder if it is able to provide a satisfactory return on
investment in the short, medium and long terms. Different
shareholders have different preferences concerning rate of
return, characteristics of return (e.g. capital gain or
dividend yield) and the risks attached. Furthermore, the
shareholders may have other interests which are not
directly related to the financial performance (e.g. access to
key technologies and know-how which may be used for
other business interests). Shareholder values will
therefore influence the decisions concerning the dividend
policy, growth strategy and capital structure which will
in turn determine the long-term wellbeing and profit
potential of the organization. Figure 5 illustrates the link
Ability to Act and React
This is the third component of competitiveness and can be
defined as the ability to retain the competitive position of
an organization by satisfying the expectations of
customers and shareholders while constantly eliminating
the threats and exploiting the opportunities which arise in
the competitive environment. Competitiveness can only be
maintained through continuous improvement of the
offerings and capabilities of an organization. This requires
a sound financial strength to fund the necessary strategic
changes such as the introduction of new technologies.
Financial strength incorporates two aspects:
(1) short-term financial strength which determines
the ability of an organization to act and react
swiftly (this is related to the availability of shortterm capital);
(2) long-term financial strength which determines the
ability to raise capital for major investments such
as the introduction of a new product range and
production facility.
The ability to act and react does not only depend on the
financial strength but also on people and access to the key
technologies.
Sustainability
Sustainability is a measure which describes the potential
of an organization to maintain or improve its competitive
position in the eyes of its customers and shareholders
while having the ability to act and react within a
Figure 5. Shareholder Values, Financial Strategy and Return on Investment
Shareholder
values
Rate of
return
Strategy
Capital
Risk
Return
Other
interests
Capital
structure
Return on investment over time
Return on investment
Long-term maximization
of cumulative return
on investment
Dividend
policy
Short-term maximization
of return on investment
Growth
Time
52
MANAGEMENT DECISION 32,2
changing competitive environment. Competitive advantage can only be sustained as long as this potential
remains high.
Figure 7a. Effects of an Increase in Customer Values
High
As customer and shareholder values are of a conflicting
nature competitiveness can only be sustained when such
a conflict is kept in an equilibrium while maintaining the
ability to act and react. The equilibrium state is shown in
Figure 6.
The examples given in Figures 7a-d demonstrate the
repercussions arising from disturbing the equilibrium
state. Figure 7a shows an increase in customer values
resulting from, for example, the introduction of a new
product by a competitor in the marketplace which offers
extra benefits for the same price. This culminates in a
Figure 6. Concept of Sustainable Competitiveness
Low
Ability to
act and
react
High
Long-term
financial
strength
Low
High
High
Shareholder
values
▼
Customer
values
High
Low
Short-term
financial strength
Low
As the result of a lower short-term financial strength of
the organization the shareholder values drop. The
competitive position of the organization can therefore be
summarized as being less favourable when compared to
its competitors with respect to the level of technology
employed and the capabilities of its employees. This is
indicated in Figure 7b by a drop in the overall vertical
position of the system. In order to reverse the above
situation there are two possible options as shown in
Figures 7c and 7d.
The first option (Figure 7c) represents a scenario in which
the organization weakens its long-term financial strength
Figure 7b. Effects of a Decrease in Shareholder Values
High
People and
technology
▼
▼
People and
technology
Low
Low
Ability to
act and
react
High
▼
High
High
Shareholder
values
▼
Customer
values
High
Low
Low
Short-term
financial strength
Ability to
act and
react
High
Long-term
financial
strength
Low
High
Customer
values
Low
loss of market share and hence revenue, thus affecting the
short-term financial strength of the organization. This is
indicated in Figure 7a, where the downward inclination of
the beam caused by an increase in customer values has
resulted in the sliding block moving away from its
original position to assume a weaker position.
High
High
Long-term
financial
strength
Low
People and
technology
▼
In order to describe the concept of sustainability an
analogy may be drawn between this concept and the
mechanical system shown in Figure 6. This system
comprises:
(1) a beam which holds two weights at its ends: one
representing customer values and the other
shareholder values;
(2) a sliding block which travels along the beam when
the equilibrium of the system changes; the position
of the sliding block indicates the short-term
financial strength of the organization;
(3) a pulley mounted by a spring, the stiffness of
which represents the strength of people and the
level of technology employed within the organization; these sources of competitive advantage
determine the overall vertical position of the
system;
(4) a counterweight representing the long-term
financial strength of the organization which can be
increased or decreased to change the vertical
position of the beam.
