Nasser Kokeyo

Formulating a Competitive Strategy

A proposal for a micro sized enterprise in Logistics and
Taxi Business
Metropolia University of Applied Sciences

Master of Business Administration Degree

Business Informatics

Thesis

26.09.2020
 Abstract

Nasser Kokeyo
Author(s) Formulating a competitive strategy: A proposal for a small
Title sized enterprise in the Logistics Industry

Number of Pages 56pages + 1 appendix

Date 25 October 2020

Degree Master of Business Administration

Degree Programme Business Informatics

Instructor Dr. James Collins, Senior Lecturer

In an increasingly changing business environment, there is the critical need for firms to
create and sustain a competitive edge in the market to realize profitability and promote long
term growth.This study was necessitated by the need to formulate a competitive strategy
proposal for a small sized company within the logistics industry in the Helsinki Area.The
company is struggling as a result of increased competition occassioned by deregulation and
the ever changing business models.There is an urgent need for a well formulated and
executed strategy to drive growth and provide long term direction for the firm.Many small
sized organizations struggle to create effective strategies to compete in markets dominated
by the large companies.

The objective of the study is to formulate a competitive strategy for the case company
through the use of applied research methodology. Inorder to achieve this objective, there is
the use of a qualitative method of data collection through semi-structured interviews of
various stakeholders from the chosen case company. Through the use of the Current State
Analysis, the company’s current strategy’s strengths and weaknesses are identified to build
a proposal with the aim of creating and delivering the new competitive strategy. Thereafter,
the first proposal is validated in a workshop setting with other company stakeholders to
develop it further or make the necessary changes and make the final recommendations to
the management.The study, based on the findings of the Current State Analysis, will be on
the various competitive strategies especially the differentiation strategy, an analysis of the
industry structure using the Porter’s Five Forces Framework, execution and implementation
of the chosen strategy to effectively highlight the process of strategy formulation until the
implementation to achieve the desired results. From these concepts and best practices, the
research work formulates the competitive strategy, namely, the differentiation strategy to be
used as a strategic tool to achieve better results.

The outcome of this study is a proposal that recommends to the managment of the case
company, a new competititive strategy to use in its operations as a strategic tool towards
achieving growth and profitabilitity.The main findings used to create the final proposal is that
a differentiation strategy could be the most sustainable option to choose from as compared
to the price leadership or the focus strategy .Differentiating factors such as service and
operational excellence, creating long lasting customer relationships and an innovative cus-
tomer experience in the market are highlighted as the main differentiating factors especially
in the service industry.

Keywords Competitive Strategy, Differentiation, Strategic positioning, Ser-

vice Quality, Customer Experience
Contents

1 Introduction 1

1.1 Business Context 2

1.2 Business Challenge 3
1.3 The Objective and Expected Outcome 4

2 Research Methods and Materials 4

2.1 Research Process 4

2.2 Research Approach 6
2.3 Research Design 7
2.4 Data Collection and Analysis 8
2.5 Validity, Reliability and Credibility 13
2.5.1 Validity 13
2.5.2 Reliability 13
2.5.3 Credibility 13

3 Current State Analysis and Interview Results 14

3.1 Case Company Current State Analysis 14

3.1.1 The Current Customer Service Offering 15
3.1.2 Service quality and values 15
3.1.3 Low cost strategy 16
3.1.4 Customer involvement in service development and Improvement 17
3.2 Key Findings from CSA 17

4 Existing Knowledge and Literature Review 19

4.1 Introduction to Strategy 19

4.2 Levels of Strategy in an Organization 20
4.3 Types of Competitive Strategies 21
4.3.1 Cost Leadership Strategy 22
4.3.2 Differentiation Strategy 23
4.3.3 Focus Strategy 24
4.4 Competitive Advantage 24
4.5 Competitive Strategy Formulation Steps 26
4.5.1 Sources of a Firms Differentiation 28
4.5.2 The Cost of a firm’s Differentiation 28
4.5.3 Differentiation and Buyer Value 28
 4.6 The Industry Analysis 30
4.6.1 Porter’s Five Forces Framework 31
4.6.2 Value Differences and Creating Competitive Advantages 34
4.6.3 The Value Chain Analysis 34
4.7 Communication of the Strategy 38
4.8 Conceptual Framework of this Study 39

5 Formulating the strategic position plan for the company and Execution Strategy 41

5.1 Differentiation Strategy Formulation 42

5.1.1 Main Theme 1: Service Quality 44
5.1.2 Main Theme 2: Convenience of the service to the consumers 44
5.1.3 Main Theme3: Human Resource Training and Communication of
Strategy 45
5.2 Analyzing the Industry Structure for Insights to formulate Strategy 45
5.3 Strategy Implementation Fundamentals 47
5.4 The Implementation of the new Strategy 47
5.5 Summary of the Proposed Competitive Strategy for the firm 49

6 Validation of the Proposal 50

6.1 Validation by the management 50

6.2 Final Proposal 52

7 Conclusion 53

7.1 Summary of the thesis 54

7.2 Future steps and Development 55
7.3 Evaluation 55
7.4 Reliability and validity of the study 56

References 57

Appendices

Appendix 1. Interview Questions

List of Figures

Figure 1The Gate Model………………………………………………………….. 6

Figure 2 Research design of the thesis…………………………….................... 8
Figure 3The three levels of strategy……………………………………………… 21
Figure 4The generic competitive strategies……………………………………... 22
Figure 5The process for formulating a company strategy……………………… 27
Figure 6The general concept of differentiation………………………………….. 31
Figure 7 Operational effectiveness vs strategic positioning…………………… 32
Figure 8 Elements that shape industry structure: Porter’s five -Forces……… 33
Figure 9The conceptual framework……………………………………………… 36
Figure 10The Critical Success Factors in the Logistics Industry……………. 46
List of Tables

Table 1. Visualization of Data Collection for the Study ……………........... 10

Table 2. Data Sources for the Study………………………………………… 12
Table 3. List of Strengths and Weaknesses of the CSA…………............. 19
Table 4. User purchase criteria……………………………………………… 31
Table 5. Value Chain and how it creates Competitive Advantage.... …… 37
Table 6. Factors to consider in formulating a competitive strategy……… 38
Table 7. Strategy creation Vs implementation phases…………………… . 40
Table 8. Summary of the main elements………………………………….. 44
Table 9.Final Differentiation Strategy for the Case Company………….. 54
 1

1 Introduction

The purpose of the study is to formulate a strategic competitive strategy for the case
company necessitated by an increasingly challenging business environment. Essentially,
any business needs a well formulated strategy matched with an outstanding execution
to succeed. Companies are faced with the unprecedented and constant challenge of
maintaining profitability in markets that are highly competitive and in an ever changing
business environment. Industries, business markets and sectors are undergoing tremen-
dous changes as a result of technological revolutions and changing business models.
These changes challenges business leaders and strategists to find out ways to strategi-
cally lead and anticipate changes and trends in their respective industries to create com-
petitive advantage and maintain profitability. Consequently, one of the biggest questions
in the business world has always been: Why are certain companies and industries more
profitable as compared to others? Strategic planning is a tool used by managers and
business strategists for short and long-term planning to create competitive advantage
and achieve profitability.

Strategy aims at aligning company’s goals so as to create value for its customers and
other stakeholders. This is necessitated by the fact that different industries are facing
enormous transformations brought about by changing business models, technological
changes and changing customer preferences. Accordingly, Porter (1985) argues that the
essence of choosing a strategy to compete is one of the major reasons for a company’s
success or failure. Many small business fail to develop these strategies that could be the
road map to growth and profitability. Management and the whole organization need to
have a long-term action plan to create a competitive advantage in an extremely compet-
itive environment.

In modern business market place, the consumer has a variety of choices when it comes
to the buying process and decisions are made based on various factors that they con-
sider to be of value to them and also that best solve their problem(s).Therefore, any
company that aims to be a leader in an industry must confront a totally different kind of
consumer who is more demanding, usually has a number of choices and values a unique
value proposition.

In the modern business environment, companies need to develop strategies to effectively

compete in these challenging business environments. Every business manager need to
 2

answer this important question when doing strategy: What is it about your current strat-
egy which will make customers choose you over the competitors? Companies, according
to management gurus must strive to be different in a way that is viewed by the customers
as pleasing and of value to them.

Faced with increased competition and a rapidly changing business environment

occasioned by technological advancement and various other factors, companies are
under immense pressure to formulate ways to compete in their industries. Therefore, to
achieve sustainable growth and enhance their competitiveness, a company needs to
carefully choose a suitable competitive strategy to compete in an industry. It is notable
that the uniqueness that companies strive to achieve is important since trying to be
everything for everybody results in a compromise of what makes a company different.
Consequently, organizations must genuinely strive to unique position their products and
services from their competitors. The modern consumer demands to be offered a unique
selling proposition. The generic competitive strategies will be discussed to find the best
proposal that can be adopted by the case company to achieve superior performance and
create a competitive advantage in the market.

The study was necessitated by the need for a new way to compete in an increasingly
competitive environment by a small sized enterprise operating in the taxi business and
other areas of logistics. To effectively compete and create more value for the customers,
it is crucial to create a distinctive competitive strategy and understand the customer
needs thereby increasing profitability by having a competitive advantage in the market.

1.1 Business Context

Finland compared to many other countries around the world has had a tightly regulated
taxi industry over the years. However, this situation changed dramatically in the year
2018, when the industry was deregulated and new laws that govern the business were
introduced. This new initiative has opened opportunities for entrepreneurs and brought
about choices for the consumers with the objective of promoting competition and
streamlining the industry.

The new regulations along with the stiff competition in the industry highlights the need
for any company to effectively formulate a competitive strategy to gain superior
performance and realize profitability. The emergence of low-cost taxi services has greatly
 3

affected profitability for the service providers. Needless to mention, the customers will
demand more from the offerings of the taxi companies necessitating a need for a
sustainable competitive strategy to succeed in the market. Companies will need to find
ways to sustain better-than-average performance to create value and remain profitable
in the short and long term.

For the purpose of completing this thesis, a case company in the logistics and taxi
services business within the Helsinki Metropolitan Area will be used. The case company
is registered as a sole proprietorship, referred to as K-NAAN OY. The company begun
its operations in the year 2015 by an enterprising businessperson who is motivated by
the incentives of being an own boss and the relative ease of starting the business.

The case company’s main customers are B2C customers and B2B customers within the
Greater Helsinki region (Helsinki, Vantaa, Espoo and Kauniainen).Within these customer
segments, the company lacks a clear strategy on defining their profitability and how best
to serve them to create a sustainable competitive position in the industry. The firm’s
management has struggled over the years to create a strategic competitive strategy that
would drive growth and give it a sustainable competitive over its competitors.

Over the years, the company has realized growth to some extent and currently employs
a co-owner and a few other employees needed to run the daily operations. However, in
the recent years, a slump in profitability occasioned by several factors has been of
concern for the owner of the company. According to the founder, new regulations in the
industry, changing business models, tough economic conditions and lack of resources
have constrained growth. That being the case, a new competitive strategy must be
formulated to drive growth and realize profitability.

