Head Ski Case
Head Ski Case
1. The best indicators to assess whether Head Ski had the competitive advantage in the ski industry would be to look at profit ratios and compare them to competitors, which will allow us to assess whether Head Ski has above average profits. The best ratios to look at are: return on assets, return on sales as compared to other ski companies that sell high-priced skies, and return on equity, combined with numbers that show how much Head Ski is financed by debt. Looking at net margin as compared to competitors would also be useful. If they have the highest net margin as compared to competitors, than they have the most competitive advantage.
2. Head Ski successfully matched customers demand for high quality metal ski for which consumers were willing to pay premium (as reflected by industry trends), with Head Ski capacity to create differentiation by producing ski with superior features and quality. The skies were sold primarily by experienced specialty retailer in the ski specialty shops, which reflected growing customer preference to buy skies in ski specialty shops.
Head ski used differentiation strategy by using strategy focused on superior product quality, and focusing on exceptional service, and prestigious high-quality image. Head Ski created a new metal ski almost 5 years before the introduction of next competitive product, by deploying its superior R&D and creating skies that were radically different in design than anything before. Head skies had unique product features (durable and long lasting, reliable: did not break, and unique performance (turning, tracking, traversing), which were superior to other products and for which customers were willing to pay more, costly to imitate (Head ski introduced several considerable upgrades to the product line over the years and did not hesitate to recall defective product), and organized to be exploited (VRIO).
Despite the difficulty of organizing complex ski manufacturing process, Head ski developed many processes from scratch, bettered them, and deployed manufacturing cost efficiencies when possible (laminating press). It implemented effective compensation reward system that consisted ofraises based on seniority, merit reviews and profit sharing plan. As a result, attempts to unionize Head ski plant have been consistently rejected.
Quality in service: Head ski was known for exceptional service thorough its ski dealer organizations and regarded them be the most valuable asset. 85% of Head skis were sold through carefully chosen high quality ski specialty shops, where sales staff was highly knowledgeable. Dealers were expected to service Head skies, and for more comprehensive repairs, skies were sent back to the Head ski factory, where skies were repaired under 3 weeks. This level of after-sale service was superior to competition, unique to Head ski, customers valued it, and were willing to pay more for it. It was organized to be exploited but not very costly to imitate, as others could set up similar service (VRO).
Shaping perceptions through marketing(Superior to competition): 85% of Head skies were sold through carefully chosen high quality ski shops, with experienced and knowledgeable sales staff, as part of marketing strategy. This strategy helped to shape the perceptions of Head ski being superior in quality and the choice ski for knowledgeable and experienced skiers. This reflected customer needs as ski sales through specialty outlets stores grew faster than through other stores. In addition, Head ski established itself as an important factor in ski racing world, as “one third of top ten places on all ski racing events were on Head skies), thus adding legitimacy to the product and adding to the value of its brand. Moreover, customers were able to test the product before purchasing it, by renting skies.
Ski rental strategy was the most effective way to introduce new customers to the “ease if Head ski”. This integrated soft-sale approach that relied on word of mouth marketing was unique to Head ski, valuable to the customer, costly to imitate as it required integration of complex relationships, and well organized to be exploited (VRIO). 3. The uniqueness of Head ski has a sustainable competitive advantage can be sustained. Head Ski understands its customers requirements and preferences and creates a unique product that customers value and are willing to pay more for.
Sources of Head Ski competitive advantage are sustainable, hard to replicate, and hard and costly to imitate. Head ski had a long history of culture focused on quality and attention to detail that grew out if its entrepreneurial history. It is difficult to imitate such distinctive, integrated strategy that involves “service, dealer relations, product quality, style, advertising”. Attempts to imitate Head ski strategy would likely fail because of the difficulty of replicating every aspect of the strategy, followed by integrating them in the right way.
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 27 November 2016
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