European Journal of Marketing

Competitive advantage in the marketing of products within the enlarged European

Union
Urša Golob, Klement Podnar,
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Marketing of
Competitive advantage in the products within
marketing of products within the the enlarged EU
enlarged European Union
245
Urša Golob and Klement Podnar
University of Ljubljana, Ljubljana, Slovenia Received May 2005
Revised September 2005,
October 2005
Accepted November 2005
Abstract
Purpose – The purpose of this paper is to analyse competitive advantage in relation to the
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formulation of competitive product marketing strategies in European Union (EU) firms. It considers
how it is possible to gain a competitive advantage through different product strategies.
Design/methodology/approach – The analysis is based on 18 EU member States (14 founding
States and four new States that joined in 2004). To investigate the range of strategies is used by EU
companies in both old and new member States, cluster, discriminant analysis and multiple comparison
procedures are used.
Findings – The results show some differences in strategies between old and new EU member
companies. Although a balanced strategy is most widely used in both groups, companies from new
member states are fond of a price and quality mix whereas companies from the old member states
favour a quality and distribution mix.
Research limitations/implications – A larger pool of competitive elements could provide more
in-depth insights. Thus, further research could include different internal and external factors that
influence the choice of strategy.
Practical implications – To gain a more sustainable advantage in the new competitive milieu all
EU member companies should be able to successfully integrate all marketing elements employed in
the strategy.
Originality/value – This paper provides an insight into competitive strategies of EU member
companies and a basis for monitoring the levels of competitiveness of member states and the
competitive marketing practices of different companies within the EU.
Keywords European Union, Marketing strategy, Competitive advantage
Paper type Research paper

Introduction
The European Union evolved from an early vision of Robert Schumann in the 1950s.
Schumann’s idea was to create a common Europe that enabled sharing the resources of
the continent in a peaceful manner by establishing co-operation among European
states (Dalgic, 1992). The core concept behind today’s European Union is the European
Common Market, which stimulates business enterprise and competition by removing
barriers and obstacles (political, legislative, procedural) and developing measures to
facilitate integration and harmonization (Hildebrand, 1994).
Although the European market is an internal market; it is made up of different
national markets that have their own particular historical, legislative and cultural European Journal of Marketing
Vol. 41 No. 3/4, 2007
traditions. In this sense, the European internal market remains an international and pp. 245-256
intercultural market, assuming an almost global character (Daser and Hylton, 1991). q Emerald Group Publishing Limited
0309-0566
Success of the member states in the international economy increasingly depends on DOI 10.1108/03090560710728318
 EJM their competitiveness, which is a phenomenon that can be analysed by country, by
41,3/4 industry and on a company level. As Porter says, however, it is the firm, not nations (or
industries), which compete on international market (Porter, 1990). This is one reason
why highly competitive companies can be understood as national ambassadors of
growth and prosperity.
In our paper we focus on how to achieve a sustainable competitive advantage at the
246 company level or more specific, at the product (or service) level. The key assumption is
that the more internationally successful companies that one member country has, the
better it is for the individual nation state as well as for the EU.
This particular logic, however, is not without obstacle. Given the range of different
historical backgrounds not all member states or the companies within them have equal
starting positions in the European single market. Besides winners, competition also
brings losers, which can slow down the growth of the EU just as easily. This is
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especially relevant inside the EU in the context of its most recent (2004) and likely
future enlargements.
Partition of the EU on developed old and underdeveloped new Europe could be
fateful for Europe and its competitiveness as a whole on the global market. In order to
prevent rich member states getting even richer and the poor becoming even poorer,
which would slow down EU economic growth overall, it is important to monitor the
different levels of competitiveness of member states and especially the competitive
marketing practices of different companies in different states of the EU. Knowing,
benchmarking and accumulating best practice marketing strategies and tools of
companies with headquarters in successful states makes is possible to share the way of
doing successful business. Less successful companies in both new and old member
states must acquire and practice successful marketing strategies, tools, and practices in
order to achieve their unique competitive advantage. For this reason, the question on
which we focus here is: what relation of different components of the market offerings
helps to bring about sustainable competitive advantage of a product or service in the
EU economy.
In our research we focus on the differences in the strategies for gaining a
sustainable competitive advantage of products. For our purposes, “product” means the
total offering that the firm brings to the target market. Our main focus is on the most
important elements of product strategies practiced by different companies within
different countries. Further, we focus on the macro differences in product component
policies between companies in old and new member states. Our research is carried out
at the product level and from the perspective of product marketing managers.