Low
Low
High
Low
Short-term
financial strength
Shareholder
values
Low
DEFINING COMPETITIVENESS: A HOLISTIC APPROACH
The above example clearly demonstrates that it is
necessary to maintain an equilibrium between all the
components of competitiveness. This example only
represents one scenario for demonstration purposes.
Other scenarios may be considered using the
equilibrium concept in order to explain the effects of
changing the level of other components of competitiveness on the short-term and long-term
performance of the organization.
Figure 7c. Option 1: Short-term Gain
High
▼
People and
technology
Low
Ability to
act and
react
High
Long-term
financial
strength
Low
High
53
High
Competitive Position Map
Customer
values
Shareholder
values
▼
High
Low
Short-term
financial strength
Low
Low
by, for example, reducing the price of its offerings in order
to increase customer values while increasing the level of
dividends paid to the shareholders, thus also increasing
their values. Using this option, the organization neglects
investment in people and technology which in the long
run will lead to an even less favourable competitive
position and the inability to act and react within a
competitive environment. In summary, Option 1 has
assumed short-term gains to the detriment of long-term
considerations. The second option (Figure 7d) considers
that in order to improve the competitiveness of the
organization it is necessary to invest in people and
technology. Although such an investment will result in a
short-term drop in customer and shareholder values and
financial strength, it will ensure a strong overall
competitive position in the long term. Such a scenario
would result in the restoration of high customer and
shareholder values and a stronger ability to act and react
in a competitive environment.
Figure 7d. Option 2: Long-term Competitiveness
The concept of competitiveness highlighted above will be
of no use if it is not furnished with a measurement
system. As the factors affecting the competitiveness of an
organization are of a conflicting nature and interact
acutely, competitiveness cannot be defined by a single
measure. It must therefore be described by a set of
measures which gauge the relative competitive position
of an organization with respect to different components
that contribute to overall competitiveness.
Figure 8 presents a competitive position map which plots
the competitive position of an organization in relation to
its competitors. The map takes a matrix form which
employs the components of competitiveness (i.e. customer
values, shareholder values and financial strength) in
three dimensions. The matrix is allowed to move along a
fourth axis which represents the strength of people and
the level of technology employed. It must be emphasized
that there are two aspects to people and technology. First,
they have a direct influence on customer and shareholder
values, thus affecting the current competitive position of
an organization. Second, they are indicative of the
potential of an organization to be able to act and react
within a competitive environment in the future.
Figure 8. Competitive Position Map
▼
High
People and
technology
People and
technology
Low
Ability to
act and
react
High
Long-term
financial
strength
Low
High
Shareholder
values
High
Customer
values
▼
Low
Short-term
financial strength
Customer
values
Shareholder
values
High
Low
Financial strength
Low
Competitive
position of
organization
54
MANAGEMENT DECISION 32,2
Figure 9 gives examples of competitive position mapping.
In this example the size of the circle is used to indicate the
competitive potential of an organization with respect to
the strength of people and the technology employed.
Three potential levels are considered: low, medium and
high. The mapping process culminates in a number of
clusters with each cluster representing a group of
organizations pursuing similar strategies (e.g. cost
leadership, differentiation, etc.).
The map can be used to determine the competitive gaps
between organizations. Each gap is an indicator of a
number of important considerations. First, it allows the
organization to identify areas of strengths and
weaknesses with respect to different components of
competitiveness. Second, the gap enables the organization to determine the extent to which they are ahead of
or behind their competitors. Third, the gap indicates the
direction in which the organization should move in order
to realize the greatest benefit.
