In part one of our series, we learned the importance of either doing different activities from competitors - or - doing the same activities but in a different way. You may have seen some activities your business does better or more efficiently than competitors. In the article by Porter, he uses examples of how Southwest and Ikea operate differently from their competitors in their respective industries which gives them a unique and difficult-to-replicate position.
To use an example of a company using CSR in a strategic manner, lets look at Swedish global hygiene and forest products company SCA (Svenska Cellulosa Aktiebolaget). SCA owns Europe's largest private forest which has become one of their main resources and they have been recognized for their highly responsible forestry practices. Due to this, SCA has more effective operations in comparison to their competitors in this capacity. Although it may be difficult for SCA competitors to replicate and purchase 2.6 million hectares of forest near their production facilities, owning the forest is not a strategy it only moves SCA closer to the productivity frontier. What makes it a sustainable competitive advantage is incorporating it into several other tactics within the company to create a strategic position.
Porter claims that strategic positioning uses three tactics: variety-based positioning, needs-based positioning, and access-based positioning. Lets see what these tactics are and how you can use it when for your CSR program.
Porter defines variety-based positioning as "producing a subset of an industry's products or services" (6), He uses Jiffy Lube as an example as they solely focus on basic car maintenance (like oil changes) and leave all other services for other car maintenance shops to provide. Although Jiffy Lube takes a tradeoff by not being able to provide all upkeep services, they gain the advantage in specialization and can work with a larger range of customers. To apply this type of positioning to CSR strategy, some firms may focus on one activity that can benefit a large array of customers. Although these firms may not gain as deep of a relationship with customers, it can expose them to a higher number of communities.
The second tactic of strategic positioning, needs-based positioning, is defined as meeting nearly all the demands of a certain collection of consumers. With your business, you know your target markets and what their needs are, but you also need to know how their demands change based on their current situations (e.g. low finances, elderly age, on holiday, etc.). The key is to have different processes to match the different needs. Since this type of positioning depends mostly on customer differences, this part of your CSR strategy should reflect different paths on how your customers can participate in supporting your CSR efforts throughout their entirety of relationship with you.
The third part to positioning is access-based which is "that of segmenting customers who are accessible in different ways. Although their needs are similar to those of other customers, the best configuration of activities to reach them is different" (7). For businesses, customers need to be reached in different ways because of where they live, how big/small the targeted customer base is, or how they buy your product. This is where we see businesses really being able to use CSR strategically to access new customers, Businesses can use CSR to connect with a community surrounding a cause; the cause will reap benefits from the business supporting it and the business will reap the benefits of the people affiliated with that cause. By connecting with a cause on a strategic level and creating a deeper relationship with the customer base, it will be hard for competitors to replicate this connection.
New definition of strategy
After detailing these three positioning factors, Porter defines strategy as "the creation of a unique and valuable position, involving a different set of activities" (8).
Lets return to our earlier example of SCA. Owning the forest is an increase an operation effectiveness. On the SCA website they state how it adds to the strategy: "Integration of SCA’s own wood raw material is a key aspect of the company’s strategy that contributes to stable cash flow and reliable supplies, and facilitates improved quality and cost control." In 2013, SCA launched a new product division, Sustainable Packaging, which was partially created to meet customer demand for a product like this. They have also expanded into renewable energy by having wind-turbine farms on their forests. Together, these three practices (and many more) form their strategy: "Continuing the work on enhancing efficiency and customer-driven innovation is essential for strengthening positions and creating growth. Efforts to develop and streamline the supply chain, make it more sustainable, and develop new product areas are also significant in terms of strengthening competitiveness."
You can use CSR just like SCA to create a strategy that consists of different activities based on using the three positioning tactics to make your business a stronger competitor. Your strategy will be difficult for others to replicate and give you the advantage you need to grow.
Read more about SCA's CSR practices here: http://www.sca.com/en/Sustainability/
- Part 1: Overview and "Operational Effectiveness is Not Strategy" - Click here.
- Part 2: "Strategy Rests on Unique Activities"
- Part 3: "A Sustainable Strategic Position Requires Trade-offs" - Click here.
- Part 4: "Fit Drives Both Competitive Advantage and Sustainability" - Click here.
- Part 5: "Rediscovering Strategy" - November 19
Brian Phipps is the Founder and a Strategist at Confluence in Denver, Colorado that consults small and mid-size businesses to increase their positive impacts and community connections in their corporate giving and social responsibility practices. To find out more go to www.ConfluenceLLC.com.