Components of the product strategy

Although several authors in the literature deal with the question of firm and product
competitiveness (e.g. Carpenter, 1987) as well as competitive advantage (e.g. Aaker,
2001; Beard and Easingwood, 1992; Piercy et al., 1998), little work has been done on
which to base the framework for this investigation. It is clear from the literature that
many sources offer direction for companies to increase their competitiveness in order to
achieve business success (e.g. Ambastha and Momaya, 2004). Company
competitiveness can be defined as the ability of a firm to design, produce and/or
market products and services that are superior to those offered by competitors, taking
into account the price and non-price qualities (Ambastha and Momaya, 2004). Through
 different strategies and policies, product managers try to deliver results that provide Marketing of
customers with superior value in order to gain competitive advantage in the market. products within
In the context of services, Devlin (1998) calls the process of adding value offering
“value-adding mix”, gained either through low prices or differentiation factors such as the enlarged EU
product features, quality and image. According to Mathur (1988) this is called
“merchandise”, referring to the elements that are made available to the customer in
combination with “support differentiation”, which refers to what is provided along 247
with the merchandise.
In modern marketing theory it is broadly accepted that the offer of products or
services is multidimensional and can be broken down in many ways. Different authors
(Song and Parry, 1997) stress different elements of product components on which
competitiveness in the market is based. According to Cateora et al. (2000, p. 304) the
different dimensions of a product can be separated into three distinctive components:
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(1) The core component, which consists of the physical product, the platform that
contains the essential technology, its design and functional features.
(2) The packaging component, which includes quality, price, style features,
packaging, and trade marking.
(3) The support service component, which consists of dimensions such as deliveries,
warranty, repair and maintenance, installation and so forth.

