Keynon, A and Mathur, S, S (2002) The Offering As The Strategic Focus

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The offering as the strategic

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Alfred Kenyon & Shiv S. Mathur
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JOURNAL OF STRATEGIC MARKETING 10 171–188 (2002)
The offering as the strategic focus

ALFRED KENYON AND SHIV S. MATHUR
Cass Business School, City of London, 106 Bunhill Row, London EC1Y 8TZ, UK
Downloaded by [University of Nottingham-Ningbo] at 18:53 10 October 2012
Much of the weight of writing on business strategy and strategic marketing deals with
the tasks and perspectives of top managers of large and well-known companies and, to
some extent, with the organizational and structural aspects of those issues. However, all
businesses have a strategic need for designing what to sell in the future, for example
against the time when present market offerings cease to generate value. In businesses
which are either large or at the leading edge of technological innovation, much of this
task may fall on managers below the top level. This paper suggests that this task of
designing what to sell is nevertheless strategic and, therefore, is legitimately described as
a competitive strategy. It also suggests that what needs to be designed are individual
offerings, even when the viability of several offerings is interdependent. It is the offering
that customers choose or reject and the price of which they compare with prices of
substitutes. Most dissenters imply that what needs to be designed is something
pertaining to the company or one of its subunits, such as a strategic business unit. It
might be its market or customer base or its internal con guration in terms of, for
example, its culture, command structure or other capabilities. A minority believe that
the offering is not what customers choose. This paper puts forward grounds for
adopting the offering as the unit. It answers a number of actual and implied objections.
A number of the objections appear to stem from an assumption that the question of
what to design for future sales is not a question of strategic importance. In those cases
the issue here appears to concern not the answer, but the question.
KEYWORDS: Competitive strategy; strategic marketing; competitive positioning; customer focus;
resource-based view
INTRODUCTION: THE HISTORY AND THE LITERATURE

