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UNIVERSITI TEKNOLOGI MARA (UiTM) TERENGGANU

Master in Office Systems Management

Customer Relation Management


OSM761

Individual Assignment:
A Case Study on Sustainable Competitive Advantage of Internet Firms: A strategic
framework and implication for global marketers

Prepared for:
Dr Abdul Kadir Bin Othman

Prepared by:
Norsyahida Binti Mohd Maamon
2012183749

Date of submission:
9th May 2014

Introduction of the Case Study


Rajshekhar (Raj) G. Javalgi, Lori P. Radulovich, Glenna Pendleton and Robert F.
Scherer had conducted a research on title Sustainable competitive advantages of internet
firms by focusing on a strategic framework and implications for global marketers. The purpose
of this study is to introduce an integrative framework to define what are the roles that play by
customer behavior and customer relationship management (CRM) in order to develop a
profitable business and sustainable competitive advantage for internet companies.

In this

research, the authors had focusing on sustaining the competitive advantage among internet
firms since in the modern world, for a business to compete globally they need to rely on the
advancement of technologies such the internet that allow company or businesses to do
business transaction across borders and at the same time it will provides businesses with
access to global market that enable companies either big or small types to compete globally
(Quelch and Klein, 1996; Javalgi and Ramsey, 2001). At the beginning of article, authors had
clearly define the meaning of internet by stated the idea from Dunning and Wymbs (2001) that
identify internet as a multi-layered nexus of information and communications technologies,
allows business transactions to occur across borders, resulting in the creation of a cyberspace
marketplace.
Authors also agreed with the idea that has been stated by Urban (2003), said that
internet technology has give impact to the businesses in term of the flow of communication, the
flow of goods and services and also the flow of money. Other than that, authors said that those
companies that able to market their product and services over the web are considered as global
company. On the next paragraph, authors emphasize the issue of a sustainable competitive
advantage which is based on authors point of view there is no literature that explain clearly on
the issue of a sustainable competitive advantage and there is no conceptual framework had
been establish to discuss the important aspect of customer-focused strategies that will influence
business performance. In addition, authors also stated that, there is also a gap in the previous
study regarding the relation between internet business models, customer behavior and creating
a competitive advantage as mentioned by Evans and Wurster (1999) and Verona and Prandelli
(2002).
Therefore, in order to closes this gap, authors had arise the issue of developing a
sustainable competitive advantage on the web by giving focus on customer-driven strategies.
The authors decided to use integrative framework to illustrate the role that customer behavior

and customer relationship management (CRM) play in order to help internet companies to gain
their profitable and also sustainable competitive advantage to compete in the global market.
Problem Identification
Based on the previous study, there is no explicitly issues has been addressed in
discussing strategy of a sustainable competitive advantage especially for internet firm.
According to Frank (2012), companies that have competitive advantage experience greater
performance relative to other competitors of the same industry or the industry average.

competitive advantage or known as competitive edge is things that help companies to be better
or more successful than others competitors by offering their customers greater value such lower
prices, quality product or services and others additional benefits (Emhke, 2008).

However

sustainable competitive advantage is referring to a firm that is able continuing achieves better
results or outperforms its competitors for a long period of time (Frank, 2012). Fallible (2010)
stated that firm that possess a sustainable competitive advantage is able to keep the businesss
current customer and at the same time increase the number of new customers also the firm are
more profitable than their businesss rivals.
In this study, the authors claimed that for a business to be successful and competing in a
global world they need to rely on the advancement of technology such internet to ensure their
business still survive. It is important aspect that businesses need to focus because in the
modern world since there is increasing number in perfect competition market. Most of the
product and services that provided by the businesses is identical. So that, in order to compete
with its competitors, the internet firm needs to integrate the use of technology with customer
focus. Customer today are more demanding, they want to have easy access to the product or
services and customer today need technological materials means they prefer to use mobile
phone, computer or others technology devices to get everything through online website (Adile,
2013). On top of that, one of the ways that the business can practice to ensure their survival by
implementing the use of e-commerce to develop competitive advantages by providing valuable
information, designing new services, lowering costs and providing variety of consumer choices
(Lumpkin and Dess, 2004).
However, nowadays there is increasing number of e-commerce businesses.