1.2 Business Challenge

Establishing a business can be easy but keeping it sustainably profitable is a challenge

experienced by many businesses in different industries. Recently, owing to the current
turbulent and rapidly changing business environment, the case company’s competitive
strategy is not yielding the expected results in terms of profitability and long-term strategy
of the organization. Consequently, the management would like to identify a suitable
competitive strategy to implement, and possible realize growth in the future.
 4

This thesis research will use data collected from an analysis of the current state of the
company’s competitive strategy, apply the use of customer insight data collected from
some of the customers of the service and best practices in literature to form a conceptual
framework. Consequently, a new competitive strategy proposal will be proposed to the
management of the company for implementation in future strategy formulation plans.

1.3 The Objective and Expected Outcome

The objective of this thesis is to propose a new competitive strategy for the case
company to create and maintain a sustainable competitive advantage in the industry.
The proposed competitive strategy is aimed at promoting growth by providing a unique
value proposition that the customers value and perceive to be different from the
competitors. This is in line with the company’s strategic plan for the next five years.
Accordingly, the expected outcome of this research study is a proposal of a new com-
petitive strategy based on reliable and valid findings from the study.

2 Research Methods and Materials

This section of the thesis discusses the research methods used in this project. It is
divided into four parts namely, the research process, the research approach and design,
the data collection and analysis and a review of the quality aspects of the conducted
research is examined.

2.1 Research Process

In order to effectively address the business challenge in the case company, it is

necessary to select the right research strategy. This is informed by the differences in the
procedures that are followed in collecting and analyzing data, nature of phenomenon
studied and interpretation. Therefore, it is extremely important to understand the
differences and choose the best method suited for a particular phenomenon (Yin
2003).The process of choosing a research approach relies on the actual problem and
the whether there exists any theory or models that explains the phenomenon (Kananen
2013:26-29).
 5

In carrying out research work, there is the use of qualitative research or quantitative
research methods. In business, the two research approaches apply case studies, action
research and design research to study a phenomenon (Kananen 2013:12).

According to Creswell (2013), the differences between qualitative and quantitative

research include the following: in qualitative research the theories are built and tested
inductively with the data collection making use of the resultant questions and procedures
for data analysis to make interpretations. Quantitative research, on the contrary, is aimed
at testing theories by analyzing relationships and variables.

In this study, a qualitative approach will be used. This required the collecting of accurate
and enough data in order to accomplish the research objective. The process involved
interviews as a source of primary data. The main source of data applied in the study was
with the management of the company, employees and some of the customers of the
service. The interviews were semi-structured and in-depth by nature. The questions were
open-ended questions with the aim of extracting the necessary information from the in-
terviewees.

According to Robson (2002), the use of qualitative data is associated with their richness
and fullness with the opportunity to study a phenomenon in a real and true manner as
possible. Qualitative research produces descriptions and interpretations of actual
behavior in specific settings through the use of linguistics symbols and stories (Cortina
and Landis, 2013).With the objective of this research in mind, a qualitative approach was
chosen since it will enable a deeper understanding of the concept of competitive strategy
within a micro sized enterprise in a context specific setting. In addition, the inductive and
qualitative nature of this research makes it possible to get in-depth answers and data
that are needed to solve the business problem at hand. Furthermore, the study is based
on a small sample necessitating an inductive approach that ensures that the researcher
gathers qualitative data that makes it possible to analyze different perspectives of the
subject that is being researched (Saunders et al., 2011).

For the purpose of completing this research, an applied development research method
will be used. An applied research is relevant in solving specific business problems or
challenges. There will be a practical outcome such as new proposal and a list of recom-
mendations to the case company at the end of the research.
 6

2.2 Research Approach

This thesis work followed a guideline based on the gate model that represents the
principal thesis sections that reports applied research used to complete the project.
Basically, the gate model consists of seven gates that begins with the definition of the
business problem/challenge, research objective and outcome. Next, the research design
that will be used is introduced and it should be logical with the business problem. The
current state analysis was created applying the use of qualitative methods of data
collection; based on interviews with the key stakeholders, reviewing the company’s
strategic plans and through observation. The conceptual framework was created by
reviewing existing literature that addresses the strengths and weaknesses highlighted in
the current state analysis. This was followed by building the proposal based on bringing
together the outcomes from the current state analysis and the conceptual framework.
The next step was the validation of the proposal in a workshop setting with the
management of the company. The gate model is illustrated in the figure 1 below.

Figure 1.The Gate Model (Collins 2019)

 7

2.3 Research Design

The study’s research design is made up of five sections. In section one, the business
challenge is introduced. Consequently, the objective and the expected outcome from the
research to be conducted is explained. This phase is important since it defines the scope
of the expected research study.

In the second section of this research, the company’s strategy current state analysis will
be explored. In this manner, it will be possible to understand the current way of
competitive strategy that is practiced by the case company. This will result in a summary
of the current positioning’s strengths and weaknesses.

The third stage, the study of existing knowledge and literature review, will involve the
study and analysis of the general concepts of competitive advantage to identify the best
practices with the aim of finding a solution to the business problem. Thereafter, these
best practices as outlined in literature review will be the basis to form the conceptual
framework for this thesis.

In the fourth part, the process of building the proposal will combine the findings from the
current state analysis and make use of the best practices from the conceptual framework
to form the proposal for the competitive strategy. In order to create the proposal, I will
interpret the data and information collected in the current state analysis and involve input
of other stakeholders especially the management of the company in building the pro-
posal. Consequently, from this process there will be the final proposal for this study done
as a co-creation with the management of the case company.

The fifth and final stage of the research will be the validation of the final proposal. This
will be done in a workshop that will consist of the various stakeholders that are part of
this research, specifically the management of the company and myself as the researcher.
Accordingly, the final version of the case company’s differentiation strategy will be
created and presented to the management for implementation. Subsequently, that will
be the end of this research process.

The Figure 1 below illustrates the research design of the thesis work. From the research
design, it can be noted that the research work is divided into five sections: scoping the
 8

thesis, current state analysis, the conceptual framework, building the proposal and finally
the validation of the proposal.

Figure 2. Research design of the thesis

2.4 Data Collection and Analysis

In this section, the data collection methods and the process of analyzing the gathered
materials are described. The data collected for this study is classified into two categories;
primary and secondary data. The primary data will be collected specifically for the
purpose of this study. On the other hand, the secondary data are those previously col-
lected by other researchers but are relevant to this study. According to Saunders et al
(2012) in business research, there are three types of interviews that can be used namely,
structured, semi-structured and unstructured interviews. The primary data was collected
through semi-structured interviews whereby the researcher presented a list of themes
and interview questions that were to be covered to the respondents. The secondary data
for this thesis is accessed from sources such as the library collection of materials, Google
Scholar and other relevant academic journals. Collecting secondary data is useful in
making analysis and that it provides comparative data against the primary data collected
(Saunders et al 2012).

Data analysis refers to the procedure that a researcher uses to present, assess and
interpret the information gathered during the collection process (Yin, 2014). Triangulation
on the other hand, refers to the process of cross checking data from different sources to
 9

come up with a more accurate outcome for a greater certainty in data collection (De
Massis & Kotlar, 2014).There exists four types of triangulation that include data
triangulation that refers to triangulation of data sources; the theory triangulation refers to
the triangulation of data set; investigator triangulation referring to the triangulation of dif-
ferent evaluators and methodological triangulation(Yin, 2014).

For the purpose of this research, methodological triangulation will be used to validate
data in the data analysis process. This was done through three data collection phases
done through semi-structured interviews, company records and by field notes. These will
be used to validate data in the analysis phase.

For the purpose of this research work, there will be three rounds of data collection stages
to be carried out. The first data collection exercise will be for the current state analysis
conducted through interviews. The data collected will be qualitative in nature. The anal-
ysis of this first round of data will form the basis for gaining a deeper understanding of
the company’s current state of competitive strategy. In addition, the conceptual frame-
work will be used together with the data findings to formulate the initial proposal for the
positioning strategy for the case company.

The second round of data collection will be useful in building the final proposal. The data
two findings are analyzed together with those from round one. In this stage of data
collection, the stakeholders’ and the researcher’s input will be required. This will be done
in a workshop setting.

The third and final round of data collection will be created when the final proposal is
presented to the stakeholders for validation. The data three will be the final for the
research process and in this regard, the outcome of the thesis work.

The table 1 below presents the various research data sources applied and the purpose
of the data collection and the analysis.
 10

Table 1. Visualization of Data Collection for the Study

Data Content Data Source Purpose of the Analysis

• Description of cur- -Interview (com- -Summary of current situa-

DATA 1 rent competitive pany founder) tion and the existing
Current State strategy used by -Interviews strengths and weaknesses
Analysis the company (Employees and of the current strategy
• Stakeholder expec- management) practiced by the company.
tation of the com- -Observation of
pany at the present the company
and in the future operations
• Analysis of chal-
lenges of the
current strategy
• Analysis of good
practices
Existing • Best practices -Literature from -Conceptual framework for
Knowledge in formulating com- books, journals, the competitive strategy
petitive strategies articles and In-
ternet sources

DATA 2 • Defined goals and - Workshop -Initial proposal of a new

Building the key processes - Interview competitive strategy
initial pro- -Conceptual
posal framework

DATA 3 • Description of feed- - Interview of the -Final proposal of operat-

Validation of back from stake- company man- ing model
the proposal holders. agement
 11

In the next Table 2 below, the selected respondents and their position and relationship
with the case company are highlighted and details of the interview such as the dates of
conducting the interview and the topics discussed are illustrated.

The first round of data collection is useful in analyzing the case company’s current state’s
differentiation strategy. As earlier stated in the previous section, it consists of qualitative
interviews and a review of the practices that the company uses to compete and offer a
unique value proposition to the customers. The interviewees were chosen based on
possessing information and knowledge concerning the company and its positioning strat-
egy. Consequently, the research’s outcome is expected to be extensive and that it se-
cures a wide objective data to be used in the analysis of the current strategy.

Accordingly, the strengths and weaknesses highlighted in the current state analysis will
be useful in building the proposal for the initial competitive strategy. In order to highlight
these weaknesses that are observed and build a broader understanding of the main
areas that are important in formulating the strategy, the questions for the interview were
drafted around the following issues:

• The company’s service offering

• Company’s main customers/segments served currently

• Current way of differentiation of its services

• Effective ways of analyzing the industry and competitors

A workshop was organized for the purpose of collecting the data for round two meant for
building the proposal. There was a total of three workshops where a new proposal for a
new competitive strategy was defined. The key stakeholders were represented, and a
collaborative work was done to come up with results that were unanimous to all those
involved in the workshop. Accordingly, the outcome was presented and documented.
 12

The third and final phase of data collection was done in a meeting with the management
of the company. The formulated competitive strategy was introduced and presented.
Consequently, it was validated and approved by the management of the company.