This paper suggests that every business has a strategic need for designing what to sell in the
future, that this means designing individual future offerings and that each such task can be
legitimately described as a competitive strategy. It thus rejects the view that it is enough to
design the future capabilities or competences of the company or of its strategic business units
(SBUs) and stresses the conceptual need for distinguishing between (1) the company/SBU, (2)
the company’s/SBU’s collection of offerings and (3) the offering as the unit of what needs to be
designed.
This paper therefore follows O’Shaughnessy (1995) in describing competitive strategy as the
design of future offerings. Where the suggested approach is adopted, the task of corporate
strategy becomes one of managing the company’s cluster of offerings. The word offering here
Journal of Strategic Marketing ISSN 0965–254X print/ISSN 1446–4488 online © 2002 Taylor & Francis Ltd
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DOI: 10.1080/09652540210151360
172 KENYON AND MATHUR
means what a customer can choose or reject. This concept of an offering is very similar to that
of the ‘market offering’ of Anderson et al. (2001). They gave three reasons for proposing the
term. First, it includes both tangible and intangible items, i.e. products and services. Second, what
is offered for sale and is purchased is not only the core item – the product or the service – but
that ‘and a set of augmenting services, programs and systems’ (Anderson et al., 2001, p. 331).
This reason nds a close parallel in Christopher et al.’s (1991) suggestion for extending the 4Ps
(product, price, promotion, place) to seven. Finally, Anderson et al. (2001) suggested that the
word ‘market’ reinforces an outward rather than an inward perspective. An individual offering as
here de ned therefore has a competitive position vis-à-vis customers and competing substitutes.
If the offering is differentiated, that position is unique.
The literature of business strategy includes contributions inter alia from two disciplines: (1)
strategy or strategic management and (2) marketing (Biggadike, 1981; Thomas and Gardner,
1985). The two streams have from time to time converged, then diverged, then converged again.
Marketing thought and literature has been classi ed in various ways. Sheth et al. (1988) classi ed
marketing theories, whereas Hunt (1976) analysed the nature and scope of marketing. This paper
is mainly concerned with only some of that scope, i.e. with Sheth et al.’s (1988) managerial
theory and with Hunt’s (1976) normative/pro t sector category. Marketing strategies have been
analysed, classi ed and discussed by Boyd and Larréché (1978). Keith (1960), a marketing prac-
titioner, recorded marketing’s evolution from production oriented via sales oriented and market-
ing oriented (choosing products to market) to marketing control. Keith’s (1960) last change
meant that marketing as a discipline had developed from optimizing the work of a specialized
marketing function to the concept of running the entire company with the aim of winning and
retaining customers. That last is the concept of the marketing or market-led company (Drucker,
1955; McKenna, 1991; Piercy, 2001).
Unlike O’Shaughnessy (1995) not many marketing writers have formally de ned ‘competitive
strategy’, but most (e.g. Lambin, 1996) seem to imply that it designs what is to be sold in the
future. It is clear that strategic marketing has consistently studied the means of success in
competitive markets, i.e. how to become more attractive to customers than competitors, but
perhaps less consistently with generating pro t or nancial value.
The literature of business strategy also began well before the 1960s, but it was in the 1960s
that it really took off. Kay (1993) and Rumelt et al. (1991) described its history from the point of
the in uence of economics. Grant (1991b) quoted Gluck et al. (1980) on McKinsey’s four phases
of the evolution of strategic planning in which the successive dominant priorities are (1)
operational control, (2) more effective planning for growth, (3) increasing response to markets
and competition and, nally, (4) orchestration of resources in order to create competitive
advantage. From the Second World War until about 1980 the unquestioned universal goal was
growth, which was subsequently criticized by Porter (1987), Ravenscraft and Scherer (1987) and
Jensen (1989). Companies wanted to get bigger. Anti-monopoly regulation restricted many
companies’ growth into related activities and, hence, the proliferation of conglomerates (Shleifer
and Vishny, 1991; Baker, 1992). This brought practical problems of mainly two types. One was
structure and control (Chandler, 1962; Williamson, 1975). The other was the question of the
company’s scope: should a company (1) de ne and (2) restrict the activities, called ‘product/
markets’, in which it might engage (Ansoff, 1965). Rumelt et al. (1991, p. 7) quoted a 1965 book
by Kenneth Andrews for the view that the process should involve an appraisal of its
strengths and weaknesses. This is of course a step towards the analysis of strengths, weaknesses,
opportunities and threats (SWOT) that was proposed and developed by Learned et al. (1969) and
cited by Barney (1995). SWOT was widely used by practitioners, consultants and business
THE OFFERING AS THE STRATEGIC FOCUS 173
schools in the 1960–1980 period, but has survived even into the twenty- rst century. It was
often applied with a fairly broad brush, which was criticized by Hill and Westbrook (1997). The
1960s were also the heyday of formal top-down planning, extending the annual pro t budget
into subsequent years.
The late 1960s and the decade up to 1980 brought two important developments. First, the
Boston Consulting Group’s (Abell and Hammond, 1979; Hamermesh, 1986) portfolio concept
aimed explicitly at nancial results rather than mere size. Its growth/share matrix introduced
the notion of selecting market areas that were likely to prove pro table. Second, Porter’s (1980)
very in uential book Competitive Strategy focused on companies positioning themselves in their
industries. His famous ve-forces diagram stressed the importance of customers and competitors.
Companies were advised to go for either cost leadership or differentiation (but not both) or for
a focus strategy.
It thus appears that most strategy writers and practitioners during these two decades attached
some importance to products/markets. However, they did not distinguish sharply between the
product/market area of (1) the individual offering and (2) that of the company or its subunit
such as an SBU. Of the issues then discussed, only the issue of the company’s scope clearly
affected just the company as a whole, not each offering. That apart, the distinction between
the company, the SBU and the offering as the competing unit was perhaps not regarded as
important. In the remainder of this paper SBU will be referred to as shorthand for any pro t
centre that has strategic functions delegated to it.
Unsurprisingly, it is not easy to nd strategy writers who examined how customers viewed and
chose between competing substitutes. That was left to marketing writers (Day et al., 1979;
O’Shaughnessy, 1995). The issue of customer choice lies of course at the heart of the study of
buyer behaviour, which Sheth et al. (1988) identi ed as one of the six schools of marketing.
Yet what about Porter (1980)? At one super cial level Porter (1980) created the impression that
he might be concerned with the individual offering, because his emphasis on differentiation, on
positioning and on substitutes is most easily associated with what customers choose, which it
will be argued is the individual offering. However, on a closer reading it appears that he in fact,
like other strategy writers before him, avoided any rigid distinction between the offering, the
SBU or the whole company and was in many cases concerned with ‘positioning’ the rm or
SBU within its industry.
Porter (1980) saw the industry as the market, but was conscious of the dif culties. Hence, he
allowed for substitutes from outside the industry and for the ‘strategic group’ as a narrower
competitive arena within the industry. It shall be seen presently that some of these escape
mechanisms were subsequently questioned by others. However, for the central argument in this
paper the salient point is that Porter (1980) was not establishing the individual offering as the
focus of competition.
As has been seen, strategic marketing has not stopped short of exploring the issue of how to
attract customers. Marketing had always stressed the importance of customers. Of course,
marketing too concerned itself with the issue of scope. Thus, Levitt (1960) urged companies to
think of their markets as bounded not by the offerings, but by the wider concept of the relevant
needs of customers which those offerings met. This wider market removed a constraint from the
scope for each company’s growth. He also later drew attention to the opportunities provided by
the product life cycle (Levitt, 1965). Abell (1980) similarly argued for a more comprehensive
de nition of a business and, therefore, of scope. Nevertheless, marketing has consistently focused
attention on the choosing customer and urged companies to be customer centred or market led
in their thinking. Day (1990, 1994, 1999a,b), Narver and Slater (1990), Jaworski and Kohli
(1993), Slater and Narver (1994), Harris and Ogbonna (1999) and Deshpandé (1999) are among
many examples.
After Porter (1980) the strategy literature developed in two directions. One strand tried to
resolve the dif culties inherent in some of Porter’s (1980) ideas. Thus Rumelt (1991) and Finlay
(2000) and, among marketing writers, Piercy (2001) and others have voiced reservations about
the usefulness of the industry to an understanding of the performance of rms. Much work was
also done (McGee and Thomas, 1986; Hatten and Hatten, 1987; Peteraf, 1993b) on strategic
groups. However, Barney and Hoskisson (1990) questioned the usefulness of the concept itself.
The other strand was the evolution of the resource-based view (Penrose, 1959; Rumelt, 1984;
Wernerfelt, 1984; Barney, 1986, 1991; Dierickx and Cool, 1989; Grant, 1991a; Peteraf, 1993a;
Collis, 1994), which explored why companies were not equally pro table and found the answer
in differential resource endowments. These writers sought to identify resources that gave rms a
competitive advantage. The present authors call these winning resources. These are speci c
enough to attract pro table sales (Peteraf, 1993a; Barney, 1995). The resource-based view
inspired other writers (e.g. Prahalad and Bettis, 1986; Prahalad and Hamel, 1990) to look at the
higher level resources, capabilities and competences that characterized entire large companies,
but were not necessarily winning resources as just de ned. With some exceptions (Barney, 1986)
neither of these last two sets of writers appear to have examined demand-side factors such as
markets, customers and competitors with any degree of clarity. These were treated as either
insigni cant by comparison with resources or as endogenous to the resource-based view model
(Priem and Butler, 2001a). Hamel and Prahalad (1994, Chapter 12) appeared to treat a
customer-focused style of management as merely one kind of capability, as indeed did Day
(1994) and Hunt and Morgan (1995).
Porter (1980) and the advent of the resource-based view between them had one important
effect on strategy as a discipline and on the economists within it. They both shifted the attention
of strategy scholars towards competitive strategy, i.e. towards how the individual business might
outdo its rivals in customer markets. Porter (1980) brought differentiation in as a generic
strategy, while resource-based view writers developed the characteristics (Peteraf, 1993a) needed
by resources for creating value, i.e. for beating the cost of capital. These innovations amounted to
a signi cant shift from the previous emphasis on corporate organization structures (Chandler,
1962), scope (Teece, 1980) and transaction cost theory. The latter (Williamson, 1975; but see
Hill, 1985) mainly studied criteria for vertical integration. However, although both these new
insights moved a little closer to the issues surrounding choosing customers, they still left those
issues to be explored by writers on marketing.
More recently developments in technology and the Internet have attracted interest in
innovation skills as competences and in knowledge as a resource (e.g. Eisenhardt and Martin,
2000). Brown and Eisenhardt (1995) reviewed the literature on innovation or new product
design. That literature does not restrict the concept of innovation to technically advanced prod-
ucts. ‘New’ is taken to mean either new to the rm or new to the world (Gopalakrishnan and
Damanpour, 1997). There are several different approaches within that literature. Strategy writers
such as Prahalad and Hamel (1990) and Hamel and Prahalad (1994) focused on top management
and corporate capabilities. Those like Eisenhardt and Martin (2000) focused on a wider view
of management issues. Marketing writers such as Johne (1999) also focused on management
capabilities, attitudes and procedures, but took note of external market factors as well.
That literature also therefore preponderantly asks how the rm needs to be managed and
structured for innovation, rather than how customers are attracted. Brown and Eisenhardt (1995)
found three research streams with perspectives of (1) a rational plan, (2) a communication web
and (3) disciplined problem solving. Only the rational plan stream aims at nancial success,
which this present paper sees as the goal of strategy (see also Barney, 2001).
The marketing literature was not unaffected by these new concepts in strategy. Thus, Hunt
and Morgan (1995) devised a resource-based and competence-based framework, called
‘comparative advantage’, for explaining the success of individual offerings. Market orientation
was treated as a resource by those authors and others, for example Day (1994). Day (1994, 1997)
also used the resource-based view for explaining success with customers. Moreover, in a very
different framework he traded off cost and demand factors (Day, 1981). However, others in
marketing (McKenna, 1991; Piercy, 2001) stuck to a strongly market-led approach.
This brief review of the two branches of literature about competitive strategy has yielded
relatively little so far about the issues tackled by the present paper. O’Shaughnessy (1995) is the
only author to have been found who clearly identi ed competitive strategy with the design of
future offerings and most marketing writers would at least identify it with the design of what is
to be sold in future. None of the texts ask head-on whether a competitive strategy shapes an
offering, i.e. something outside the company or the whole company or one of its SBUs. Mathur
and Kenyon (1997, 2001) and Finlay (2000) are apparently so far the only authors to have asked
that question. Mathur and Kenyon (1997, 2001) went for the offering and Finlay (2000) rejected
that view and went for the business or SBU. This paper will distinguish below between this
question and the apparently similar one asked by Day (1981).
The rest of the literature is apparently either unaware of the issue of the unit of competitive
strategy or regards it as not arising at all or as relatively trivial. This puzzle is examined next.
WHY IS THE QUESTION OF THE UNIT OF COMPETITIVE STRATEGY SO