Despite the importance of the product itself, different dimensions that add to a
product’s value in the eyes of the consumer should not be defined in isolation from the
customer-supplier context (Saren and Tzokas, 1998). This fits in with consumer
behaviour theory that argues that consumers demand a uniform offer from a single
source. It means that all product components must be integrated to be accepted on the
local or international markets. Among numerous dimensions that provide added value
for the customer, the focus of our research is on product quality, innovation, variety,
distribution and price, which are all important in differentiation strategies theory. Each
product component can be a foundation for product strategy, either stand-alone or in
combination with other elements on which the competitiveness of a particular product
is based.
Product quality can be defined as a product’s overall excellence and superiority
(Zeithaml, 1988). Quality is considered complementary to strategic management and
one of the primary bases for competitive advantage. In the marketing field, the main
focus is product quality, which in a broader sense, is defined as the extent to which a
product meets the needs and demands of the customer (Lemmink and Kasper, 1994). A
quality product adheres to specific standards that have been determined by the
expected use of a product (Cateora et al., 2000). Quality means conformance to
standards of excellence as well as satisfying customers’ needs. According to Aaker
(2001), quality strategy is a prototype of differentiation in which business delivers or is
perceived to deliver a product or service superior to that of its competitors.
Product innovation is an idea, practice or product that is perceived as new by an
individual or other unit of adoption (Lamb et al., 2005; Rogers, 1976). In marketing
literature, innovation has always been important to significant advantage. Innovation
is most often researched in the context of new product development and the diffusion
of innovation model. When considering innovation as a differentiation strategy we
must distinguish between product and process innovations, even though they are
 EJM interdependent (Utterback, 1987). “From a managerial perspective, the benefit of
41,3/4 innovations can be seen to arise from product-related patents, proprietary methods of
production, trade secrets, and the product functional performance” (Kotabe, 1990,
p. 24). Despite the great importance that innovations have, new product development is
one of the riskiest endeavours of modern corporations. In some industries the failure
rate for new products is an alarming 90 per cent. Thus, when managing product
248 innovation, particular attention should be paid to the reasons for product failure or
success (Cooper, 2001).
Product variety is defined as a number of different versions of a product offered by
a firm at a single point in time (Randall and Ulrich, 2001). In the context of marketing,
product variety is about matching supply with demand. The concept of the
custom-made product has a special relevance to relationship and one-to-one marketing
(Jančič, 1996). As a result of intensified competitiveness, new technologies put
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individuals in direct contact with sellers and increase customer power thus forcing
producers to interact directly with customers, recognise their individual needs and
respond to their wishes and preferences. Conceptually, variety-related decisions focus
on how to create diversity in a product line and on managing a firm’s processes and
supply chain to implement variety (Ramdas, 2003, p. 80).
Product distribution (accessibility and speed of delivery) refers to the broad
principles by which a firm seeks to achieve its distribution objectives to make its
products available to the target markets (Rosenbloom, 2001). It is about how and in
what timeframe the product will be delivered to the customer. For the customer it is
important that a product is available whenever and wherever it is needed. Product
distribution is not viewed as a necessity or a condition for doing business but rather as
an opportunity for gaining competitive advantage. Even Drucker (1990) himself said
that channels of distribution should be a major concern to every business and industry.
Aaker (2001) argues that access to an effective and efficient distribution channel is
often a key success factor regardless of which channel is chosen and can lead to a
sustainable competitive advantage (see also Cravens, 1994).
Product pricing is a multidimensional and complex concept that has an important
strategic role in marketing. Cost leadership or low cost strategy is considered one of the
generic strategic approaches (Aaker, 2001; Porter, 1980). Its role has a direct impact on
buyer behaviour and consequently on revenues of the firm (Campo and Gijsbrechts,
2001; Cravens, 1994). It involves the determination of a price structure and price levels
along with decisions on short-term price changes (Campo and Gijsbrechts, 2001,
p. 390). Pricing objectives can be classified as: profit-oriented objectives, cost-oriented
objectives, sales-oriented objectives and competition-oriented objectives (Campo and
Gijsbrechts, 2001). The main barrier for low-price strategy has been the belief that
industrial markets are inflexible and that price is not a major determinant in
influencing demand (Thompson and Coe, 1997). Nowadays many European
competitors are facing severe low-prices (usually non-branded competition) that
mostly originate from the Far East (Hilleke and Butscher, 1997).

Research methodology
Data for our analysis is drawn from the international Cranet-E database (see Ignjatovic
and Svetlik, 2003). Although the primary focus of the Cranet-E database is on human
resource management data, it is one of the few studies that utilised country data on
 market performance and marketing strategies that were collected in a standardised Marketing of
manner. The Cranet-E database contains statistically representative samples of products within
middle-sized and large organisations from different countries (Svetlik, 2004). The most
recent study was conducted in 2001 and includes organisations in 29 countries from all the enlarged EU
over the world (Ignjatović and Svetlik, 2003). The average response rate among the
participating countries was approximately 20 per cent. Our sample frame consists of a
selection of EU member states. We focused our research on 14 old EU member states 249
(all member states except Luxembourg) and four new ones that joined EU in the year
2004 – Estonia, the Czech Republic, Cyprus and Slovenia. The selection of data from
new member states was rather limited because the Cranet-E database contains only
information on companies in these four markets. Thus, from a total of 4,055 companies
operating in all selected EU countries, the majority are from the old member states
(88.9 per cent) and the rest (11.1 per cent) are from the states that recently joined the
EU. Furthermore, in the analysis the sample was restricted to companies with no
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missing data on any of the marketing strategy measures. The final sample has 3,415
valid observations.
Data was collected through standardised postal questionnaires translated into all
relevant languages. The questionnaires were addressed to senior managers, usually
HR/personnel specialists. Thus, the database contains a large amount of information
mainly from the human resource management field, but also some data about market
performance and product marketing strategies. For the purpose of our research we
chose indicators that measure marketing strategies of private (93 per cent) and part
State owned (7 per cent) companies.
The section used for the analysis comprised five indicators on a three-point scale
that measured the importance of each indicator or source of competitive advantage for
product component strategy. Companies supplied information about the importance of
price, quality, variety, distribution and innovation to their processes and, finally,
products for market performance. In order to investigate what range of strategies is
most commonly used by EU companies in both old and new member states, we used
descriptive statistics in the first step and methods such as cluster and discriminant
analysis and multiple comparison procedures in the second.