Table 2. Data Sources for the Study

Data type Source/Participants Topic Date

DATA 1 -Founder of the company -Internal aspect of May 2020

Current -Three current employees the current strat-
State Anal- of the company egy
ysis -Competitors,
market segments
and market situa-
tion
-Collecting future
improvement
ideas

June 2020
DATA 2 --Key stakeholders -Defining a new
CSA & Build- - Operations Manager) competitive strat-
ing the pro- -Owner of the company egy for the com-
posal pany

DATA 3 Internal stakeholders -Stakeholder July 2020

Validation of -Owner of the company feedback and im-
the proposal -Person in charge of oper- provement ideas
ations on proposal
 13

2.5 Validity, Reliability and Credibility

The selection of a suitable research design ensure that the research work is of a good
quality. The concepts of validity, reliability and credibility are used to evaluate the quality
of a research study. In this thesis, the focus will be on the evaluation of a qualitative case
study.

2.5.1 Validity

This study utilizes the gate model to provide and promote progress in the process of
conducting the research and writing the thesis. The study has been researched on by a
cofounder of the case company who understands the company operations and its
strategic plans. There is the use of data that has been gathered from various participants
but is limited to the scope of this study.

2.5.2 Reliability

The term reliability refers to the possibility of repeating the exact procedures and arriving
at the same results and conclusions (Yin 2003). In this study, the respondents were the
founders of the company and people who have a clear understanding of the operations
of the company. Furthermore, this study was conducted between the years 2019-2020
ensuring that the strategy being used by the company is still current. The data used is
relevant to the specific case company and not any other company within the same
industry or elsewhere. This thesis makes use of qualitative method of research. The
data obtained is documented, analyzed and accurately reported to ensure reliability.

2.5.3 Credibility

Since the study is qualitative in nature, the credibility is ensured by collecting enough
data that will clearly useful in solving the business challenge. According to Patton (1999),
“issues of quality and credibility intersect with the audience and the intended research
purposes”. The step of validating the mentioned business challenge, thesis objective
and expected outcome in addition to consulting with the stakeholders during the research
process ensures credibility. In addition, the research also makes use of several reference
sources and theoretical perspectives to create a credible conceptual framework to come
up with a solution to the business challenge.
 14

3 Current State Analysis and Interview Results

This section of the thesis presents, describes and analyzes the interview results from the
respondents concerning the current competitive strategy used by the case company.
First, the study presents an overview of the current state analysis. Second, the findings
of the current strategy used at the company are presented. The results of the current
state analysis are formed using the Data 1 of this research process of data collection.

3.1 Case Company Current State Analysis

This part of the thesis discusses the current strategy used by the case company. The
main objective of the current state analysis is to gain a deeper understanding of the
current strategy that the company uses to compete in the market. The insights found
from the data obtained in the current state analysis will be looked at to find the strengths
and weaknesses. The research work also uses the current state analysis to make
comparison between the current practices to the best practices found in the literature
review during the research.

As mentioned in the earlier sections, the case company has been in operation since the
year 2016.The management of the company with the help of a business consultant
created a strategic plan that is used for providing guidance and measurement of the
company’s objectives and Key Performance Indicators (KPIs). The strategic plan is valid
for a period of five years and is reviewed periodically. However, apart from the strategic
plan, the company lacks a clear competitive strategy and relies on instincts of the
management to carry out its operations. Currently, there is no clearly defined way of
running the business. Therefore, in pursuing to understand the current strategy insights,
we will seek to understand the following parameters towards creating a new strategy:

 Understand the customer more and find out the reasons they use the service and
not competitors

 Work out ways to increase profitability by improving the service, and streamlining
costs/prices

 Understand the industry structure

 15

 Insights on the reasons for success or failure of the current strategy

Many organizations fail to properly articulate the main questions about its strategy and
the way it is executed. The management needs to be clear on how they plan to create
value in the market. Moreover, they need to invest in those areas and align the
company’s services to fit with those capabilities. For the purpose of this study, the inter-
view questions were semi-structured and were explored around themes to allow for a
logical analysis towards gaining a deeper understanding of the strengths and weak-
nesses. They are summarized in the sections below.

3.1.1 The Current Customer Service Offering

In this research, the interviewees are the co-founders and employees who are directly
involved in the day-to-day running of the business. They mentioned that they have
struggled to clearly offer a unique service that rivals cannot match. There is no particular
distinctive way of standing out from a crowded and competitive market place. For ex-
ample, the founder of the company states that;

“I have realized that our service is not any different from the rivals. Therefore, competition
is fierce, and the customers cannot clearly point out anything unique about our offerings”.
This has greatly affected our profitability over the years (Interview, May 2020)

Furthermore, the company does not focus on any particular segment right now. Their
services are targeted at the mass market with a regional coverage of the “Greater
Helsinki Regions”. Consequently, from the interviews it can be deducted that the man-
agement of the company lacks insights on how to effectively serve a particular business
segment in the industry.

3.1.2 Service quality and values

The co-founder and the person in charge of strategy stressed on the importance on
customer service. The company tries to solve the problems that customers raise
promptly. However, with the emergence of new competitors since the deregulation of the
industry, many customers have complained about the deteriorating quality of services.

“Our contacts have been informed by various clients that some of the personnel have
not been providing the service in a manner that creates a lasting impression on the
 16

customers. This leads to poor reviews and ultimately customers switching to other ser-
vice providers .” (Interview, May 2020)

However, availability of the contact services is one aspect of the service that got positive
feedback and review from the customers. The quality of the contact services is consid-
ered top notch within the company. For example, in the interview with the co-founder, he
points out that;

“I listen to the clients, ask questions and put a lot of effort in trying to solve their problems.
We put the customer first and understand that they are the reason why we exist. They in
turn appreciate my ability to find an appropriate solution to their problems and value my
experience.” (Interview, May 2020)

Moreover, the co-founders have a hands-on approach to management and visits the field
to interact with the customers with a view to getting the real situation on the ground. In
this way, they can understand the customers better and experience the working
conditions of the employees;

“In most cases, our business is based a lot on personal relationships with the customers
who we serve diligently. Consequently, the clients’ satisfaction levels are high. They view
as a reliable partner in business and trust our company to deliver on their promise. Above
all, the reference we get from these clients in expanding our business has been invalu-
able during the past few years.” (Interview, May 2020)

3.1.3 Low cost strategy

The fierce battle to capture a piece of the market share and to retain customers involves
several tactics that are employed by the company. The case company currently pursues
a low-cost strategy as a differentiator from the competition offering similar services.
However, it also noteworthy that they are “stuck in the middle” since they also practice
the strategy of high-quality service and creating long lasting personal relationships with
the customers. According to the co-founder in charge of strategy;

“We have noticed several customers switching from us to larger competitors over the
years specifically because of the lower service prices. The industry is competitive since
the larger firms enjoy economies of scale and have more resources which we lack now.
 17

They can offer lower prices in most cases because of their costs that is to our disad-
vantage.” (Interview, May 2020)

3.1.4 Customer involvement in service development and Improvement

Apart from the extraordinary support offered to the case company´s customers, they are
also invited to give feedback on how to develop the service further and give suggestions
for improvement;

“We value our customers’ opinions and encourage their feedback to develop our service
and make necessary improvements. We have customers who have been with the com-
pany from its establishment. They have grown with us over the years and they give us
requests on how to improve on the service and we are actively involved in co-creation
with our clients over the years. Our services are tailored to the needs of our prospective
clients. This is another differentiating factor for our company.” (Interview, May 2020)

In addition, the firm tries to differentiate itself in the marketplace by meeting the individual
needs of its customers. The fact that each client has a different characteristic means that
their requests and needs also varies greatly. The co-founder of the company stated that;

“Currently, it is a company practice that when we receive a customer offer for our
services, we have a conversation with them to tailor the service to their unique needs
and come up with the best possible solution to solve their problem. The tailored move
offer is sent to the customer promptly.” (Interview, May 2020)

3.2 Key Findings from CSA

According to the findings on the data from the interviews, it can be observed that the
case company has issues with its current way of positioning itself and does not effectively
try to be different from its competitors in a way that would greatly be useful in creating a
lasting impression with the customers thereby improving profitability. To begin with, there
has been a lack of clear definition of the value proposition and positioning strategy com-
pared to the main players in the industry. In addition, it can be deducted that it is partic-
ularly difficult to differentiate this kind of service in an industry that is dominated by too
many competitors.The case company clearly does not integrate its true competitive strat-
egy in its daily operations. There is a lack of execution of the mentioned strategy creating
a situation whereby the customers are not able to see any unique value that is offered
 18

compared to its competitors. Ideally, a great strategy does not separate the daily opera-
tions and the strategic.

Currently, the company focuses on price driven strategy and building strong relationships
with its customers. Furthermore, there is a great commitment towards the increase of
quality of service and creating more value to the customers. That being the case, they
can increase customer satisfaction creating a source of differentiation as was explained
by the co-founder of the company.

The Table 3 below, highlights the strengths and weaknesses of the current competitive
strategy as found in the current state analysis in the case company.

Table 3. List of Strengths and Weaknesses of the CSA

STRENGTHS WEAKNESSES

Investing on training for the employees The prices set are too inflexible

Constant innovation in the industry pro- Concern over quality of the service as
vides a good base to differentiate from demonstrated by the customer feedback
competitors

Strong relationships based on mutual Lack of enough customer insight to drive

trust with several customers growth

Personalization of the services to meet Inadequate communication of the strat-

customer requirements egy to the employees
 19

In this study, from the evaluation of the above strengths and weaknesses, it can be
derived that the business needs to systematically align it strategy with the changing
business requirements and address the weaknesses highlighted in the table 3 above to
create a sustainable competitive advantage in the market.

4 Existing Knowledge and Literature Review

In this section, literature review related to the topic competitive strategy and how to
create competitive advantage will be discussed. First, the general concept of competitive
strategy will be explored to get a better understanding of the subject. In the second stage,
the generic competitive strategies as presented in literature is reviewed. Finally, the
conceptual framework based on the literature review is presented in this thesis.

The weaknesses found in the current state analysis of the case company’s competitive
strategy such a lack of a clear positioning strategy, and effective execution of strategy
will be looked at in literature to look for solutions for building the proposal towards
formulating the positioning strategy for the case company. In order to effectively address
the business problem mentioned, a deeper look into the literature relating to this topic is
explored. I reviewed literature on business strategies including the differentiation
strategy, low-cost strategy and the focus strategy. Secondly, the issue of competitive
advantage created through service quality, customer loyalty and service convenience
are discussed.