WIDELY NEGLECTED?
Many writers and practitioners ignore what it is that a company designs when it plans what to
sell in future. In the present authors’ view this is the individual offering. Is this neglect of the
question justi ed? Is the question meaningful? Does it matter in practice?
When an issue is ignored it is hard to ascertain the reasons. The evidence can at best
only be anecdotal from informal contacts with writers who ignore it. Some of what follows
must be speculative. The present authors believe that the following three types of factor all play
a part.
First, for some writers the central concern is not what should be sold to customers, not the
nature of the competitive process, but how a company or SBU is best governed, shaped and
managed. These writers are not therefore concerned with designing what to sell in future, but
rather the company’s or SBU’s culture, command structure or other capabilities or perhaps its
market, meaning the scope of its customer catchment area or areas. For them the above ques-
tions do not directly arise. These writers use a different concept of competitive strategy and
differ in their question, not in their answer. The two different usages of ‘competitive strategy’ are
distinguished later in this paper.
There can be no disagreement with these writers. The need here is simply for transparency: it
would be useful if these writings did not lend themselves to confusion with those that do study
competitive success in customer markets.
Second, as already mentioned, for some followers of the resource-based view deployment
of what are called here winning resources encompasses whatever is needed for succeeding in
customer markets. When some resource-based view writers treat winning resources as a
suf cient condition of nancial success or ‘competitive advantage’, they make the approach to
customer markets endogenous to the resource-based view (Priem and Butler, 2001a). If so,
deployment of winning resources ipso facto encompasses what needs designing.
Priem and Butler (2001a) used the identi cation of valuable or winning resources by their
characteristics as an illustration of the practical application of the resource-based view for
researchers to test empirically. They found that question as it stood wanting in operational
validity. Resource-based view studies shed much light on what types of resources are likely to be
winning ones, but for practical application and testing the key is what resources do rather than
what they are. Barney (2001, p. 46) cited a number of practical applications where resources are
tested for what they achieve. This paper supports that approach, but focuses more on what
resources do for offerings: is the proposed offering produced by resources which include one or
more winning ones? The practical value of the resource-based view then lies in its description
of this necessary but not suf cient condition of success.

