The success of a firm is essentially dependent on the resources that the firm has and the way it manages to exploit them. The resources of the company, in addition to its competencies and capabilities, have an important role in creating a competitive advantage that the organization can utilize. For Miele, the German-based global leader in high-quality domestic appliances, such a competitive advantage was achieved through the company’s utilization of many resources, distinguishing it from the rest of the competitors. Fearing the increasing competition in the market of the domestic appliance and losing its competitive advantage, the company is rethinking its resources. In that regard, the present paper provides an analysis of the company’s current resources, their role in providing a competitive advantage, as well as a recommendation on new resources that the company might consider acquiring/developing to remain successful in the future.
The resources that gained Miele a competitive advantage can be related to product leadership value discipline. In that regard, the resources are those that made the company create a competitive advantage by offering products pushing the boundaries of product and service performance. Such resources include the high costs of product development, high manufacturing standards and testing systems, technological innovations, and unique organizational culture. Additionally, the brand of the company and the relation with their customers can be seen among the resources of the company as well. The tangible resources might include the workforce at the company’s plants, which is forced to compete with outside bidders, to encourage innovation in production processes, with the intangible equivalent, in this case, being the strategy of the company and its organizational culture.
The organization’s marketing resources are those resources that are related to the marketing activities of the company. The resources falling into the aforementioned category, and which apply to the case of Miele include the reputation of their brand and the relationships with customers (Hooley et al. 2008: 144). The latter can be seen through the way the company’s products are perceived by the customers, building “a tremendous loyalty among consumers who know that the brand stands for quality” (Hooley et al. 2008: 174). Nevertheless, it can be stated that the marketing resources of the company are not fully utilized through direct marketing efforts. Resource-based view (RBV) proponents argue that despite the recognition of the role of marketing resources, they little contributed to the marketing literature (Srivastava et al. 2001: 778). In the case of Miele, such aspect is mainly observed through the doubts that the company has in the ability to utilize such assets for a long time, specifically in light of the economic downturn.
Sustainable Competitive Advantage
Assessing the sustainability of the competitive advantage provided by the company’s resources, the core competencies providing such an advantage should be assessed. Such assessment tests whether a core competence:
- Provide access to a wide variety of markets.
- Contribute to the perceived customer benefit of the end product.
- The core competency is difficult to imitate (Henry 2008: 130).
Evaluating Miele’s competencies based on the aforementioned criteria indicates that most of them are applicable. Such a statement includes the contribution to the perceived customer benefit of the end product, which is primarily seen as the service/product quality perceived by customers. In that regard, it can be seen that the company’s core competency corresponds to such criterion, where it is common that Miele’s customers acknowledge “that the brand stands for quality” (Hooley et al. 2008: 174). The difficulty to imitate is mainly based on the factor of economic feasibility, where the combination of the company’s resources is difficult to imitate, specifically in terms of the focus on research and development as well as the close relations with the customer. In terms of access to a variety of markets, it can be stated that the fact that 70% of the sales are outside of Germany, through wholly-owned sales subsidiaries in 48 countries, indicates the applicability of such criteria (Miele Company Limited). Nevertheless, such aspect implies geographical access, rather than access to new customers, which can be seen as one of the main fears of Miele in the present case. Miele has difficulties attracting new customers to their product, considering that the new generation is comprised of cost-conscious consumers (Hooley et al. 2008). Additionally, in addition to meeting those criteria, the fourth requirement might be seen in the appropriation of accruing returns by the organizations. The suspicion of shrinking profits since the 1990s and the fact of putting 1,900 employees, i.e. 73 percent of its global workforce, on short-time working, can be considered as an indication of the lack of the fourth requirement. Thus, it can be stated that it is becoming difficult for the current resources and core competencies of Miele to provide a sustainable competitive advantage, specifically in the light of the new shifts in the consumers’ cost-consciousness.
The main problem with the strategy of Miele is the lack of flexibility that would have enabled the company to change its strategy in the context of new economic conditions in the market. Recent researches on RBV traditions focused on dynamic capabilities, a concept that can be seen applicable in the case of Miele. Dynamic capabilities are defined as “the capacity of an organization to purposefully create, extend, or modify its resource base (Hooley et al. 2008: 151). Thus, it can be stated that the company should build a capacity to find new resources in its current situation. The resources that might help the company to remain successful can be seen through adopting different market targeting and positioning capabilities and acquiring internal marketing support assets such as information systems and market intelligence (Hooley et al. 2008: 161-68). Those resources would enable the company to differentiate its products, and at the same time maintain one of its most valuable customer-based marketing assets. The present situation with Miele resembles the argument for which RBV was criticized, i.e. considering as a resource the sources of advantages delivering value to some customer groups (Fahy et al. 2006: 153). Marketing intelligence would enable the company to better understand their customers and create differentiating capabilities, while market targeting and positioning will enable the company to utilize such understanding through aligning the resources and the capabilities of the company to target and position differentiated products to other customer groups.
It can be concluded that the dynamic environment of business requires companies to build their capacities to change or modify their resources. Miele is no different in that regard, with the company’s main resources no longer providing a sustainable competitive advantage through their core competencies. The proposed resources might help the company to manage the changes in the market by identifying alternative opportunities.
- Fahy, John, et al. (2006), ‘What is a marketing resource? A response to Gibbert, Golfetto and Zerbini’, Journal of Business Research, 59 (1), 152-54.
- Henry, Anthony (2008), Understanding strategic management (Oxford ; New York: Oxford University Press) xxv, 441 p.
- Hooley, Graham J., Piercy, Nigel, and Nicolaud, Brigitte (2008), Marketing strategy and competitive positioning (4th edn.; Harlow, England ; New York: FT Prentice Hall) xviii, 614 p.
- Miele Company Limited (2010), ‘Miele Global’, Miele Company Limited.
- Srivastava, Rajendra K., Fahey, Liam, and Christensen, H. Kurt (2001), ‘The resource-based view and marketing: The role of market-based assets in gaining competitive advantage’, Journal of Management, 27 (6), 777-802.