The competitive position map is not based on the
assumption that the size of an organization has a strong
positive correlation with its profitability. The map
therefore makes it possible to compare organizations
which derive their competitiveness from economies of
scale with those organizations which compete on the basis
of differentiation. The competitive position map does not
aim to provide information about the attractiveness of a
market or market segments nor to determine whether an
organization should invest or divest in certain business
areas. The map therefore complements other strategic
Figure 9. Mapping Competitive Environment of an
Organization
Financial strength
Financial strength
Shareholder
values
Customer
values
Competitive
position of
organization
Financial strength
Shareholder
values
Customer
values
Shareholder
values
Key:
People and technology
Low potential
Medium potential
High potential
Performance Measures for Competitiveness
A measurement system for different dimensions
of competitiveness is necessary in order to map
the competitive position of an organization and its
competitors. It is important to realize that such a
measurement system depends on an organization’s
perception of customer and shareholder values,
the competitive environment and the drivers that
determine competitiveness in that environment.
Furthermore, it is not the aim of this work to develop a
fully fledged measurement methodology but rather to
give examples of how a performance measurement
framework can be arrived at. The use of such examples
will reinforce the potential and application of the concepts
thus far presented.
Measurement of Customer Values
Customer values are the combination of several benefits
offered for a given price, and comprise all aspects of the
physical product and the accompanying services.
Different customers have different wants, needs and
desires which lead to market segmentation[6,9]. The
concept of segmentation has to be considered when
determining the competitive position of an organization
with respect to customer values.
Customer values should be viewed not only in terms of
product characteristics, but also in terms of processes
which deliver the product. Both the product and the
process concept have to be right if customer satisfaction
is to be achieved. The factors which drive customer
satisfaction are very closely related to the competitive
environment of an organization. As a result, the first step
in determining measures for customer values relates to
the identification of critical success factors for the
competitive environment under consideration. A number
of approaches have been proposed for identifying such
factors. Some approaches concentrate more on the
product features and market[10] while others place more
emphasis on the process and delivery characteristics[11].
Financial strength
Competitive
clusters
Customer
values
analysis tools such as the market share/growth matrix[7]
and the market attractiveness/company strengths
matrix[8].
Shareholder
values
Customer
values
As customer values cannot be measured in absolute
terms a rating scheme should be employed for
measurement purposes in order to compare the
performance of organizations within a competitive
environment. The factors considered are then weighted
according to their importance. A rating for customer
value which can be used in the construction of the
competitive position map is finally obtained. The
dimension representing customer values can be divided
into a number of portions in cases where market
segments can be clearly defined. Figure 10 gives an
DEFINING COMPETITIVENESS: A HOLISTIC APPROACH
55
Figure 10. Competitive Position with Respect to Customer Values
Organization's
offerings
Product
concept
Process
concept
Customers
Speed
Cost
Flexibility
Market segmentation
Dependability
Customer value rating
Weight
Rating
Weight
Rating
Segment A
Segment B
Segment C
Weight
Rating
Weight
Rating
Cost Speed Flexibility Dependability
Final rating (0-10)
Segment A
Segment B
5
10
Segment C
5
Customer
value
0
10
example of the process leading to a relative measurement
for customer values. In this example, the organization’s
offerings are analysed using cost, speed, flexibility and
dependability as critical success factors. The outcome of
this analysis determines the market segments for the
competitive environment considered. Within each market
segment the organizations are then rated on a scale
ranging from 0 to 10. The segmentation together with the
rating determines the competitive position of an
organization with respect to customer values within the
competitive environment.
Measurement of Shareholder Values
Shareholder values are essentially determined by the
return on investment in relation to the risks involved.
There are several measures that are of interest to
shareholders some of which are listed in Figure 11.
In developing a measurement system for shareholder
values it is necessary to consider short-term as well as
long-term gains. For example, a floating average of return
on investment is a more appropriate measure than a
single annual measure[13].
Measurement of Financial Strength
The financial strength of an organization determines its
strategic capabilities[14]. It can be measured through a
variety of financial and non-financial measures. The
choice of measures depends on the organization itself as
well as its competitive environment. For example, the
fixed assets of service organizations are low when
compared with heavy industries in which fixed assets
play a dominant role. It is therefore not possible to
develop a universal framework for measuring financial
Figure 11. Examples of Measures Used by Shareholders
Shareholders evaluate their investments not only within
the same competitive environment but across industries
and against other investment opportunities such as
bonds or securities. However, different shareholders
appraise their investments in different ways and therefore
it is inappropriate to select one particular measure to
gauge shareholder values. A broader approach to
measure shareholder values (which goes beyond the use
of financial ratios) is the Shareholder Value Analysis
(SVA)[12]. Using this approach, however, it is difficult to
translate the outcome into a single measure.