Third, there may well be other reasons why writers do not regard the above question as arising.
These other views, though usually unexpressed, are occasionally articulated by writers and others
and will be described and evaluated below as the paper discusses what it calls divergent views.
THE DESIGN OF A NEW OFFERING AS A COMPETITIVE STRATEGY

This paper suggests that the design of what the company will sell in future should be regarded as
a competitive strategy and that this amounts to designing individual future competitive offerings.
Such a competitive strategy would then by implication have as its unit the individual offering
competing for customers’ choices. Strategists will of course aim to design a winning offering.
That means one that will create value in excess of its cost of capital. A winning offering is thus
one with what is widely called ‘sustained competitive advantage’.
The reason for giving so much emphasis to the single offering is that, in the present authors’
view, the following hold.
(1) Financial success can be attained by a normal business only if it markets what customers will
choose and buy in suf cient price/quantity combinations. Customer choices must be a key
concern of strategy (Biggadike, 1981).
(2) Competitive positioning is a separate and independent part of the task of designing what to
sell in future. Customers’ choices depend on factors at least partly outside the seller’s control:
customers’ own preferences and rival offers by competitors. The intrinsic properties of what
is to be sold are not enough. It must also have a winning competitive position vis-à-vis
customers and competitors.
(3) Customers can only choose individual offerings, not pluralities of offerings.
That in a nutshell is the case. The three points will be elaborated on as the paper goes
through the various diverging views.
THE DIVERGING VIEWS

The suggestion that the individual offering is the object of a competitive strategy and, therefore,
the unit of that strategy is rarely aired and on those rare occasions resisted, particularly by writers
on strategy. This paper identi es ve types of diverging views, which are summarized in Table 1.
As this issue of the unit has had little public discussion, only a few of these diverging views are
explicitly stated in the literature, usually in passing. The others appear to be implied or have
surfaced in conversations with academics and practitioners.
TABLE 1. Five diverging views
Description Focus Some proponents
Competitive positioning is not Internal management and Hamel and Prahalad, Grant,
needed separately from technological innovators innovation school and
developing capabilities and some managers
resources
Offering-centred view unbalanced ‘Balance’ Finlay (2000)
between demand and supply
sides
Offering-centred view too Practical control Managers and some
complex to apply academics

Competitive positions for rm/ Firm/SBU within ‘its’ market Porter
SBU, not each offering
Customers sometimes choose Brand, range or reputation Marketers with special
rm/SBU interests
Diverging view 1: competitive positioning is not needed separately from

developing capabilities and resources
This view that the competitive position of an offering is not necessarily a separate issue from the
capabilities of the selling company or SBU is probably held by many of the writers who simply
ignore the issue. However, sometimes this view is more positively stated.
Grant (1991a, 1996) ascribed the ascendancy of the resource-based view inter alia to the greater
stability of a rm’s resources and capabilities than the state of ux of modern external
markets. Grant (1996) also cited Prahalad and Hamel (1990), who recommended that rms with
a capability for ‘inventing new markets, quickly entering emerging markets, and dramat-
ically shifting patterns of customer choice in established markets . . . are the ones to emulate’
(p. 80). The paper will presently discuss that view. However, Grant (1991a, 1996) was claiming the
superiority of supply-side strategy formulation, not just for these higher level capabilities, but
also for the winning resources described by resource-based view proponents such as Barney
(1991, 1995) and Peteraf (1993a). Winning resources tend to be lower level resources
(Scarbrough, 1998; Rouse and Daellenbach, 1999) that enable individual offerings to generate
value.
Grant (1991a, 1996) and others have therefore made a much wider and indeed general claim.
In their view a strategy focusing on resources or capabilities is more likely to succeed than one
that also focuses on offerings and their relative attractions to customers. Resources effectively
take care of competitive positioning and represent a suf cient focus for the strategist. Priem and
Butler (2001a) criticized this approach and so did Barney (2001).
It is possible that some of the resource-based view supporters who do not mention the issue of
positioning offerings may hold that same view in linguistic form, de ning a market success as
the outcome of a superior corporate competence. Similarly, if a company with a unique ability
for producing and selling superior typewriters nds that typewriters have been superseded by
word processing personal computers, its winning competence is with hindsight rede ned as
a losing one.
In contrast, Prahalad and Hamel (1990) and Hamel and Prahalad (1994) may have been making
a less universal claim. They seemed to focus mainly on those large and prominent companies,
the technological or other lead of which, coupled with their ability to keep maintaining that
lead, confers on them so great a monopoly that detailed customer preferences or moves by
competitors have no realistic chances of denying them nancial success. Canon’s technical
lead apparently enables it to create value irrespective of changes in customer preferences or
competitive countermoves. The discovery of a drug for curing human immunode ciency virus
might be another example. This reason for ignoring the distinction between company/SBU and
offering is therefore pragmatic. If there is no practical point in the distinction, why make it?
That view seems persuasive in part. Where a company’s technical lead is so great as to confer on
it a suf cient monopoly, the need for attending to the competitive positioning is much less. Yet
even large technically dominant rms need to be cautious. First, will their advantage persist long
enough to recover the cost of capital? Second, are no shocks possible from customers or from
unexpected new entrants, perhaps from a different industry?