4.1 Introduction to Strategy

Strategy is a crucial subject for any organization. In these modern times, it is about the
success or failure of any kind of organization be they big or entrepreneurial start-ups.
Porter (1996), defines competitive strategy as creating a competitive position or a
number of these competitive positions that results in a sustainable and superior financial
position. Strategy is also defined as the long term objectives of an organization which
creates advantage in a rapidly changing business environment through the use of
competences to achieve value in the market (Gerry, Scholes and Whittington 2009)
 20

The ever changing business models and market trends requires business managers to
create concrete business strategies that will give their organizations a sustainable
competitive advantage over their rivals. There is an increasing need to formulate
strategic business strategies to effectively compete. Mandy (2009) states that “a firm
needs business strategy to outline the fundamental course of action that they plan to
follow in order to achieve their objectives”.

According to Barney (1991), a firm’s competitive advantage is measured by the value it

creates by implementing a strategy that is unique. This can be done by utilizing its
capabilities, competences as well as resources matched with the business opportunities
provided to create a sustainable competitive advantage.

In a nutshell, therefore, we can deduct from the definitions above that strategy seeks to
address the long-term direction of a firm. Secondly, strategy should have a scope-the
areas of activity by the company should be defined. Thirdly, the strategy formulated
should give the firm a competitive advantage over its competitors. The fourth principle
about strategy is that it should fit with the firm’s business environment. Fifth, it should
make use of the company’s competences and resources. Last but not least, the strategy
should create value and fulfill the expectations of the stakeholders within the company
and in the industry.

4.2 Levels of Strategy in an Organization

To begin with, inside an organization, there exists three different categories of strategy
namely; corporate- level strategy, business- level strategy, operational-level strategy.

According to Johnson et al (2009, 7) “Corporate- level strategy is concerned with the

overall scope of an organization and how value is added to the constituent business of
the organizational whole.” It includes issues such as the geographical scope of the
business, diversity of services and products, mergers and acquisitions and the allocation
of resources within the organization.

Likewise, in describing business-level strategy, Johnson et al (2009, 82-85) states that it

is the way individual business should compete in a market. The term, competitive
strategy in essence refers to the business-level strategy and addresses issues that are
considered important such as innovation, differentiation, pricing strategy and the
 21

appropriate response to the competitors’ in the industry. The corporate strategy and the
business-level strategies should be aligned with one another to be effective.

Johnson et al(2014, 7) states that operational strategies, the third level strategies “are
concerned with how the components of an organization deliver effectively the corporate
and business level strategies in terms of resources, processes and people.” In most
cases, for business strategies to succeed, the decisions that are made or actively happen
at the operational level are crucial. In other words, operational strategies are vital to a
successful strategy implementation.

Figure 3 .The three levels of strategy (Ritson 2013, 13)

4.3 Types of Competitive Strategies

In business unit strategy, competitive strategy defines the framework that managers use
to guide their competitive positioning decisions. According to Porter (2008, 358)
competitive strategy forms the basis of competition for any business in any industry. In
highly competitive business environments, companies need to create strategies to effec-
tively compete and sustain superior performances by offering quality services to its
existing and new customers.

The generic competitive strategies (Porter 2004, 370) are widely used in defining
competitive advantage. In this framework, Porter argues that a firm can create a superior
and competitive advantage over its competitors in two ways namely; cost advantage or
 22

differentiation. In addition, a firm can also create advantage through the focus strategy
that infuses the cost advantage and differentiation. Furthermore, the cost leadership
strategy and the differentiation strategy are targeted at the whole industry customers
while the focus strategy targets a customer segment to serve. All in all, the strategy to
be pursued by a firm depends also on the industry it operates in (Eisenhardt & Martin
2000). Porter (1996) argues that by choosing a strategy and customizing it to its
operations, a firm can compete and cope better with the five forces compared to its rivals.
The widely used generic strategies are illustrated in the figure below 2.

Figure 4. The generic competitive strategies (Porter 1980:31)

4.3.1 Cost Leadership Strategy

According to Porter (2004), cost leadership refers to the strategy adopted by a firm with
the aim of being the low-cost provider within an industry. Generally, a firm operating with
this strategy has a broad scope and offers its services to many segments. Porter,
however, argues that a low-cost leader need to also consider differentiation especially if
the product or service is not favorably perceived by consumers as comparable or
acceptable to those of its competitors. In addition, the cost leadership strategy if based
primarily on operational effectiveness can easily be imitated by competitors and the
superior performance created will not last for long (Porter, 2004).
 23

Accordingly, the low cost provider /no frills strategy is chosen when targeting a customer
segment group that cannot afford the high costs/expensive products or services or at the
same time do not care about differences in the services being offered(Johnson et al.
2005, 245-246). In addition, the low-cost strategy emphasizes on offering the same
services as competitors at an overall lower price within the industry. However, this strat-
egy has its delimits and risks that include imitation from other players offering the service
and lack of investment in innovation to further develop the product or service offering
(Johnson et al. 2005, 246).

Cost leadership is a reliable strategy to use in a business environment where the buyers
have more power and influence (Sihite & Simanjutak, 2015). This strategy implies
offering the lowest possible costs compared to competitors in an extremely competitive
industry where the profits are low but still higher than that of the business rivals.

4.3.2 Differentiation Strategy

According to Porter (2004) a firm pursuing a differentiation strategy a firm can achieve
differentiation through offering a unique value proposition that cannot be matched by its
competitors. This is done by identifying certain attributes that many consumers perceive
to be important and uses these dimensions to uniquely position itself to serve and meet
those needs. In addition, differentiation can be achieved by investing extensively in
research and development, service design and marketing. Generally, these attributes
differentiate a firm from its competitors and can command a premium price.

This implies that a firm provides services or products that are unique compared to its
competitors usually at a higher price or in some instances, the same price. In order to
effectively implement this strategy, it is necessary to identify strategic customer
segments. These customers have certain preferences and value a unique set of activities
that makes it possible to differentiate the offering for them. Consequently, in an industry
wide competition or focus strategy competition it is crucial to apply the differentiation
strategy to stand out from the competition (Johnson et al. 2005, 246-247).

A company that pursues differentiation generally puts a lot of emphasis on the level of
service and the support it offers the customers. It is, however, important to note that a
basic level of service and support can also be easily imitated. Therefore, to truly
differentiate from competitors a firm needs to train its employees and create an
organizational culture that reinforces these values. A firm that builds strong personal
 24

relationships with its customers succeeds in creating loyalty that results in “sustainable
financial” returns in the long term (Heskett and Schlesinger, 1994). Most firms, Porter
argues are different but lack a differentiation strategy that consumers truly value as being
unique.

According to Banker et al (2014), companies pursuing a differentiation strategy can have

“a more sustainable financial performance than those pursuing the cost leadership
strategy.” Managers can apply the use of the latest technology, features, designs and
brand image to differentiate from its competitors (Sihite& Simanjutak, 2015).

4.3.3 Focus Strategy

The focus strategy is the third generic strategy. Porter (2004), states that the focus
strategy is concerned with a narrow competitive scope unlike the other two. Essentially,
a firm that pursues this strategy seeks to serve a segment within the industry. This is
achieved by tailoring activities and strategy to serve these segments at the expense of
others. A firm that focusses on segments optimizes its strategy towards the segment
thereby creating competitive advantage regardless of not being a cost leader or not being
the main differentiator in the marketplace.

The value proposition in a focus strategy results when a company is more efficient
through better outcomes brought about by streamlining the services targeting a narrow
segment to compete with a broader scope of competitors (Gupta 2016).Basically,
managers apply the focus approach on a particular segment such as a service, customer
or location.

4.4 Competitive Advantage

“Strategy without tactics is the slowest route to victory. Tactics without strategy is the
noise before defeat.”-Sun Tzu

According to Porter (1985) a strategy is “a broad formula for how a business is going to
compete, what its goals should be and what policies will be needed to carry out these
goals.” Companies need to create effective competitive strategies to compete in the
market. However, the execution and deployment of the strategy is equally important in
order to effectively realize any competitive advantage. Strategy frameworks and tools
are based on the idea that the companies seek to achieve sustainable competitive
 25

advantage. In the process of competing in an industry a firm performs several activities.

These include such things like marketing, training employees, processing orders and
managing finances. These are the basic units that create competitive advantage and
create a foundation for differentiation from its competitors.

Porter (1996) argues that, a firm can create competitive advantage through developing
valued traits. These are a set of attributes that are desired and considered different from
its competitors creating an advantage. To effectively do this a firm need to understand
and identify its customers and end users thus be able to anticipate their needs effectively.
In addition to these insights about the customer, a firm should formulate a competitive
strategy by adding value to its offering in a more successful manner compared to its
competitors. Basically, the concept of “customer value” is very important when creating
services that are superior and more sustainable in the long-term. Competitive Advantage
is essentially about creating customer value and customer relationship management.
These are related to service quality.

According to Porter (1996) Competitive Advantage brings “the concept of the value
chain”. Essentially, the value chain is a useful concept in that it creates a general
framework for strategic thinking about a firm’s activities and assessing their role in differ-
entiation and creating superior services as compared to industry competitors. The profits
of a firm are “the difference between the value what buyers are willing to pay and the
cost of performing the activities involved in creating the value.” This is important to
analyze when creating the unique value by applying the concept of the value chain anal-
ysis.

Competitive Advantage is the foundation used by managers and people involved in

creating strategy by describing and analyzing a strategy, linking it to the activities of the
company and understanding what brings about competitive advantage. The concept is
important in assessing how a firm can create and sustain competitive advantage.
Therefore by creating a sustainable competitive advantage, the company is able to gain
a larger market share and generate profitability by selling more than its competitors.

According to a Harvard Business Review (2015) article, a sustainable competitive

advantage can be created by pursuing the following offering when formulating strategy:

• A unique competitive offering by the firm

 26

• Performing activities that are tailored to strategy

• Clear trade-offs and choices compared to competitors

• Operational effectiveness

Organizations formulate competitive strategies since it an essential component in a

modern business environment characterized by rapid transformations. Firms need to
anticipate the future and be proactive in creating sustainable strategies to stay profitable.
Therefore, the ability to adapt to the dynamic environment is one of the key factors to be
considered by managers and the stakeholders in formulating the long-term strategy of
an organization (Ghezzi, 2014).

4.5 Competitive Strategy Formulation Steps

In a competitive strategy formulation, Porter (2004) recommends that a firm follows these
steps. First, the current position of the firm is analyzed, and the current strategy
determined. These include the current position in the market, the strengths and
weaknesses, its competitors and the industry trends. In the second phase, the firm de-
termines what is happening in the environment it operates. This involves gathering the
necessary market intelligence for the purpose of getting to know of the opportunities and
constraints that exists in the market to be used in strategy formulation. The trends in the
industry, competitors’ capabilities and limitations are reviewed. In addition, changes in
the society and government policies that are likely to affect the business should also be
reviewed accordingly. The third and final phase, involves determining the new strategy
to be implemented by the company. The strategy team needs to analyze different
scenarios that are likely to arise within a specific period in the industry in order to
effectively deal with changes in the marketplace. Consequently, the changes are made
to start implementing the new strategy. Figure below summarizes this position.