Analysis and results

Strategies based on sources of competitive advantage
The mean scores for each element that was evaluated are shown in Table I (n ¼ 3,415).
All five elements are considered to be relatively important (mean scores above 2.4),
however, the most important are quality and distribution, each with more than 20 per cent

Mean Mean
Mean Per cent of (old member (new member
Element (all countries) Std. dev. total weighting States) States)

Price 2.59 0.54 19.8 2.58 2.66

Quality 2.86 0.36 21.9 2.85 2.87 Table I.
Variety 2.44 0.63 18.7 2.44 2.47 Mean scores for
Distribution 2.74 0.47 21.0 2.76 2.54 components of product
Innovation 2.43 0.63 18.6 2.44 2.29 strategies
 EJM of the total weighting. Other elements have less mean emphasis but all are close to
41,3/4 20 per cent.
If mean scores between old and new member states are compared for each element,
it is clear that companies from both groups of countries consider quality to be the most
important factor in the strategy (mean scores above 2.8). Companies from the old EU
states, however, seek to emphasise distribution over price in contrast to new member
250 states that place a higher priority on price. At this point it is important to note that
distribution tends to be a more durable source of competitive advantage than pricing
(Lawless and Fischer, 1990). Innovation had the lowest mean score in all countries
(, 2.5).
Because of the relative importance that all companies in both new and old member
states placed on each of the strategic elements, it is unlikely that all of them would
attempt to use such similar strategies. Therefore, in further analysis we employed
cluster analysis, which Beard and Easingwood (1992) also considered in a similar
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situation. Cluster analysis was used to identify possible sub-groups of companies in

both old and new member states that adopt similar strategies to other companies in the
same group but that differ from other sub-groups (Beard and Easingwood, 1992).
We performed a K-Means cluster analysis and examined the results from two to five
clusters. A four-cluster solution was chosen on the basis of a difference in Ward’s
functions (sum of distances of cases from its cluster centres). Further, discriminant
analysis was conducted to check the robustness of our four-cluster solution. A test of
equality of group means showed that clusters differed significantly on all five strategy
components. Discriminant functions are significant meaning that all three functions
significantly distinguish among the four clusters. Eigenvalues were high while Wilk’s
Lambdas were low indicating little within-group variation. The first discriminant
function has a very high correlation with quality, the second correlates with price and
the third measures the other three components of marketing strategy. The
classification results show that a high percentage of originally grouped cases were
correctly classified into each of four clusters (96.9 per cent).
One-way analysis of variance indicates that preferred elements are not the same
across all four clusters (see Table II). For the multiple comparisons procedure, we used
the Bonferroni test to find out how elements are connected with particular clusters. The
Bonferroni test can be used when there are unequal numbers of cases in each cluster. It
is also the test that is the most flexible and can be used in any multiple testing situation
(Dallal, 2001). The test revealed that most clusters differ significantly by mean levels of
measured elements with a 95 per cent confidence level. For example, price is the least
important in cluster four but is strongly associated with clusters two and three. In
cluster one quality is not important and distribution is not strongly associated with

Element F-value P-value

Price 9.23 0.000

Quality 17,034.94 0.000
Table II. Variety 117.87 0.000
Results of one-way Distribution 2,232.35 0.000
ANOVA Innovation 158.21 0.000
 cluster three but is important in clusters one, two and four. Variety and innovation do Marketing of
not have high overall importance, however, both are quite important in cluster two. products within
All the results presented above allow us to interpret the clusters (see Table III).
Cluster one can be named distribution and price. Price and distribution are the most the enlarged EU
important elements of this cluster followed by variety. This cluster contains the
smallest number of cases, around 13 per cent. Cluster two is called balanced. This is the
largest group containing 40 per cent of the sample. The emphasis is on all elements 251
that are of equal importance. Cluster three is based on price and quality and contains
approximately 16 per cent of all companies. In this group the emphasis is on price and
quality, all the other elements are not significant. The final cluster, four, is a quality &
distribution cluster that contains 30 per cent of the companies. This group placed the
least emphasis on price.
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Old and new EU member companies