Shin

(2001) claimed that e-commerce had changed the economy and the way business has been
done. E-commerce has make the companies to find new methods in order to compete and
expand in the global market, to retain and attract their customer by producing products and

services that fulfill customer needs and reorganize their business processes in order to help
companies to deliver their product and services more effectively and efficiently (Shin, 2001).
Other than that, Shin (2001) argued that most of the internet companies have focused on the
pleasant and attractive look of the visual and also ease of use of their web sites as the main
strategy to increase their customer base.

However, currently the internet companies have

changed their focus. The internet companies not only focusing on developing a customer base
but they also focus on how to increase revenue growth and profitability.

Thus internet

companies should think and check back their current business practices and strategies and also
build up the strategies that give clear path t profitability (Shin, 2001). On top of that, the authors
had identified established internet businesses has emphasize their focus on branding strategies
as a way to show their strong reputation and to make them different among the increasing
number of internet competitors. Susan (2013) identified that brand strategy is a long-term plan
that help companies to develop of a successful brand to achieve the goals. Branding strategies
that is well-defined and successful perform will affect all aspects of a business and is directly
link to consumer needs, emotions and competitive environment. Therefore, authors agreed
there is a need for a strategic framework to explain the sustainable competitive advantage of an
internet firm.
Solutions and Discussion of the Problem
The authors had identified that a successful internet firm will come out from a growth
phase as a global firm in which they understands and meets the needs and desires of global
customer. It is important as an internet firm to understand and fulfill the needs of their customer
because it will help the business be competitive advantage to its competitors. Thus to help the
firm to really understand and develop the sustainable competitive advantage, authors suggested
the framework known as framework to sustain the competitive advantage and performance of
internet firms.

Figure 1:
Framework to sustain
the competitive
advantage and
performance of
internet firms

The framework in figure 1 illustrated greater understanding the relation among consumer
behavior, internet customer relationship management and firm performance. The first building
block of this framework illustrated the internet consumer behavior. Karamian (2012), defined
consumer behavior as the way that consumers act in look for, buying, using, evaluating and
disposing of services and products in which that can fulfill their needs. In this framework it show
that typical consumer will go through usual stages in the decision making process. The stages
in the decision-making process include problem recognition, information search, evaluations of
alternatives, purchase choice, transaction process and post purchase. While navigating the
web, customer has the freedom and control in the decision-making process. The companies
that want to attract customer at the decision-making process must employ the affiliation and
lock-in strategies. The affiliation strategy play it role at the early stages of problem recognition,
information search and evaluation of options in which this strategy will help the firm to create
customer trust on the web and encourage web site visits among the customers.
Within the information search stage, affiliation strategy become significance since it help
internet firm to attract and increase number of visitors to the web.

Usually most of the e-

business or internet firm will ask their visitor to sign up and create an account to allow them to
experience exciting moment while navigating through the website. Once visitor create their own
account web administrator will ask user or visitor to fill up simple form that consist of
demographic information such gender, location, age and other related demographic information.
By gaining all this information it will be an opportunity for internet firms to identify users or
consumers style of purchasing or preference because during the early stage of decision-making
process, the firm able to tracking and develop a profile of their customers through the common
process in this early stage which are problem recognition, information search and evaluation of
alternatives. As a result the internet firms will able to track and develop a profile of their visitors
or consumer who they will assume as potential customer. This is what has been done in
affiliation strategy in which internet firm will try to develop a feel of attachment towards the
customer by develop a trust and strengthens loyalty by creating a brand preference based on
the customer preference and logical perception of better value.
The lock-in strategy play important role in the next three process of consumer behavior
which are purchase choice, transaction process and post purchase in which this three
processes known as purchase stage. According to Verona and Prandelli (2002) the objective of
the firm in the purchase stage is to execute a lock-in strategy. Internet firm that employ a lock-in
strategy able to restrict their customers from switching brands, products or services to other web