In addition, Porter (2011, 270) argues that the five tests of a good strategy are as follows:”
a unique value proposition compared to competitors, delivered with a different value
chain that is tailored to the value chain, one that makes a clear tradeoffs and chooses
what not to do, comprises of activity choices in the value chain that fit together and
reinforce each other and offers strategic continuity with continuous improvement in
realizing the strategy”.
 27

1. How is the company currently competing

in the marketplace?
• Identify the current strategy
• Identify assumptions

2. What is currently happening in the busi-

ness environment and industry?
• Consequently, identify key factors
for success and failure in the
industry that business operates
• Next, identify capabilities and
limitations in the industry
• Identify companies’ strengths and
weaknesses compared to
competitors

3. What the company should do next in for-

mulating strategy?
• Compare present strategy to the
business environment that currently
exists
• Look out for alternative courses of
action
• Choose the best alternative to
pursue

Figure 5. The process for formulating a company strategy (Adapted from Porter, 1980)

In this section, a framework for assessing and analyzing differentiation is presented.

First, the sources of differentiation are highlighted. Second, the cost of differentiation will
be determined. In the third part, the type of differentiation that create buyer value using
the buyer’s value chain is examined. Finally, the concepts will be used to formulate a
differentiation strategy for the case company.
 28

4.5.1 Sources of a Firms Differentiation

In the previous section, it was noted that a firm creates differentiation from competitors
through the provision of something that is unique to buyers more than just simply offering
a lower price compared to its competitors. Through the differentiation strategy a firm can
achieve the following in its industry:

• A command of a premium price

• Sell more of the product/service

• Create buyer loyalty

According to Porter (1996), “differentiation results in superior performance if the price

premium achieved exceeds any added costs of being unique.” The concept of service
differentiation is important when discussing how to effectively understand experience
differentiation. Products and services are an important part of creating customer experi-
ence and should be designed with the customer in mind to have a long lasting impact.

4.5.2 The Cost of a firm’s Differentiation

In formulating a differentiation strategy, it is noteworthy that it usually a costly process.

The firm will incur cost to be unique since this means that it needs to perform its value
activities better than other competitors within the industry.

The cost drivers incurred in differentiation include, scale, learning, timing and
interrelationships. Moreover, the relationship between cost drivers and uniqueness takes
two related forms:

• Uniqueness drivers can impact cost drivers

• The cost drivers affect the uniqueness of a service/product

4.5.3 Differentiation and Buyer Value

According to Porter (1996), a firm’s “uniqueness does not result in differentiation unless
it is valuable to the customer or end user.” To successfully differentiate from the
 29

competitors a company must seek ways of creating value to consumers that result in a
price premium in excess of the extra cost of achieving differentiation.

A firm can make use of the buyer’s value chain that essentially describes the various
discrete activities performed by a company in delivering the service at the most value to
the end user for the least cost in order to create a competitive advantage in the market.
The buyer’s need should be used in determining what is of value to them and hence the
differentiation.

Buyer value is created that makes it possible to justify a premium price or another
competitor at an equal price through these two ways:

• Through lowering the costs for the buyer

• Through raising buyer performance

The buyer purchase criteria are based on certain attributes of a firm that is viewed to
create value to the buyer. These are of two types namely, the use criteria and signaling
criteria. The Table 4 below summarizes the factors that consumers consider when
making purchasing decisions that are useful to a service firm.

Table 4. User purchase criteria (Source: Porter, 1996, p.141-144)

Use Criteria Signaling Criteria

Service quality Reputation/Image of the firm

Delivery time Price (Quality)

Customer support Customer list/references

Package sizes Time in business

Availability Branding/appearance
 30

These criteria should be precisely defined to guide in formulating a differentiation

strategy.

The models of differentiation concept in service differentiation states the importance of

customer experience for a sustainable business differentiation (Texeira et al., 2012).To
illustrate this, a common generalization of service differentiation concepts is shown in
the Figure below. Experience is created around the service that is offered thereby creat-
ing the seamless customer experience.

Figure 6 .The general concept of differentiation (Adapted from Meyer and Schwager
2007)

4.6 The Industry Analysis

Competitive strategy is the result of a clear understanding of how to compete that

ultimately determine the attractiveness of an industry. The positioning strategy chosen
is aimed at creating a favorable advantage for the chosen firm. Kotler (2009, 72) argues
that the globalization of markets and increased competition creates opportunities and
challenges for many firms. Accordingly, a firm needs to formulate an effective strategy
based on the industry forces in which the company operates.

In this study, an industry analysis of the logistics and moving companies using Porter’s
five forces will be discussed. For a firm, possessing a competitive advantage is vital to
 31

effectively compete in the market. A firm needs to identify its position relative to that of
its competitors to sustainably compete in the market. Through the analysis of the indus-
try, a firm can know if it is a leader, follower, challenger or a niche competitor. Conse-
quently, the information obtained from the data can be used to formulate appropriate
strategies to compete.

Firms in all industries evolve in a competitive environment. This makes the concept of
differentiation to be extremely important to stay competitive by the firm continually reaf-
firming its differences in order to create its own competitive advantage. For companies,
in order to achieve competitive advantage, they should understand that operational
effectiveness is not a strategy. The figure below illustrates this to better understand the
concept.

Operational Strategic
effectiveness Advantage
Positioning

Striving for best practices Aimed at creating a unique and

sustainable competitive position

Here the firms perform the

same things as rivals Firms strive to be unique and dif-
ferent from competitors

Figure 7. Operational effectiveness vs strategic positioning

4.6.1 Porter’s Five Forces Framework

Porter’s five forces, as is illustrated in the Figure 1 below, is a framework developed for
the industry environment analysis and business strategy development. The competitive
forces model identifies five forces that affects a firm’s behavior in a competitive market.
Understanding these five forces is crucial in analyzing an industry’s profitability and
 32

anticipating competition (Porter 1985, 288). The Figure below illustrates the forces that
affects the strategy of a company.

Porter’s five forces provides a framework for a firm to anticipate, influence competition
and profitability over time (Porter 1985, 370). A firm strategy should be geared towards
influencing the competitive forces to achieve competitive advantage. To illustrate this, a
company can influence the bargaining power of buyers by improving on its services
which will consequently raise the buyers’ switching costs (Porter 2008)

Figure 8. Elements that shape industry structure: Porter’s five -Forces

These five forces model when applied to the logistics service industry in Finland offers
useful insights on how an organization can analyze its strategic positioning and create
competitive advantage. They include the following:

• Existing rivalry between the firms in an industry; the rivalry in an industry greatly
shapes profitability. Currently, the logistics industry is highly competitive. Many
firms compete by offering the lowest prices that can easily be copied by compet-
itors. Therefore, companies need to clearly take strategic measures to shift the
 33

competition to create sustainable competitive advantage. (Porter 2008: 80). For

example, rivalry can have a positive effect if the competitors serve different cus-
tomer segments and offers a different service mix.

• The power of buyers in the market; in the marketplace, buyers can influence the
competition by lowering prices, demanding more service quality and having a
greater say in shaping the value proposition offered by a company. Conse-
quently, from a service organization’s perspective, the company needs to
improve on the quality of its services in order to raise buyer’s switching costs.

• The power of the suppliers; in an industry, powerful suppliers can affect a firm’s
profitability by performing several activities. For example, they can offer
differentiated services/products, shifting costs to other industry participants and
influencing prices greatly.

• Threat of entry by competitors; new entrants influence competition by putting

pressure through gaining a slice of the market share, affects pricing of the
services and have a bearing on the costs. Consequently, the industry profitability
is greatly affected in the process. A firm needs to be on the lookout for such
possibilities and defend its market share from the new entrants.

• The threat of substitutes products/services becoming available in the market; this

is seen in competition when substitute products/services are introduced into the
market that perform similar functions as those offered by rivals through different
means. Consequently, if a firm is not able to effectively counter these moves by
creating a superior service or creating another competitive advantage, its
profitability and existence in the market will be greatly affected.

The five forces framework in the logistics industry in Finland where the market is
dominated by bigger firms, barriers of entry are low, bargaining power of suppliers are
not existent and the threat of substitutes is high; the model for the purpose of this study
will focus on the rivalry in the industry and the bargaining power of customers. Therefore,
we can conclude that these two forces will determine the activities that a company must
do better than its competitors if it is to gain competitive advantage. These will form the
foundation on which the competitive strategy will be formulated.
 34

Accordingly, by offering services that are of superior quality compared to the rivals will
result in loyalty making it harder for the customers to switch for a rival. In a nutshell, the
bargaining power of the buyer is weakened this way. A service company, therefore,
needs to evaluate its service level and put emphasis on its employees to deliver superior
services thereby creating a differentiation and ultimately a superior competitive ad-
vantage (Wirtz et al.2008)

4.6.2 Value Differences and Creating Competitive Advantages

How do we define value to the customers within the company? To create long lasting
and profitable customer relationships, companies need to understand its customer needs
better than competitors and strive to deliver more value in the marketplace. A company
that achieves the aim of providing superior customer value can differentiate itself and
thus create competitive advantage.

Kambil, Ginsberg & Blog, (1996) states that the value proposition is defined by how
elements like the service traits and the added services are tailored together and delivered
to the customer in a way that satisfies them. The value proposition is the company’s
offering that solve customers’ problems and when it is clearly differentiated, determines
the reason why consumers buy from one company over its competitors with a similar
offering in the market.

According to Kotler & Keller (2016), these solid positions are achieved by action and not
just empty promises found in the strategy plans. Consequently, a company promising to
differentiate on quality of its services, for example in the logistics industry must strive to
deliver on the promise if it is to achieve an advantage over its competitors. Differentiation
is possible by thinking and understanding the customers’ journey or experience with the
company’s service. Service differentiation can be created by insisting on service quality,
customer satisfaction, and the speed of service, convenience and innovation.

4.6.3 The Value Chain Analysis

Value chains are the cornerstones of competitive advantage (Porter 1996). This is
because they define those set of activities within a company that when performed to-
gether creates a unique value to the customer resulting into loyalty to its services.
Therefore, through analyzing and clearly differentiating the value chains from the other
 35

activities performed by a company, it is possible to come up with specific tasks that can
be useful in defining competitive advantage.

According to Porter, (1996) the value chain comprises of primary and support activities
of a firm. The Figure is an illustration of the value chain activities.

Figure 9 .Value Chain Activities (adapted from Porter 2004)

A differentiation strategy formulation process should involve the analysis of the com-
pany’s value chain and processes. In this way, the company will create unique activities
that bring value to the customers thereby achieving the competitive advantage. The table
below illustrates how a company can try and execute its way to competitive advantage
in an industry by comparing two different ways of creating value in the market.
 36

Table 5. Value Chain and how it creates competitive advantage. Porter (in Magretta,
2011, 88)

ACTIVITIES Perform the SAME activi- Alternatively, perform DIF-

ties as competitors but be FERENT activities from
superior in the execution of competitors to create a
the activities. competitive edge.