However, the main problem with this relatively small if prominent sample is its unrepresentative
nature. Neither large companies nor technological leaders are representative of business in
general. These writers do not of course claim that their samples are representative of all business.
The risk is more that others come to assume that they do. Most managers are in small and far
from leading edge rms. However, the present authors readily concede that this exception to the
need for studying customer reactions is at least theoretically possible if perhaps rare in practice.
Hamel and Prahalad (1991, 1994, pp. 73–105) stressed the bene t of a capability for
designing market-changing offerings, but not even here did they allot an independent role
to exogenous developments in customer markets. Their focus was still on the capability or
competence. This is explicit in their book Competing for the Future: ‘It is a view of strategy that
recognizes that competition for core competence leadership precedes competition for product
leadership’ (Hamel and Prahalad, 1994, p. 23).
However, the more universal version of this divergent view is that of Grant (1991a, 1996) and
others. It is common ground that winning resources and corporate competences have a very
potent in uence on how the offerings are positioned. Yet it will rarely be the sole in uence
and in many, perhaps a great majority of cases external factors such as customer preferences
and the actions of competitors have at least equal in uence. Moreover, even where the internal
features have long been dominant, there is always the risk of external shock upheavals in
the market. The typewriter was such a case, as was the swing in sentiment against fur coats.
The fact that customer markets are in a state of ux, as Grant (1991a, 1996) said, should cause
strategists to pay more attention to them, not less. Customers are, after all, the ultimate arbiters
of success.
Diverging view 2: offering-centred view unbalanced between demand and

supply sides
Finlay (2000), who regarded the business or SBU as his main unit of analysis, articulated this
diverging view. Finlay (2000) was commenting on Mathur and Kenyon (1997), who had not at
that stage clari ed that an offering-centred usage of ‘competitive strategy’ was not the only legit-
imate usage of that expression. Their second edition spelt out that an investment by a company
or SBU in better capabilities and resources could also be validly described as both strategic and
competitive (Mathur and Kenyon, 2001). Hamel and Prahalad (1994, pp. 23 and 200–1) also
referred to these two views of competitive strategy.
Finlay (2000) argued that to make the offering the unit of competitive strategy gives too
much weight to external factors, such as the reactions of customers and not enough to internal
ones.
Finlay (2000) used a second argument that the offering-centred view implies a belief in ‘a
marketing strategy decoupled from the rest of the business’ (p. 175). He evidently regarded the
offering and how customers view it as a functional marketing issue. He denied the validity of
functional strategies.
However, his main thrust was aimed at the lack of balance, the ‘undue emphasis’ on
the external side. Yet there need be no rivalry between (1) designing a new offering and its
competitive position and (2) improving the capabilities of the rm or SBU. Both can be validly
described as different kinds of competitive strategies.
Second, there is a need for distinguishing between (1) what unit is to be designed and (2)
how that unit is to be designed. The answers are (1) that the unit should be the offering and (2)
that the process of designing a new offering requires both the deployment of the seller’s winning
resources and a winning competitive position. Both elements are needed in order for an offering
to generate value. It is in fact not easy to see how an approach that ignores customer reception
can be called balanced. This paper is not biased in favour of a marketing approach. Instead, it sees
the strategic task as encompassing both the demand and the supply side (Priem and Butler,
2001b, p. 64).
Day (1981) may super cially have appeared to raise the same question about the appropriate
unit. He concluded there that both (1) the top-down viewpoint of the selling company or
subunit and (2) the bottom-up perspective of the differences seen by customers within a given
‘market cell’ need to be heeded (Day, 1981, p. 290). The bottom-up approach tends to suggest
that markets should be de ned for the lowest possible subunit of the company, the
product market unit. On the other hand, the top-down approach suggests a de nition at a
higher level in the company, where common resources may be held. He thus effectively
recommended a balance between demand and supply factors. This might be thought to be at
variance with the view taken in this paper.
However, Day (1981) was answering a different question from the one here. His paper
effectively analysed the question of the scope of the company in terms of its market, which he
saw as a kind of customer catchment area. Should the market be de ned collectively for the
whole company or at progressively smaller levels of subunits of the company? This paper is
asking whether what to sell in future should concern (1) any organizational unit, large or small
or (2) whatever customers actually choose or reject.
Day’s (1981) question and the question being asked here clearly cover some common ground.
However, the difference matters and it can be illustrated in two ways. First, Day’s (1981) smallest
‘unit’ was the product market unit, which he saw as the smallest possible organizational unit of a
company. However, a product market unit may well contain many offerings and the individual
offering is the unit that this paper is recommending should be designed. This paper’s ‘unit’ is
not an organizational unit of the company. Second, this paper suggests as its test that it must
be something the price of which customers compare with competing substitutes. Day (1981)
did not need that test, precisely because that is not the question he was addressing. He asked for
how large or small a part of the company the market should be de ned. This paper’s question is
a qualitative question, about the kind of unit to be adopted, a question that, in the present
authors’ view, is incompatible with the concept of balance. Draught beer can only be sold in
either imperial or metric units: there is no halfway house between them. In contrast, Day’s
(1981) question was a quantitative question, where compromise or balance was perfectly
appropriate.
What should in the present authors’ view be discussed is whether the design of new offerings
is a strategic task or not. If it is, then the offering is by de nition its unit. What can therefore be
questioned is whether the design of future offerings can be properly called a strategic task.
Usages of words are perhaps not always of absorbing interest. However, it seems clear that the
design of new offerings is a matter of prime importance in small businesses. Its importance is
most likely to be called into question in some of the very largest multi-offering companies, but
even among those companies few can afford to neglect it.
The question might also be raised of the relative importance of (1) designing offerings and
(2) investing in corporate capabilities and resources. Here there may be no general answers.
Capabilities are a much more decisive issue in a pharmaceutical giant than in a corner store. On
the other hand, it may be at least arguable that issues outside the seller’s control, such as the
reactions of customers and competitors, have a certain logical priority over matters internal to
the seller. A company can structure and train itself to meet market circumstances. It may have
rather less power, to put it mildly, to do the reverse, i.e. to change the position of external parties
to suit its own internal strengths and weaknesses.
Finlay (2000) presented his diverging argument in terms of costs and prices. That aspect of his
argument is discussed separately below after the discussion of the ve types of diverging view.
Diverging view 3: complexity

