TOWARD GENERAL THEORY OF MARKETING
The nature of
general theories
A theory can be more general than another because
o it explains and predicts more phenomena
o it accommodates, integrates or
systematically relates a larger number of
concepts and lawlike generalizations
o it totally incorporates the less-general theory
o it has a higher level of abstraction
Resource-
Advantage
theory
provides the
foundations
for a general theory
of marketing
marketing takes place within the context of competition, a general theory of marketing should be consistent with the most general theory of competition -> R-A is a general theory of competition
the closest thing to a general theory of marketing is Alderson’s functionalist theory of market behavior -> R-A accommodates and integrates key concepts and generalizations from Alderson’s functionalist theory
R-A is a positive theory and a good positive theory can provide a foundation for good normative theory -> R-A provides a positive foundation for normative marketing strategy
A dynamic, process theory of competition that is interdisciplinary in the sense that is has been developed in the literatures of several different disciplines
combines heterogeneous demand theory with the resource-based theory of the firm
stresses the importance of market segments, heterogeneous firm resources, comparative advantages/disadvantages in resources and marketplace positions of competitive advantage/disadvantage
describes the
process of competition
Competition is the disequilibrating, ongoing process that consists of the constant struggle among firms for a comparative advantage in resources that will yield a marketplace position of competitive advantage, and, thereby, superior financial performance. Firms learn through competition as a result of feedback from relative financial performance signaling market position, which, in turn signals relative resources.
The marketplace position of competitive advantage results from the firm, relative to its competitors, having a resource assortment that enables it to produce an offering for some market segments that is perceived to be of superior value and is produced at lower costs.
Once a firm’s comparative advantage in resources enables it to achieve superior performance through a position of competitive advantage in some market segments, competitors attempt to neutralize and/or leapfrog the advantaged firm through acquisition, imitation, substitution or major innovation
R-A theory is
a general theory
of competition
When R-A is compared with perfect competition theory, it better explains and predicts numerous phenomena, e.g., in case of financial performance diversity
Perfect competition: firms are viewed as combiners of homogeneous, perfectly mobile resources and intra-industry demand is viewed as homogeneous -> variance in financial performance across firms and their business-units must result from industry factors such as collusion
R-A: firms are best construed as combiners of heterogeneous, imperfectly mobile resources and intra-industry demand is best construed as substantially heterogeneous, then “firm effects” should dominate “industry effects”
The empirical studies on the diversity of financial performance indicate that R-A makes the correct prediction on the issue of financial performance diversity
Foundational premises of perfect competition are special cases of R-A theory -> R-A theory incorporates perfect competition
The theory of
market processes
Alderson’s
functionalist
theory of market
processes
may be viewed as a functionalist, system approach to integrating theories of heterogeneous demand, differential advantage and channels of distribution
firms pursue profit because they have a primary goal of survival
six bases of differential advantage for a manufacturing firm: market segmentation, selection of appeals, transvection, product improvement, process improvement, and product innovation
the existence of a differential advantage gives the firm a position in the marketplace known as an ecological niche
Given heterogeneity of demand, heterogeneity of supply, competition for differential advantage, and the requisite institutions (intermediaries) to effect the sorts and transformations necessary to match segments of demand with segments of supply, market processes will take resources in the natural state and bring about meaningful assortments of goods in the hands of households
R-A theory accommodates and integrates
key concepts and generalizations of
differential advantage theory into its
general theory of competition
Both D-A and R-A maintain that competition is dynamic (because all firms cannot be superior simultaneously)
Neither D-A or R-A theory is defended on the ground that its theory of competition represents “second best” or “workable” approximations of perfect competition
Both D-A and R-A theory share the view that competition involves both initiatory and defensive actions
Both D-A and R-A theory share the view that competition involves the struggle among rivals for advantages
Both D-A and R-A are developed in a natural language (English) – not in the language of mathematical equations
A positive foundation for strategy
Good positive theory can
provide a firm foundation for
good normative theory
R-A theory is a positive theory of competition: it purports to describe, explain, and predict – and thus it contributes to understanding – how competition works
Marketing strategy is inherently normative -> prescribes how strategic decisions within the firm should be made
R-A theory (a positive theory) provides a foundation for marketing strategy (a set of normative theories)