VALUE CREATED Be a leader by being a low Create value by meeting

cost provider as compared different needs and/or
to competitors. same needs at a lower cost

ADVANTAGE Cost advantage but this is Creates sustainably higher

hard to sustain since rival prices or lower costs of de-
can copy livering the service

COMPETITION Company can be the best Be UNIQUE by competing

by competing on EXECU- on a differentiation strat-
TION egy.

Accordingly, a study by the Harvard Business Review (2010, p.67) a company team in
charge of formulating a competitive strategy team needs to ask themselves the following
tough questions regarding the strategy as illustrated in Table 5 below.
 37

Table 6. Factors to consider in formulating a competitive strategy (HBR, 2010, p.67)

WAY TO PLAY CAN IT BE STATED EASILY? DOES THE COMPANY LIVE IT?

CAPABILITIES SYSTEM Is the company clear about its Does the company invest in the
value proposition in the mar- capabilities that matter to the
ketplace? way they create value?

SERVICE/PRODUCT FIT
Ability to articulate three to six Does the whole business align
capabilities that states what on these superior capabilities as
they do uniquely than compet- defined?
itors?
Do the organizational structure
Have how they work together and the operating model support
in the system been defined it?
accordingly?
Does the performance manage-
Is this reflected in the strategy ment system align to it?
document?

COHERENCE Are the differentiating capabil- Has the firm made it a routine to
ities familiar to everyone stay ahead of the competitors
within the organization? and win in its chosen market?

Is the leadership responsible Do the decisions made create

when it comes to reinforcing more towards the coherence or
the differentiating capabili- do they create incoherence in the
ties? strategy?

According to Porter (1980), ultimately, a company’s processes and activities are the ones
that sustain its competitive advantage in the industry. Moreover, the company needs to
perform these activities better than its competitors and to create a strategic positioning
by being unique through a differentiation strategy. In addition, a good strategy creates
trade-offs and pursues a specific set of customers and services that eventually creates
 38

a strong competitive advantage for the company in the industry it operates. Porter (1980)
argues that a differentiation strategy when adopted and clearly pursued will be difficult
to imitate by competitors since by aligning the company’s processes and activities to a
fit and this results in efficiencies that are difficult to duplicate if effectively implemented.

4.7 Communication of the Strategy

Once the value proposition has been clearly defined, in order to effectively deliver the
service to the customer in a manner that differentiates from the competitors, the company
must address the way it this will be done. This essentially addresses the issue of strategy
execution and how to effectively implement the strategy to benefit from it. A study of 275
portfolio managers by Harvard Business Review, points out that execution of a strategy
is the reason for the success or failure of many organizations.

According to Harvard Business Essentials (2010), managers need to distinguish the

difference between creating strategy and the process of implementing the strategy. The
main differences and the action plan are highlighted in the Table 7 below.

Table 7. Strategy creation Vs implementation phases

STRATEGY CREATION STRATEGY IMPLEMENTATION

Involves analysis and Planning Execution

Thinking about the strategy to be Doing

formulated

Initiated as a result of a business Follow through by carrying out sur-

problem veys and measuring the KPIs

Usually performed at the top Involves everyone from the top-to-

bottom

Is entrepreneurial in nature Operational in nature

 39

Involves goal setting Usually targeted at achieving a

goal

4.8 Conceptual Framework of this Study

In this section, the findings of the current state analysis themes that will form the basis
of the development areas for the case company are discussed. The areas identified in-
clude the following: how to create value in the marketplace, focused differentiation, com-
munication strategy and communication of strategy. The conceptual framework analyses
how to create competitive advantage in an industry in general. In addition, the main is-
sues that were highlighted as the weaknesses from the current state analysis were cov-
ered to try and find a solution to the business problem as defined in the previous chap-
ters. The weaknesses in the current strategy cannot be solved using one concept but
from combining the suggestions given in the summary of the key findings of the concep-
tual framework highlighted in the Figure 9 below.
 40

Key issues

•The Value Chain and Customer Experience(Porter 1996)

•Cost Advantage(Porter 1985)
•Differentiation(Porter 1985)
Competitive
Advantage

•Porter's five forces framework(Porter 1985)

Industry
structure

•Strategy Execution and Communication

•Aligning the organization towards the strategy(Kaplan and
Norton 2004)
Strategy
Implementation

Figure 9 .The conceptual framework

As is illustrated in the Figure 9 above, the conceptual framework has three elements that
creates a clear and extensive picture of the topics related to the formulation of a firm’s
competitive strategy and creating sustainable superior performances. Equally, it offers a
clear guideline for the firm towards the development of the strategic positioning strategy
that was sought. The existing knowledge and best practices emphasize that it is
important to first and foremost understand the fundamentals of competitive strategy and
how to create advantage in an industry. Accordingly, a clear assessment of the
 41

environment in which the company operates will need to be analyzed to be able to

effectively formulate the differentiating strategy. This requires the understanding of such
concepts such as the Porter’s five forces analysis to perform the industry analysis and a
pursuit of uniqueness and capabilities through the Value Chain Analysis. Finally, the
strategy implementation process will be examined. This is useful in creating an environ-
ment within the organization whereby the strategic targets are reached. Specifically,
communication of the strategy and aligning the whole company towards the formulated
strategy is critical at this stage.

These topics and concepts that are mentioned above are covered in depth by looking at
the perspectives and conclusions from several authorities in the topics and research
areas in the literature review in the section above. The formulation of the differentiation
strategy, therefore, will be based on the findings from the current state analysis
highlighting the strengths and weaknesses and the conceptual framework discussed
herein.

5 Formulating the strategic position plan for the company and Execution
Strategy

In this section, the findings of the current state analysis and the best practices as
illustrated in the conceptual framework are discussed with the aim of building the
proposal towards the formulation of a new competitive strategy for the company.

The research findings based on the current state analysis concludes that the company
lacks a clear strategic positioning strategy to implement in its operations. In addition, the
company needs to analyze the industry to come up with insights on its competitors that
will be useful in formulating the competitive strategy. Finally, communication of the strat-
egy is limited and should be improved. For the purpose of this study, the empirical de-
velopment follows the guidelines of the conceptual framework structure that was derived
from the literature review. In addition, qualitative data gathered in round two of the data
collection exercise will be useful when building the proposal.

The conceptual framework is useful in providing the cornerstones on which the

weaknesses that were identified will be improved towards building the initial proposal for
the new strategy. Relevant literature that describes the ways in which a company can
create competitive advantage in the marketplace over its competitors-through
 42

differentiation and cost leadership were looked into deeply. These two strategies
together with the focus strategy form the generic competitive strategies discussed earlier
in section four of this thesis. However, the cost leadership strategy, according to various
literature materials that forms the conceptual framework, is difficult to maintain since
rivals can easily imitate the strategy greatly affecting profitability and is therefore not
sustainable. For this reason, the study will be mainly focused on formulating a
differentiation strategy and how to effectively communicate the strategy to the various
stakeholders to create an impact during the execution.

To build the proposal, the structure applied will be based on the steps that were identified
in the Conceptual Framework. They are as follows.

• Understanding of the fundamentals of competitive advantage such as innovative

customer experience and market segmentation as illustrated by Porter, (1985)

• Analyzing the industry structure using the Five Forces Framework and the Value
Chain Analysis as presented by Porter, (1994)

• Strategy Implementation fundamentals such as Communication as illustrated by

Kaplan and Norton, (2004)

The first step is to get a good understanding of the concept of strategy and then follow
that with following the right steps to formulate the strategy. Specifically, the industry
analysis using the Porters’ Five Forces framework was useful in providing an
understanding of the industry in which the company operates. However, to create the
differentiation strategy that was identified, the concept of value chain analysis was
applied to be able to effectively illustrate how the company can create superior
advantage over its competitors by utilizing a customer centric vision in creating a new
strategy to implement.

5.1 Differentiation Strategy Formulation

A differentiation strategy was chosen as the best alternative competitive strategy to be

adopted by the company. This was based on the challenges highlighted during the
current state analysis, for example, the difficulty of charging lower prices that ultimately
affects the profitability. The cost leadership strategy can also be easily imitated by
 43

competitors and from the literature review, is not sustainable especially in an industry
that is highly competitive.

The concept of the value chain analysis will be useful in finding the pains in the customer
journey that the company can work on to create a truly great customer experience to
truly differentiate from the competitors. The company’s value chain (the specific activities
a firm perform delivering a service) is a source of differentiation. All these activities if well
linked and sourced can affect the performance or satisfaction of the product and
therefore the differentiation. The following table is a summary of the key differentiating
factors that can be utilized from a broad policy choice in competitive scope in a service
industry.

Table 8. Summary of the main elements

Service Quality Service quality and values, simplified pro-

cesses, single point of customer service,
skill and experience level of employees,
convenience of service and feedback

Customer Relationships Trust, commitment, customer satisfaction,

commitment, personalized services, cus-
tomized solutions and through personal
contacts

Innovative consumer experience The ability to serve customer needs eve-

rywhere, unique value proposition and
customer retention.

Market Segmentation as a source of dif- Seek to serve a segment of the market or

ferentiation geographical region as a source of com-
petitive advantage.

Based on the list provided above, it can be noted that a company has a wide range of
choices of activities in the value chain that they can perform effectively to differentiate
 44

from the competition. Consequently, the best practices that will address the weaknesses
identified in the current state analysis are as follows:

5.1.1 Main Theme 1: Service Quality

Service quality is highly regarded as a differentiating factor. This is made possible by

delivering a superior service compared to competitors thereby improving customer
satisfaction. Consequently, the retention rates achieved as result of an improved service
quality will result in a better performance by the company. The participants in the
interviews pointed out that building strong customer relationships is crucial in their long
term growth and sustainability. In most instances, a company loses customers as a result
of poor service quality such a lack of professionalism, unreliable services and bad pricing
strategies.

Service quality ensures a sustainable competitive advantage by retaining the customers

who in turn act convert other people to use the company’s services by advocating for
them positively through the word of mouth. Therefore, a firm must consistently strive to
achieve the highest level of service quality to effectively compete in the volatile market
place. A firm’s internal operations must be tailored towards achieving operational
effectiveness that creates value to the customer.

5.1.2 Main Theme 2: Convenience of the service to the consumers

From the interviews, it can be noted that the case company uses various methods to
create a convenient service that makes the company unique. However, it was lacking
the latest technologies that creates convenience to the customers. This is critical in
creating strong customer relationships thereby attracting new customers and retaining
the existing ones. Customer loyalty and satisfaction are enhanced by providing a
convenient service .Participants in the interview mentioned the use of technology such
as apps that makes it possible for clients to order for the ride services from the conven-
ience of their devices such as mobile phones.

The company can also offer personalized services by keeping customer preferences in
the company’s databases. This can be in the form of outbound marketing campaigns
with special discounts and various offers with personalized messages.
 45

To strategically position itself for growth, the company needs to continue investing in the
latest technology and seeks new ways of doing business. Business managers need to
persistently seek new ways of designing their services and delivery in ways that
facilitates convenience of service.