site because they are able to make customers feel attractive and attach to their brands. Internet
firm can develop the attractiveness and attachment feeling to the customers through CRM
techniques. CRM will help internet firm to increase the attachment among their customers by
tracking and profiling customers to enhance satisfaction by changing or customized the product
offering to meet customers needs. Refer to the framework, in both the affiliation and lock-in
stages there is other element which is corporate identity. Corporate identity can be established
through brand names in which are referring to customer opinions of firm brands (Draward,
2013). The corporate identity will encourage customer loyalty because it is most important thing
to keep or retain customer and achieving superior performance.

Therefore, to retain and

develop a good relationships with the customers can be done by completely understand their
needs and wants through the concept of customer relationship management (CRM).
Based on the figure 1, the next building block of the framework to sustain the competitive
advantage and performance of internet firms is internet customer relationship management.
Peelen (2005) identified customer relationship management as a process that focus on
identifying customer, creating customer knowledge, building customer relationship and shaping
customer perceptions towards the organization and its products. On top of that, the authors
claimed that, as internet firm that successful adapted CRM strategy which involves integrating
the fulfillment of customer needs as an objective within the firms core business process through
the entire organization. Therefore, based on the framework, it can be seen that consumer
behavior has a relation with customer relationship management. As a internet firms to develop
a good relationship with their customer the first thing they need to do is to understand the
consumer behavior in the decision making process. So that, the firm need to practice the CRM
concept at the beginning of the decision making process in order to help the internet firm to
identify their customer, develop the profile or details about customer base on the customer
knowledge and then the firm will know customer perceptions and preference towards their
products or services.
Agarwal and Panda (2003) agreed that for electronic marketplace to create a
sustainable competitive advantage is the heart of a CRM concept through communicating,
better understanding and delivering value to existing customer and at the same time to attract
and retain new customer. In the other words, CRM is an important tool that helps to create,
attract and develop relationships with target customers to increase customer value and enhance
firm performance (Payne and Frow, 2004). As most of the internet firm know more about
individual consumer and identify customer purchasing habits, it make easier for the firm to

manage the relationship with the customer.

Once there is a strong relationship with the

customers, at the same time it will derive to the customer loyalty that will increase firm
performance.

Thus, it is important for the internet firm to focus on managing customer

relationship since it will enhance the corporate performance of the firm.


So that is why internet firm performance being a third building block of the framework to
sustain the competitive and performance of internet firms it is because all this three building
block for this framework, internet consumer behavior, internet customer relationship
management and internet firm performance is links with each other. Firm performance can be
indicating base on two categories which are strategic performance and financial performance.
Strategic performance means that the firm has the competitive advantage among their
competitors in term of trust, satisfaction and loyalty among the customer while for the financial
performance the firm will experience the competitive advantage to its competitors in the form of
profitability, sales, return on investment and shareholder value. In brief, as illustrated in the
framework on figure 1, successful of the internet firm to compete in the global markets is
depend on they can attract and manage their relationship with the customers by completely
understand consumer behavior in make a purchasing decision and customer relationship
management in which this two building block will help the internet firm to enhance their
performance.
Conclusion
As a conclusion, in the modern and global world, the businesses need to address
different method to be successful in the unique market forces of the internet. As internet firm to
be a sustainable competitive advantage it just not only focusing on the use of technology but it
must together with the capability in managing customer relationship to improve customer
targeting for greater effectiveness and enhance firm performance. Perhaps, a comprehensive
framework that had been discussed by the authors throughout this research will help internet
firm to compete and targeting global consumer and develop a sustainable competitive
advantage for the enhanced firm performance of internet firms.

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