It is interesting to note that there was a relatively small difference between companies
from old and new member states in terms of balanced strategy as a basis for market
competition (see Table IV). In the old member states this strategy is used by 40.6 per
cent of companies and by 34.3 per cent of companies in the new member states
respectively. The strategy comparisons, however, showed a remarkable gap between
old and new member states in the price and quality strategy. More than 30 per cent of
companies from new member states use price and quality-oriented strategies while the
proportion of companies in old member states is significantly lower (14.7 per cent).
This is in contrast to the quality and distribution strategy in which companies from old
member states are in the majority; the proportion of those employing quality and
distribution strategies is 31.2 per cent compared to 23.9 per cent in the new EU
countries. Distribution and price strategy is least popular in all companies irrespective
of the country of origin. The number in both groups does not exceed 14 per cent.

Cluster number Cluster name No. of cases

1. Distribution and price 454

2. Balanced 1,362 Table III.
3. Price and quality 561 Clusters according to
4. Quality and distribution 1,038 associated elements

Distribution and price Balanced Price and quality Quality and distribution

Old EU member 411 1,234 448 949

% 13.5 40.6 14.7 31.2
New EU member 43 128 113 89
% 11.5 34.3 30.3 23.9
Total 454 1,362 561 1,038
% 13.3 39.9 16.4 30.4 Table IV.
Product strategies in old
2
Notes: Value of x =59.14; Results are significant at 1 per cent level (n=3,415) and new member states
 EJM Through comparing product strategies in individual countries the conclusion can be
41,3/4 drawn that the new member states, especially the Czech Republic and Slovenia, are
stepping out in the third group of strategies where the emphasis is on price and quality.
In Slovenia, for instance, the third “price and quality” cluster includes more than 40 per
cent of all companies compared to the Czech Republic where the proportion is 32 per
cent or to Austria where the proportion of companies employing price and quality as a
252 strategy is as low as 11.6 per cent. Cyprus tends to have more balanced strategies; the
majority of its companies are in the second group. Estonia, on the other hand, has the
most similar distribution as companies from the old member states.
The firms in old member states predominantly use either balanced strategies or
strategies based on a quality and distribution mix (see Table V). The highest
percentage in the balanced cluster (. 40 per cent) includes: Ireland, UK, Spain, Portugal
and Belgium. These countries also tend to have fewer firms that emphasise price and
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quality (, 18 per cent). Countries with more than 40 per cent of their firms in the
quality and distribution cluster include: Denmark, Italy, Finland and Greece. All other
countries from the “older” part of the EU tend to have more evenly distributed firms
between the two clusters. Apart from The Netherlands, which has the most evenly
distributed firms and the highest value in the first cluster emphasising distribution and
price (. 30 per cent), the proportion of firms in either the first or third cluster is less
than 22 per cent.

Research limitations
Our findings are limited by the fact that only four new member states were included in
the sample compared to 14 old member states. Thus, the sample is unbalanced. It
should, however, be noted that the countries that were included (Cyprus, the Czech
Republic, Estonia and Slovenia) although all relatively small countries, have different
political, economical and historical backgrounds and are therefore interesting to
compare.
Second, the survey considered only a limited number of strategy elements. A larger
pool of competitive elements could provide more in-depth insights. Third, the choice of
strategy may be affected by several internal or external factors (such as type and size
of organisation, ownership, industrial sector, target market) that were not included in
our study and could be incorporated in further research. Furthermore, because the data
was obtained from an international database with a standardised questionnaire the
authors had no influence on question design. Questions on product strategies could be
more thorough in future research in order to obtain even more interesting and relevant
results. Although limitations do exist, we believe that none negate the essential
findings of our study.