Strategy is widely seen as a responsibility of senior management, strictly of the chief executive.
In other words it is a task for the few and offerings can be very numerous, as Anderson et al.
(2001) illustrated. How can a few top people take charge of such a multitude of strategies?
Nor is complexity just a problem of large numbers. A Nestlé box of chocolates can be two
separate offerings in Switzerland and the UK because, even if the box is physically identical in
both countries, it has different competing substitutes in each of them and is therefore differently
positioned. Quite possibly Nestlé would have to introduce either both offerings or neither
if sales in just one country on its own would not yield adequate economies of scale. If so,
the competitive prospects of each would still need to be studied separately because they are
differently determined. However, the decision whether to go ahead must be taken for the two
offerings jointly.
There is no denying the gravity of this practical diverging view, but the dif culties are not
insuperable. Mathur and Kenyon (2001) suggested that each offering should have a sponsor, that
this sponsor should retain continuity of responsibility after a strategy is adopted and that sponsors
could take on a number of offerings or strategies and be responsible to unit managers. In this
way the strategy function can be delegated to a certain extent, as long as top management retains
the overall power for approving strategies and, in particular, for allocating nancial and
non- nancial resources to them. As it seems that successful offerings are more likely to be
designed by managers close to the customer, such managers can become sponsors and then
remain responsible for implementing. At the design stage top management would have to
approve the nance and other resources. At the implementation stage the SBU or pro t
centre through its sponsors can and should take full responsibility and be accountable to top
management. These structural complexities should be much more rare in small businesses.
Sponsoring is neither an easy nor a low-cost solution, so the case for strategically designing
individual offerings needs to be a strong one. This paper strives to provide it by stressing the
dangers of neglecting customers and their preferences and the need for shaping the internal
environment so as to succeed in the external environment.
It would certainly be convenient and tidy if one and the same unit could meet the needs of
accountability and of competitive strategy, but unfortunately that circle cannot be squared, as the
case of the box of chocolates illustrates.
Diverging view 4: the company or SBU is what has a competitive position

Traditional micro-economics began by describing the single-offering ‘ rm’ and for the most
part has not changed that simple language with the advent of the multi-offering rm. Hence,
when Porter (1980), Grant (1997) and others wrote about positioning the rm, they appeared to
imply that what has a competitive position is not the individual offering, but the company or
SBU. In his treatment of concepts such as differentiation Porter (1980) may have had in mind
what customers buy rather than the company/SBU, but he certainly did not explicitly make that
distinction. Some of his language was hardly that of someone positioning just individual
offerings. ‘Sometimes a rm can successfully pursue more than one [of the three generic
strategies] as its primary target, though this is rarely possible’ (Porter, 1980, p. 35). In addition,
one of his tables (Porter, 1980, pp. 40–41) suggests that, in his view, a competitive strategy
determined the internal con guration of the rm/SBU for facing its markets and treated its
market reception as an outcome and a test of success. His main thrust seemed to be the question
‘What should the company/SBU do to compete?’
Positioning has been frequently discussed by marketing writers such as Trout and Ries (1972)
and Hooley et al. (1998) and by strategy writers such as Saloner et al. (2001). None of these
claimed that customers could choose the company/SBU, but neither did they discuss whether
customers could choose the company/SBU. In any case, SBUs may well be where, under the
authority of the chief executive of cer, strategies for offerings are best devised and managed.
Day (1984) and Cravens and Lamb (1985) discussed that issue of the location of strategic
decisions.
Those with this diverging view seem to agree that competition has to be either on price or
by differentiation (Saloner et al., 2001) and, therefore, in terms of how customers choose. On the
other hand, they appear to treat that choice as one for the whole company or SBU, not for each
offering.
In fact, Porter (1980) may even have been implying what might be called a uniformist view,
i.e. that all the company’s offerings have to be tarred with the same brush of differentiation or
cost leadership and that the same company or SBU cannot comfortably market offerings of both
kinds.
There are two dif culties with this view. First, there are many examples of companies or
SBUs that do in fact successfully market both kinds of offerings with some success. In motor
vehicles there are the Ford Fiesta and Puma and in air travel KLM and the low-cost
version Buzz. The measure of differentiation is in terms of customer perceptions, not internal
efforts: the Ford Fiesta may appear largely undifferentiated from its many competitors, while
the Puma version of the same model may however be seen as quite differentiated from its
fewer rivals. The second dif culty is more important. Differentiation is almost by de nition
not a uniform concept. Each offering is differentiated in a unique way, by different attributes
and with different intensities in each case. A large brewery’s various bitter ales will be differ-
entiated from their rivals in alcoholic strength, sugar content, distinctive avours, advertised
lifestyle attributes and no doubt other dimensions. Competitive positioning is not a tar with
the same brush yes/no decision for the whole rm or SBU, but a separate task for each
offering.
Diverging view 5: customers sometimes choose the rm or SBU, not the