Return on equity
Earnings per share
Payout ratio
Dividend yield
Net profit
Equity
Earnings available
=
Average number of shares
Total dividends paid
=
Total earnings available
Dividend paid
=
Price of share
=
56
MANAGEMENT DECISION 32,2
strength. The approach below gives an example of how a
set of financial and non-financial measures can be used to
gauge the financial strength of organizations.
The first step involves the selection of key measures
which define the ability of an organization to act
and react within the competitive environment under
consideration. Examples of such measures include:
● Profit, which is a prerequisite to satisfy the
expectations of the shareholders for a high return
on investment. It can be applied in absolute terms
and in relation to other performance measures
such as profit/sales, profit/outlet, profit/product
group, etc.
● Ability to raise capital, which defines the ease with
which the organization can raise funds when an
investment opportunity presents itself. This
ability is closely linked with the risks as perceived
by investors in providing capital in the form of
either debt or equity. Therefore, measures such as
the current debt to equity ratio (gearing), cost of
capital and the ability to meet interest payments
can be used.
● Cash flow, which determines the organization’s
liquidity status and defines whether the
organization is capable of meeting its payment
obligations such as interest payments.
Qualitative measures such as reputation or potential to
form strategic alliances, although not quantifiable, can be
used in the analysis of financial strength by using
qualitative ratings. Examples for industries in which
qualitative measures would be used are the biotech
industry or organizations which are mainly funded by
venture capital.
The next step involves constructing a measurement table
which lists the selected measures for the organizations in
a competitive environment. These measures are then
given a weight according to their importance. The data is
next normalized in order to standardize all the measures
Figure 12. Measurement Table for Determining Financial
Strength
Raw data
Standardized data
—
Weighting
Organization
Competitor 1
Competitor 2
Competitor 3
Competitor 4
Competitor 5
…
Competitor n
into a single scale. An overall standardized value for the
financial strength of each organization is finally
determined by taking into account the weights assigned
to each measure (see Figure 12).
Measurement of Technology and People
Technology and people encompass those factors which
define the strategic capabilities of an organization that
cannot be measured in financial terms. Technological
innovation can be regarded as the driver for changes in a
competitive environment. The competitive position of an
organization hinges on its ability to drive or at least keep
abreast with such changes.
In every area of the competitive environment forecasting
of future trends in technology and innovation is of crucial
importance. A large number of tools are available for this
purpose[15]. Porter’s competitive forces model[16], for
example, provides a basis for identifying potential
changes in the competitive environment as a result of
possible technological breakthroughs.
Using the matrix given in Figure 13, the key technologies
and skills of an organization can be rated against its
competitors. In this figure, circle and triangles are used to
represent respectively the technologies and the skills that
Figure 13. Technology and Skills Matrix
Overall
competitive
position
6 … n
Key technology /skills
1
Organization
2
3
4
5
Competitive
position of the
organization
Strong
Competitor 1
Competitor 2
Medium
Competitor 3
…
Competitor n
Financial
strength
Standardized
Measure 1 Measure 2 Measure n Measure 1 Measure 2 Measure n
average
Weak
Directly related Indirectly related
technology
technology
and skills
and skills
DEFINING COMPETITIVENESS: A HOLISTIC APPROACH
57
are directly and indirectly related to the business of the
organization. The size of the circles and triangles define
the organization’s competitive potential with respect to the
technologies and skills considered. An overall rating can
finally be assigned to the organization and its competitors
in order to gauge the overall competitive position.
Business strategies establish how organizations can shift
the current competitive position to a stronger one.
Business strategies are therefore based on the current
competitive position and competitive gaps. Figure 15
illustrates the way in which the competitive position map
can be used for developing a business strategy.
Apart from obtaining an overall rating for the
competitive position, the use of the technology and skills
matrix will also enable organizations to identify areas of
strengths, weaknesses, opportunities and threats with
respect to technology and skills.