Conclusions
This paper has explored elements of competitive advantage on which product
component strategies are based. The focus was on 18 countries from the enlarged
European Union. Our research generated some interesting insights. The literature
suggested that there might be some differences in product mixes for gaining a
sustainable competitive advantage in relation to products and services among old and
new EU members. Our research has two important findings. The first is that
companies derive competitive advantage in different ways. European companies
 Marketing of
Distribution and price Balanced Price and quality Quality and distribution
products within
UK the enlarged EU
% firms within country 11.3 49.8 13.2 25.7
France
% 27.2 38.3 13.8 20.7
Germany 253
% 16.2 36.7 14.7 32.4
Sweden
% 13.4 38.5 15.6 32.4
Spain
% 7.6 45.1 14.1 33.2
Denmark
% 14.1 32.3 13.4 40.3
The Netherlands
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% 30.7 20.5 23.9 25.0

Italy
% 7.3 27.3 16.4 49.1
Ireland
% 8.0 50.6 14.9 26.5
Portugal
% 6.1 42.4 17.2 34.3
Finland
% 9.7 26.4 21.5 42.4
Greece
% 10.0 33.3 14.4 42.2
Czech
% 13.3 32.5 31.7 22.5
Austria
% 18.1 34.8 11.6 35.5
Belgium
% 7.7 48.7 14.4 29.2
Cyprus
% 66.7 15.4 17.9
Estonia
% 14.4 35.6 20.0 30.0
Slovenia
% 11.3 25.0 41.1 22.6
Total
% 13.3 39.9 16.4 30.4 Table V.
Product strategies in
Notes: Value of x2 = 294.29; results are significant at 1 per cent level (n = 3,415) individual countries

appear to use four distinct product mix policies or strategies. Around 40 per cent
favour a so-called balanced strategy in which all elements (price, quality, variety,
distribution and innovation) are relatively important. This cluster is similar to a
finding by Beard and Easingwood (1992). The authors carried out research in a
high-tech market and found out that nearly half the examples favoured a balanced
strategy. Their findings, however, also suggested some examples of relatively
“pure” strategies (pure quality, pure performance), which was not the case in the
present survey.
 EJM Our second finding was that important differences in product mix strategies exist
41,3/4 between old and new EU member companies. Although a balanced strategy is most
widely used in both groups, companies from new member states are particularly fond
of a price and quality mix whereas companies from the old member states favour a
quality and distribution mix. The latter is a source of a more durable competitive
advantage since both distribution and quality tend to be durable, whereas pricing
254 tends to be a non-durable type of competitive advantage (Lawless and Fischer, 1990).
Mean scores for each element and the findings described suggest that product price
as the main source of competitive advantage is typically associated with new member
countries, Slovenia and the Czech Republic in particular, while old member countries
tend to emphasise quality and distribution over price.
These findings are not unexpected. Marketing orientation still seems to be on a
different level in new member states. Dyker (2001, p. 1004) similarly argues that
“competition policy tends to be one of the weaker areas of policy making” in most new
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member states. Marketing orientation in new member states is predominantly focused

on sales volume and their advantage is based on lower prices. Our findings suggest
that production in new EU countries is more labour intensive and so is giving relative
cost advantages (Hilleke and Butsher, 1997). Because of increased competition with
products manufactured in the Far East, however, this advantage will soon no longer be
important. Accordingly, companies from new EU countries must thus consider
reorienting their strategies to be more successful. In line with this, improved quality
and distribution may become higher priorities in choosing sources of competitive
advantage. Our results also have some implications for those European companies that
favour a balanced strategy. In order to gain a more sustainable advantage in the new
competitive milieu they should be able to successfully integrate all marketing elements
employed in the strategy. In light of intensive low-price competition from countries like
China, the potential source of advantage for all European firms may also be innovation
which, as it appears from our results, is perhaps not as important as it should be when
considering the perspective of the Lisbon strategy, EU competitiveness based on the
knowledge economy and the growing societal demands.

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Further reading
Cranet-E (1999), Cranfield Network for the Study of Human Resource Management in Europe,
Cranfield University, School of Management, Cranfield.

About the authors

Urša Golob is a doctoral candidate at the Faculty of Social Sciences, University of Ljubljana. She
teaches Principles of Buying, Selling and Marketing and her research interests focus on
marketing, corporate social responsibility and corporate communications. Urša Golob is the
corresponding author and can be contacted at: ursa.golob@email.si
Klement Podnar is Assistant Professor at the Department of Marketing Communications and
Public Relations at the Faculty of Social Sciences, University of Ljubljana. He lectures in
Marketing and Visual Communications and his research interests are in marketing, corporate
identity and corporate communications. He has published widely in these areas.

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