offering
The last diverging view accepts the need for designing what customers are intended to choose
and the need for positioning it vis-à-vis customers and competitors. It denies only that what
customers choose is invariably the individual offering. The speci c exceptions to which these
critics refer are (1) brands, (2) ranges of offerings and (3) the reputation and standing of the
company.
The argument about brands is that the customer chooses Gucci or Hotpoint or Sony or
Gillette and, therefore, is choosing the brand and, thus, the company that owns the brand and
not the individual offering.
The range of offerings is the second version of this view. Customers often nd it attractive
to choose a range of offerings from the same company because the company has made
them jointly attractive. Hotpoint offers a specially discounted servicing plan to customers
who have a number of Hotpoint domestic appliances, such as a washing machine, drier, cooker
and dishwasher. There are real cost savings if a single service engineer can service several
appliances in one visit, savings that can be passed on to the customer. The customer also saves
his or her own time and disturbance by having a single visit from a Hotpoint engineer from
time to time, rather than several visits by engineers from different companies. Similarly, an airline
may nd it cheaper and more convenient to buy its whole eet of aircraft from one
manufacturer (Turner, 1997). It will bene t from savings inter alia in training costs, spares
inventories and servicing costs. Are the customers in these cases not choosing the company
rather than the offering?
The third case of reputation and status is again similar. Customers may be swayed by
the reputation or nancial solidity of a well-established selling company. They might feel less
con dent about a smaller or less well-known business. Customers may feel reassured by the
natural reluctance of the well-established company to risk its reputation or solvency by sailing
close to the wind or acting unethically. This comfort factor is most in uential, for example,
in professional services where customers have dif culty in assessing quality for themselves, or
in construction contracts with long lead times between purchase and completion or in some
developing countries where customers may feel more secure with offerings from reputable
international companies.
In the 1980s the Tata name was helpful in selling both trucks and hair oil in India. Similarly,
warranties and undertakings of after-sales support are much more credible when given by
reputable organizations than by companies the very survival of which may be in doubt.
Similarly again, the prepaid phone card is more acceptable from a reputable company than from
a relatively unknown rival.
Again, is it the company that people choose in such cases?
The general answer to these arguments is that, in all such cases, the brand, the bene ts of
the range and the comfort factors are not what customers are choosing, but attributes that
powerfully in uence their choices. This is best demonstrated by the fact that, when customers
choose, they decide whether the price is worth paying and the brand and other attributes have
no prices. Only the offering has a price.
Brands are in any case seldom the decisive attribute that sways choices. In a washing machine
these might be programme options, ease of operation, noise level and the model’s track record in
damaging fabrics. As long as the brand is only one of several factors heeded by most choosing
customers, the brand is just that: an important choice-swaying attribute of the offering (Keller,
1993). Customers choose neither the brand nor the company that owns it. To sum up, it is not
the brand that competes for customer choice, but a branded offering.
The word brand is being used here in the usual sense as something that identi es a given
seller’s offerings (Aaker, 1991). If writers de ne a brand much as an offering is de ned here
(De Chernatony and McDonald, 1992; Hankinson, 2000) they would presumably not use the
brand as an argument for making the company or SBU the unit of competitive strategy.
As a brand has no price, it is dif cult to see how customers can compare and choose it.
Customers have to evaluate whether they prefer a Hotpoint washing machine at £400.00 or
a Bosch machine at £450.00. The two machines are not exactly alike, but have different
attractions and drawbacks and customers may not necessarily go for the cheaper machine.
Customers ask themselves which machine is better value for money. Non-price features may be
very important, but it is hard to see how price can be out of the picture. Customers will part
with purchasing power and will weigh up how much they want to pay for what bene ts. The
simplest refutation of the proposition that customers choose the company is that neither the
brand nor the company nor the SBU or other business unit or pro t centre has a price.
Competing offerings have prices, whereas companies, parts of companies or brands do not have
prices in this context. The question here is about Bosch washing machines, not about Bosch
shares in the stock market.
The same test can be applied to a range. Once again, all these incentives for the customer to
buy all appliances from Hotpoint or all aircraft from Boeing are an attraction of those other
offerings that the customer did not buy originally. However, it remains those other offerings that
customers may or may not choose, not the company or SBU. The bene ts of buying a range
from the same company are an attraction of each of the offerings in the range. The offerings
each have a price that customers can evaluate, whereas the range has not. It is still the offering
that is chosen.
In any case, very often the bene ts of the range do not prevail. Thus, in August 1998 British
Airways, which had previously stuck to Boeing planes, ordered a number of planes from
Airbus for the rst time. Similarly, many Hotpoint customers buy non-Hotpoint dishwashers or
cookers. The range, like the brand, is only one of many attractions.
Nor is the reputation and status case different. The better standing of a larger, more solid
company such as Tata is a powerful attraction of the offering, but only the offering has a price
and only the offering is chosen. Tata’s reputation and status are again only one of many
attractions, though sometimes a very important one.
To sum this up, it is dif cult to see how these cases amount to an exception to the rule that
the offering is what customers choose, with an eye on its relative attractions and its price.
Finlay (2000) on costs and price

Finlay’s (2000) diverging view (view 2 in this paper) about the lack of balance in the offering-
centred approach to competitive strategy was stated as follows.
The view that competitive strategy equates to offer strategy emphasises the offer value above the offer
price. While the offer characteristics are speci c to the offer, the offer price isn’t, since the offer price
depends on the underlying cost base of the business, not simply on the direct costs that can be associated
with the particular offer. To concentrate on the offer to the relative downplaying of the business as a
whole puts an undue emphasis on one side of the value-for-money equation – on the external where
revenues are generated, and downplay the internal, where costs are incurred. Competitive strategy
requires both sides to be considered together (pp. 174–5).
These words make or imply at least three very important points that should command general
assent.
(1) Indirect costs are usually common to more than one offering. Hence, one offering is an
inconvenient unit of strategy.
(2) An individual offering has its own non-price characteristics.
(3) The strategist must consider the external customer side and the internal cost side together.
This applies despite the asymmetry between widely shared indirect costs and the offering-
speci c characteristics that sway customers.
More controversial is Finlay’s (2000) contention that these considerations make it imperative
to adopt the ‘business’ as the unit of competitive strategy. His argument seems to hinge on
a critical characteristic of the offering: its price.