From the competitive position map the maximum
expectations of customers and shareholders can be
established. The competitive gaps of the organization
with respect to these maximum expectations can then be
ascertained. The financial strength of the organization
together with the potential of its technology and people
determine the extent to which the competitive gaps can
be reduced. On the basis of this, strategic options can be
formulated for the minimization of the gaps. Two
examples of such options are given in Figure 15. The first
option aims to improve the shareholder values while the
second option emphasizes customer values. The adoption
of either of these options will reduce the financial strength
of the organization in the short term due to the required
investments.
Application of Competitive Position Map in
Strategy Development
Figure 14 summarizes the competitive mapping process.
The resulting map forms a sound and coherent basis for
the development of business strategies. The map enables
the user to identify the competitive position of an
organization in relation to the competitive structure of the
business environment.
Figure 14. Competitive Mapping Process
Raw data
Financial
strength
Standardized data
Return on equity
=
Earnings per share
=
Payout ratio
=
Dividend yield
=
Standardized
Measure 1 Measure 2 Measure n Measure 1 Measure 2 Measure n
average
—
Weighting
Financial
strength
Organization
Competitor 1
Competitor 2
Competitor 3
Competitor 4
Competitor 5
…
Competitor n
Organization's
offerings
Product
concept
Net profit
Equity
Earnings available
Average number of shares
Total dividends paid
Total earnings available
Dividend paid
Price of share
Shareholder
values
Process
concept
Customers
Speed
Cost
Flexibility
Dependability
Key technology /skills
Market segmentation
Customer
values
Customer value rating
Weight
Rating
Weight
Rating
Segment A
Segment B
Segment C
Weight
Rating
Weight
Rating
Cost Speed Flexibility Dependability
1
Organization
2
3
4
5
6 … n
Overall
competitive
position
Competitive
position of the
organization
Strong
Competitor 1
Competitor 2
Medium
Competitor 3
Final rating (0-10)
…
Competitor n
Segment A
Segment B
Segment C
5
Customer
value
10
0
5
10
Weak
Directly related Indirectly related
technology
technology
and skills
and skills
58
MANAGEMENT DECISION 32,2
Figure 15. Application of Competitive Position Map in
Strategy Development
Financial strength
Current
position of
company
Expected
shareholder
value
Strategic
option 1
Shareholder
values
Expected
customer
value
Customer
values
Strategic
option 2
Conclusion
This work has culminated in a holistic definition for
competitiveness. The definition can be summarized as:
Competitiveness is relative and not absolute. It depends on
shareholder and customer values, financial strength which
determines the ability to act and react within the competitive
environment and the potential of people and technology in
implementing the necessary strategic changes. Competitiveness can only be sustained if an appropriate balance
is maintained between these factors which can be of a
conflicting nature.
Competitiveness can be measured using a mapping
process. The competitive position map reflects the tradeoff between satisfying customer and shareholder values
and maintaining financial strength. By mapping the
competitive environment of an organization it is possible
to identify the competitive gaps. The knowledge
generated by the competitive position map forms a sound
basis for business strategy development.
References
1. Bowman, C., “Charting Competitive Strategy”, in
Faulkner, D. and Johnson, G. (Eds), The Challenge of
Strategic Management, Kogan Page, London, 1992.
2. Stalk, G., “Time-Based Competition and Beyond:”
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No. 5, 1992, pp. 27-9.
3. Grant, R.M., Contemporary Strategy Analysis: Concepts,
Techniques, Appl ications, Basil Blackwell Ltd,
Ambridge, MA, 1991.
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Imperative”, Business and Economic Review, Vol. 37
No. 4, 1991, pp. 18-21.
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York, NY, 1985.
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York, NY, 1980.
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Standard for Business Performance, Free Press, New
York, NY, 1986.
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Linking Strategy to Performance, The Free Press, New
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Strategy, Prentice Hall, New York, NY, 1993.
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Rainer Feurer is a research student and Kazem Chaharbaghi is a lecturer, both at the School of Industrial and
Manufacturing Science, Cranfield University, Cranfield, UK.
Application Questions
(1) “Competitiveness is relative and not absolute.” Do we think deeply enough about how customers perceive
competitive offerings?
(2) Are the four parameters listed (financial strength, shareholder values, technology/skills and customer value)
enough to determine competitive strength?
(3) Compare the authors’ approach with that taken by Porter (competitive strategy, competitive advantage, etc.)
Evaluate the two in terms of relative strengths of application and depth.