5.1.3 Main Theme3: Human Resource Training and Communication of Strategy

In any business, the main focus in its operations should be the customers. Consequently,
to gain sustainable competitive advantage, it is critical to pursue the loyalty of the
customers. This is made possible by impacting on their bargaining power favorably
towards the company. Customer satisfaction generates profitability and growth that
many companies strive for.

However, of equal importance is the wellbeing of the employees of the company. It was
identified there was some training for the employees in the data provided in the current
state analysis. Business managers have a responsibility to train their employees to
support innovation thus maintaining profitability and retaining market share. The training
should focus on providing an efficient customer experience and on the use of the latest
technology. The participants in the study stressed on the need of proper training to
achieve competitive advantage and effectively run the operations of the company.

The case company operates in a service industry. Therefore, the company must improve
on the quality of their services to create loyalty and improve the customer satisfaction
levels.

5.2 Analyzing the Industry Structure for Insights to formulate Strategy

In any industry, a strategy has a competitive context. These include external forces-as a
result of the action of the buyers /suppliers, new entrants, substitutes and the existing
competition. For this study, the company weakness of lack of insights of the industry as
illustrated in the current state analysis is best addressed by applying the Five Forces
Framework aforementioned .A closer study of the five forces will be useful in conclusively
understanding the underlying forces that affect profitability within the industry. The
following factors relating to the Five Forces were identified that can be useful when
creating the competitive strategy.
 46

• The industry is highly competitive as a result of the deregulation of the industry

and ease of getting a license to operate.

• There exists low barriers to entry and exit for the market players.

• There is a threat of substitute from other service providers especially from ride
hailing apps and service providers like Uber and Yango.

• Customer bargaining power is high especially with the increased competition.

The customers are price sensitive and looking out for differentiated service offer-
ings

• The suppliers of the service mainly the drivers are relatively powerful

In this industry, the Porter’s Five Forces framework can be used to come to the following
logical conclusions that can be useful when creating a strategy based on the analysis of
the environment. These are the critical success factors for the business when pursuing
a differentiation strategy as illustrated in the figure 10 below:

Critical Success Factors in Achieving Competitive Advantage

• Create a superior service to stay ahead of competition

• Serve niche markets as a way of differentiation

• Innovate to serve customers better

• Strive to form strategic partnerships and alliances to create competitive ad-

vantage

Figure 10: The Critical Success Factors in the Logistics Industry

 47

5.3 Strategy Implementation Fundamentals

According to Kaplan and Norton (2000), in order to have any desirable result, the process
of designing strategy map begins with defining the vision of the company, objectives of
a company and then proceeds to creating a roadmap or plan on how to reach the stated
objectives. The definition of the stated objectives begins with identifying the reasons for
a company’s existence or its mission. Next is to illustrate the critical objectives of the
company and the relations between these objectives by aligning them to the perspectives
as provided by the strategic management tool of the Balanced Scorecard. These
perspectives of the Balanced Scorecard include the following: financial perspective,
customer perspective, internal processes perspective and the learning and growth
perspective. This is useful in measuring the targets set in the objectives and need to be
aligned with the formulated competitive strategy.

Kaplan and Norton (2000) also stressed the importance of commitment at the top level
in achieving the success of the formulated strategy. In addition, the strategy needs to be
thoroughly communicated to other departments and employees. Many strategy plans fail
as a result of a lack of proper execution, implementation and communication once they
have been formulated. In seeking alignment of the organization towards the strategy, the
management of the company can use the following tactics:

• Creating supportive activities

• Changing the organizational structure to be aligned to achieve the objectives

• People and Incentives-management needs to ensure that the people are trained
and the hiring targets the right employees. Also, provide the resources to enable
employees do their job well

• The culture of the organization and the strategy needs to be well matched and
practiced.

5.4 The Implementation of the new Strategy

My proposal for the new competitive strategy was presented in a workshop setting
involving a cross-organizational team from the company. The people involved were the
 48

management, employees and a representative from a consulting company involved in

creating strategic plans for the organization. In total, three workshops, done virtually due
to the restrictions brought about by the Covid-19 pandemic situation, were held to
introduce them to the new competitive strategy. This included a brief presentation
archived from the findings of the current state analysis. In addition, the conceptual
framework of the thesis was highlighted to create a clear picture of the matter to all the
participants.

The participants provided useful information that could be used in creating the
differentiation strategy for a unique experience that sets the company apart from its main
competitors. For example the management stated that its customers value a service that
is offered in “a more focused way” resulting in an improved competitive positioning in the
industry. For example one of the employees stated that;

“The possibility of the customers truly appreciating our services will be greater if we align
the company to offer more than just a cool and reliable service intended to the general
public. However, we can design the service through the value chain to look into the finer
details as to how we can improve on the service, who we are targeting as our primary
customers and the reason why we believe this is the right kind of service for the particular
segment. This way, we can come up with a better and a more focused service that cre-
ates a unique customer experience.”

The person in charge of the company’s strategy development also noted that in creating
strategic plans and how the company positions itself in the industry in terms of
competition requires knowing the customer pains points and what they value in a service.
Consequently, they are able to first understand the customer and what they value in a
service. This way, he pointed out, the company engages with the customer and the
decisions made in developing the competitive strategy is based on what the customer
values. He stated that;

“In the process of creating our strategic decisions on how to compete in the market, we
have to understand who the customers are, what kind of things they value and they
things they except from the service that is offered by the company.”

In addition, he emphasized the focus on customer experience for the differentiation

strategy. The company can offer a unique experience by engaging the customers to fully
 49

understand their needs and to an extent focus on a particular customer segment to fully
reap the benefits of the new competitive strategy.

The differentiation strategy requires that the company identify the customer pain points
in the value chain system. However, to achieve a sustainable competitive advantage, it
was discussed in the workshop that the managers need to be proactive and anticipate
the needs of an increasingly sophisticated customer faced with numerous choices. In the
workshop, it was noted by one manager that;

“The company quickly needs to have a clear understanding of the value chain in the
industry and actively be on the lookout for new trends, innovations and changing
business models within the industry and outside of it to fully be ready for the
transformations that are facing many businesses and industries around the world. These
can be used to have a clear understanding of the target customers.”

Another proposal brought up in the workshop related to the development of the strategy
was the crucial need to properly communicate the strategy throughout the company.
Participants emphasized on the importance of communication of the competitive
strategy. For example, the company founder stated that;

“To effectively create, implement and follow-up on the strategy, communication within
the company has to be improved. This way, we can all be able to align the objectives of
the competitive strategy to achieve the desired result. Our team will strive to have the
competitive strategy well known from the top management of the company to the
employees on the field dealing directly with the customers.”

5.5 Summary of the Proposed Competitive Strategy for the firm

In this section, a summary of the proposed competitive strategy with related components
and contents are provided. The proposed competitive strategy are based on the findings
from the current state analysis, suggestions from literature and best practices as found
in the readings during the research process. The proposal is a co-creation work that was
based upon analyzing the results from the data collection exercise stages. In formulating
the differentiation strategy, the findings from the Current State Analysis and theoretical
parts are discussed in detail in to create the conceptual framework of the thesis.
 50

In a nutshell, to create a sustainable competitive advantage desired by the company, it

is important to understand the sources of competitive advantage. The concept of the
value chain analysis is useful in finding ways to differentiate the company. In the service
industry, cost advantage might be difficult to sustain and can easily be imitated by
competitors. Consequently, it was not considered as an alternative in the process of
developing the competitive strategy.

In developing the strategy, it is useful to understand the factors that affect profitability.
The case company can use the widely applied Porter´s five forces analysis framework
to analyze competition and evaluate the firm’s strategic position in the industry to effec-
tively create strategies to apply to create sustainable competitive advantage.

In addition, in implementing the strategy, it is important to emphasize on communication

and follow up of the strategy with the stakeholders in the company. The case company,
will need to have a team in charge of communicating the strategy to have a chance of
effectively implementing the chosen strategy. The overall objective should be to align the
company towards the adoption and full implementation of the strategy.

6 Validation of the Proposal

This section of the study discusses the results of the validation stage. In addition, it raises
the issues of further development to the initial proposal. In the final stages, the final
proposal comprising of the recommendations and the action plan are also presented.

The validation of the research study was carried out in a review workshop comprising
the stakeholders in the company, the owner and the person in charge of day-to-day
operations of the company activities. The proposal as earlier indicated is a differentiation
strategy addressing the current business challenge faced by the company.

6.1 Validation by the management

The first validation was done as a co-creation work with the management of the company
together with myself, as the researcher. The differentiation strategy, of offering unique
attributes such as service excellence to retain existing customers and attract prospective
new ones was presented to the management. It was stressed that for service
differentiation to succeed, the company needs to combine a set of skills such as strategic
 51

management, innovation, marketing and continuous service / product development. The

person in charge of strategy in the company stated that;

“The company must have a clear understanding of the entire value chain process and
functions. Also, skills to infuse with the value chain partners to offer a unique experience
are invaluable. Understanding only your own business part is not sufficient to create a
seamless service that differentiates from the competitors.”

Finally, the responses received were collected to further develop on the initial proposal.
In addition, the final proposal is fine tuned to formulate the new competitive strategy to
be adopted by the case company for the next five years. The Director of the company
pointed out that this is a step in the right direction towards creating a sustainable com-
petitive advantage for the company in the short and long term.

“The proposal provides a great overview of the competitive strategy to be implemented

and highlights the importance of continuous communication as a way of ensuring that
the employees and other stakeholders are aligned with the resultant differentiation strat-
egy that is to be used while pursuing other customer segments.”

The company, plans to hire a customer experience expert to fully implement this
ambitious plan over the years. This will align with the strategic objective of creating a
superior customer experience that will be considered unique and valued by the
customers thus creating loyalty to the company. This differentiation strategy will present
the following benefits to the customers:

• Individualized advisory by a contact center established within the organization

• Strong relationship management and a well trained workforce with a customer

centric culture

• Service and process reliability

• A newer and sleeker models of cars and vans used by the firm
 52

6.2 Final Proposal

The final proposal for the differentiation strategy formulated for the case company is
illustrated in the Table 9 below. The four themes have been identified as the roadmap
that can be adopted by the case company as a differentiating factor. The final proposal,
when compared with the conceptual framework, it can be noted that the sources of
competitive advantage through the use of the value chain and a unique customer
experience to create differentiation were formulated in the initial proposal and was not
changed. However, the participants argued against the cost leadership advantage
stating that it is not sustainable since competitors are likely to imitate and the market
already has a number of players offering the lowest prices in the market.

Other concepts in the conceptual framework, including the analysis of the industry
structure and the implementation of the strategy through thorough communication made
the final proposal more comprehensive.