There are a number of dif culties in what Finlay (2000) had to say about price and
costs.
(1) Finlay (2000) stated that ‘while the offer characteristics are speci c to the offer, the
offer price isn’t’ (p. 174). Neither of these points is free from dif culty. Customer-
swaying characteristics such as brand, seller’s repute and possibly servicing or credit
arrangements are or can be shared with other offerings. In a company transacting both
household and motor insurance, both offerings may share the same customer-friendly
call centre. It must now be added that each of the company’s offerings has a separate price
from all others, even though that price may be very indirectly and marginally in uenced
by costs shared with other offerings. The customer is aware of the output features of
the offering, which include the price. The customer’s decision, as Finlay (2000) stressed,
concerns value for money. For example, offering A is 10% more expensive than its com-
peting substitute B, but do the advantages of offering A’s distinctive features outweigh
the 10% premium in its price? The customer sees a price that is very much speci c to the
offering.
(2) Finlay (2000) appeared to imply that price depends just on direct and indirect costs, not on
the prices of competing substitutes. It is in fact not common to nd instances of cost-plus
pricing. In modern developed economies it is likely that more sellers are price takers than
price setters.
(3) In any case, even unit costs do not entirely depend on factors internal to the company. Often
they depend quite critically on volumes and market share and to that extent therefore on the
reception of the offering by customers.
The discussion here is about designing a new future offering, not the pricing of an existing
offering. A careful strategist might arrive at the future price of an offering after assessing the
future prices of competing offerings, some of them not yet on the market. They might prepare a
schedule of prices at different volumes and unit costs. If no price/volume alternative gives them
a chance of beating the cost of capital, they will reject that particular version of the offering and
redesign it. They would presumably not plan to raise the price to a level where lower sales
would give their company an even worse return. It is not easy to see how the cost-plus model
could help this process. Costs have only a limited in uence on the design and choice of a future
offering and in normal competitive conditions even less on its price.
This paper has discussed Finlay’s (2000) points about prices and costs separately from his main
point about balance (divergent view 2) so as not to distract from that serious issue.
Why is the offering-centred view neglected?

Above the paper asked why the question of the unit receives so little attention. This is now
narrowed down to examining why the case for one of the choices, that of the offering, is
neglected. This paper has endeavoured to state the views for and against the offering-centred
view and to explain why in the present authors’ view the case for it is the stronger. It might be
worth suggesting a few reasons why the case for the offering is so widely overlooked.
It seems possible that a bias in favour of the company or SBU may come from the fact that
researchers are more likely to investigate large businesses than small and within larger business
interview senior rather than more junior managers. In particular, consider the following.
(1) Researchers nd it easier to look at large rather than small businesses because each larger
one represents a larger proportion of the whole business world, because their managers are
more accessible and because their annual reports contain more useful data and are publicly
available. Similarly, other published statistics are more likely to be collected from larger
businesses.
(2) Larger companies are more likely to employ external consultants.
(3) Senior managers are easier to contact than middle managers, but are more concerned with
issues affecting the whole company or SBUs than with individual offerings.
(4) Many managers are more comfortable with internal issues that they can control than with
issues concerning customers and competitors whom they cannot control.
(5) Issues concerning offerings are more commercially sensitive than matters of internal
control.
These suggestions may be worth investigating. However, a robust theory of a topic such as
competitive strategy should surely apply to the smallest as well as the largest business, particularly
in this twenty- rst century in which more and more business is conducted in small and even
self-employed units.
SUMMARY
The paper can now summarize how the logic of this issue can be seen. It is suggested that, if
value is to be created in customer markets, then the central concern of strategy has to be with
what customers choose to buy from this company or alternatively from competitors. It is
dif cult to see how what customers select or reject can be anything other than the offering or
how it could be the company itself or its SBUs, for example through its reputation or brand.
The test is that customers have to compare prices as well as non-price attributes and only the
offering has a price. An attractive range of offerings, a loyalty scheme or a comfort feature which
that company offers are simply attractive attributes of an offering, which may in some cases sway
many customer choices. These attractions can be very important in causing the offering to be
chosen, but do not appear to turn the company or SBU into what is chosen. Any model of
competition or competitive strategy that takes the multi-offering company – the ‘ rm’ – or the
SBU as the unit of strategy is unlikely to account for the facts of customer choice.
The task of making the company or SBU and its capabilities more competitive can also be
legitimately described as a competitive strategy. However, a logical case can be made for
regarding the design of future offerings as more fundamental. The competitive market
environment is much less controllable than the internal features of the company. Customers and
competitors can shift their positions autonomously. Competitive positioning is unavoidably a
prime strategic topic, because customer choices have a critical impact on success and the
company can only address them one offering at a time.
All this describes what competitive strategy should examine. When it comes to how a good
offering is designed, resources and competitive positions are equally indispensable contributors.
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Keynon, A and Mathur, S, S (2002) The Offering As The Strategic Focus

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Journal of Strategic Marketing

The offering as the strategic

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The offering as the strategic focus

INTRODUCTION: THE HISTORY AND THE LITERATURE

WHY IS THE QUESTION OF THE UNIT OF COMPETITIVE STRATEGY SO

of this necessary but not suf cient condition of success.

THE DESIGN OF A NEW OFFERING AS A COMPETITIVE STRATEGY

THE DIVERGING VIEWS

TABLE 1. Five diverging views

Description Focus Some proponents

complex to apply academics

Diverging view 1: competitive positioning is not needed separately from

unexpected new entrants, perhaps from a different industry?

Diverging view 2: offering-centred view unbalanced between demand and

Diverging view 3: complexity

Diverging view 4: the company or SBU is what has a competitive position

Diverging view 5: customers sometimes choose the  rm or SBU, not the

Finlay (2000) on costs and price

a critical characteristic of the offering: its price.

Why is the offering-centred view neglected?

In D. Iacobucci (ed.), Kellogg on Marketing. New York: Wiley, 330–65.

Grant, R.M. (1991b) Contemporary Strategy Analysis. Oxford: Blackwell.

Piercy, N. (2001) Market-led Strategic Change, 2nd edn. Oxford: Butterworth-Heinemann.

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of this necessary but not suf cient condition of success.

Diverging view 5: customers sometimes choose the rm or SBU, not the