All in all, to effectively differentiate from its competitors, the case company has to focus
on creating value to the customers and being unique in its offerings. This can be done
through service quality, investing in innovation, training of its employees, introduce
loyalty programs for its customers, provide top of the range cars and vans and strive to
provide an excellent service for a unique experience.

A summary of the final proposal is shown in the Table 9 below. The first column presents
the themes identified to be useful in differentiation while the second column is an
illustration of the examples of the practical recommendations that can be used by the
case company to implement the differentiation strategy.
 53

Table 9. Final Differentiation Strategy for the Case Company

Differentiation Strategy

Focus Themes Practical Recommendations

Ensuring Service Quality Provide a reliable service, technological

solutions, flexibility, punctuality, prompt
reaction and partnerships that create
value to the users

Service Innovation Digitalization, employ new pricing models,

smooth payments services, alternative
fuels and make use of apps

Seasonal offerings Special discounts on holiday seasons

such as national holidays and Christmas
festive season

Continuous training of employees Simulation employee training, group

discussions, coaching and mentoring.

Consequently, as the differentiation strategy has been formulated, this marks the
conclusion of this thesis. The management is keen to follow-up with a survey on
customer satisfaction and a review of the strategy if needed. In the workshop, the dis-
cussion on the initial proposal was overwhelmingly approved. Therefore, the final pro-
posal was not altered. The differentiation strategy is intended to increase the firm’s sus-
tainable competitive advantage over the years and grow its market share considerably.

7 Conclusion

This section of the thesis presents the summary and evaluation process of the research
work. In the evaluation, the outcome of the thesis is compared to the objectives. In
addition, the validity and reliability of the study is considered.
 54

7.1 Summary of the thesis

This thesis was to address a business challenge of sluggish growth and declining
profitability as a result of increased competition and changing business models.
Consequently, there is need for a clear competitive strategy to effectively use in the
industry to create a sustainable way of competing

A current state analysis of the case company’s sources of competitive advantage were
analyzed to find out the strengths and weaknesses. This was done by interviewing the
owners of the company and studying the company’s existing business plans. Similarly,
a study of the existing knowledge and literature on concepts on fundamentals of
competitive advantage, industry structure, and the implementation of the strategy are
discussed to build the conceptual framework for formulating a competitive strategy.

Together with the management of the company, in a workshop setting, it was resolved
that a differentiation strategy based on a seamless customer experience was to be
adopted. These experiences would include a superior service quality, customer support,
and those other factors that result in competitive advantage would be practiced within
the company. Subsequently, the company can retain existing customers who remain
loyal to the company while targeting new prospective customers by offering a unique
service experience.

These set of recommendations were developed to be implemented by the company as

a differentiation strategy from its competitors and potential rivals. The author suggests
that the strategy be executed by following these steps:

• Planning involving the top management of the company on how to create the
competitive advantage by pursuing the differentiation strategy as mentioned in
the previous sections.

• Implementation of the strategy. The company at this stage will start the training
of the employees to offer a unique and seamless customer experience in order
to create a long lasting impression. Consequently, customer loyalty is achieved
thereby creating a sustainable competitive advantage.
 55

• Communication of the strategy is vital. Top management and employees need to

be familiar with the strategy. In this manner, they are able to set the tone and give
direction in a way that the desired result can be achieved.

7.2 Future steps and Development

The company management and other key stakeholders resolved to carry out a market
research survey targeting its customers after a period of six months to measure and
gauge the effect of the new competitive strategy adopted and practiced by the company.
Accordingly, they will be able to anticipate the market and be proactive enough to adjust
and make the necessary changes or review the strategy depending on the results of the
market research.

In addition, the need for creating a strategy to guide the management in the short and
long term cannot be underestimated. A well thought out strategy followed by thorough
execution can be a major source of sustainable competitive advantage for firms in these
challenging business environments.

7.3 Evaluation

This thesis evaluation focusses on the outcome of the action research work. Sections
are covered separately as follows; the thesis objective was to formulate a new
competitive strategy for a struggling company with declining profitability occasioned by
increased competition and rapidly changing business models.

The outcome of the study was a new competitive strategy and recommendations to be
used by the company to create a sustainable competitive advantage. The differentiation
strategy was chosen as the best strategy in an increasingly challenging market where
the service offering has not been clearly been made unique by the service providers.
The company will adopt a unique customer experience as the cornerstone of creating a
sustainable competitive advantage over its competitors. In addition to this, the
management intends to seek new customer segments to serve. Potential segments
include school rides and transporting the elderly.
 56

The company intends to follow up with a customer survey that will give new and useful
insights on the success of the differentiation strategy after a period of six months after
the adoption of the new strategy.

7.4 Reliability and validity of the study

To successfully complete this research process, qualitative research method was used
to gather data at the various stages of the data collection process. There was the use of
three data rounds, available company strategy documents and best practices as found
in literature books on strategy and its implementation. These sources were critical in
obtaining the necessary information that were referred to during the course of this
research work.
 57

References

Banker, R., D., Mashruwala, R., & Tripathy, A. (2014). Does a differentiation strategy
lead to more sustainable financial performance than a cost leadership strategy? Man-
agement Decision, Vol 52(1), 872-896.

Barney, J. B. (1991). Firm Resources and Sustained Competitive Advantage. Journal of

Management. Vol. 17, (1), 99-120.

Cortina, M.J & Landis R.S. (2013).Modern Research Methods for the Study of Behavior
in Organizations. New York, NY. Routledge.

Creswell, John W. (2013). Qualitative Inquiry & Research Design: Choosing Among Five
Approaches. Los Angeles: SAGE Publication, Inc.

De Massis, A & Kotlar, J. (2014).The Case Study Method in Family Business Research.
Guidelines for Qualitative Scholarship. Journal of Family Business Strategy.Vol.37 (6),
pp.59-72.

Eisenhardt, K.M & Martin, J.A. (2000). Dynamic Capabilities-What are they. Strategic
Management Journal. Vol 21(10), pp 05-21.

Ghezzi, A. (2014). The dark side of business models: The risks of strategizing through
business models alone. Strategic Direction, 30(6), 1-4.

Gupta, M. (2016). An empirical study on fit between strategic human resource manage-
ment and business strategy. International Journal of Management Research and Re-
views. Available from ijmrr.com/. [Accessed on 07th April 2020].

Heskett, J.L & Schlesinger (1994).Putting the service profit chain to work. Harvard Busi-
ness Review, Vol 72 (2): 164-174

Johnson, G., Whittington R., Scholes K. (2009).Fundamentals of Strategy. Prentice Hall.

Kananen, J. (2013).Design Research (Applied Action Research) as Thesis Research: a

practical guide for thesis research. JAMK University of Applied Sciences.

Kambil, A., Ginsberg, A., Bloch, M. (1996).Re-Inventing value propositions, Center for
Digital Economy Research, Stern School of Economics. Working paper. Available from:
https://archive.nyu.edu/bitstream/2451/14205/1/IS-96-21.pdf. [Accessed on 05th April
2020].

Kaplan, R. and Norton, D. (2004).The Strategy Map: Guide to aligning intangible as-
sets, Strategy & Leadership, Vol. 32 No. 5, pp. 10-17.Available from: https://www.emer-
ald.com/insight/content/doi/10.1108/10878570410699825/full/html. [Accessed on 20th
May 2020].
 58

Kaplan, R. & Norton, D., (2000). How Balanced Scorecard Companies Thrive in the New
Business Environment. Harvard Business Press.

Kotler, P. & Keller, K. (2016). Marketing Management.15th. Ed.Prentice Hall, New Jersey

Magretta, J. (2012): Understanding Michael Porter - The Essential Guide to Competition

and Strategy .Harvard Business Review Press.

Mandy, M. (2009). The Relationship between Distinctive Capabilities, Strategy Types,

Environment and the Export Performance of Small and Medium-Sized Enterprises of the
Malaysian Manufacturing Sector. International Journal of Management and Innovation.
Available from: ProQuest EBook Central. [Accessed on 08th May 2020].

Meyer, C, & Schwager, A. (2007).Understanding Customer Experience. Harvard Busi-

ness Review, 85(2):116-167.

Patton, M. (1999). Enhancing the Quality and Credibility of Qualitative Research. Health
Services Research, 34 (5), 189-200.

Porter, M (1996). What is Strategy? Harvard Business Review, Vol 74(6): 61-78.Availa-
ble from:http://web.b.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=1&sid=65f29eae-
d204-4053-9514-9a808dd2ee22%40pdc-v-sessmgr05. [Accessed on 10th May 2020]

Porter, M (1980).Competitive Strategy. Techniques for analyzing industries and compet-

itors. New York. Free Press

Porter, M (1985). Competitive Advantage: Creating and Sustaining Superior Perfor-

mance. New York. Free Press

Reichheld F, Markey, R, & Hopton C. (2000) the Loyalty Effect – The Relationship be-
tween Loyalty and Profits. European Business Journal, 12(3), 134-139.

Ritson, N. (2013).Strategic Management 2nd Edition, Bookboon Edition.

Robson, C (2002). Real World Research (2nd edit).Oxford: Blackwell.

Saunders, M. N. K., Lewis, P., & Thornhill, A. (2011). Research methods for business
students. Amsterdam: Prentice Hall
 59

Sihite, M, & Simanjuntak M.A (2015). The Competitive Strategy in green building for In-
donesian Stakeholders. International Journal of Innovation, Management and Technol-
ogy, 6(1), 8-15.

Teixeira, J., Patricio L, & Constatine, L (2012).Customer Experience Modeling. From

Customer Experience to Service Design. Journal of Service Management, 23(3), 300-
364.

Uphill, K. (2016). Creating Competitive Advantage. How to be Strategically Ahead in

Changing Markets.Kogan Page Publishers.

Wirtz J, Pangarkar N, Heracleous L (2008): Managing Human Resources for Service

Excellence and Cost Effectiveness at Singapore Airlines. Managing Service Quality,
18(1), 4-19.

Yin, R.K. (2003).Case Study Research Design and Methods. Applied Social Research
Methods Series.Vol.5. Sage.
 Appendix 1
1 (1)

Appendix 1.

Interview Questions

1. I asked for brief explanations concerning service offering by the company that in-
clude:

• How do you create value to your customers in the marketplace?

• How efficiently do the company´s service offerings solve the customers’ prob-
lems and meet their expectations?

• What do you do to maintain the quality of your service?

• How clear is your differentiation strategy in terms of the capabilities of the ser-
vice?

2. Can you identify your primary customer?

3. What business strategies do you use to sustain the company’s operations?

4. Are you able to articulate some of the capabilities that you do uniquely compared to
your competitors?

5. Does the strategy document reflect the capabilities?

6. Can the differentiating capabilities be articulated by everyone in the company?

7. Are the capabilities being reinforced by the company leadership?

8. How often does your company perform competitor analysis to understand competi-
tive advantages and disadvantages?

9. In the industry, how easy is it to switch to competitors’ offering

10. What are the company’s pricing strategy?

Appendix 3
1 (1)