Capability Gap and Strategies for Superior Performance
A Strategic Marketing Perspective
Agus Rahayu
Universitas Pendidikan Indonesia, Setiabudhi 229 street, Bandung, Indonesia
Keywords: Capability gap, unique resources, superior customer value, superior performance.
Abstract: The phenomenon of the ASEAN economic community (AEC) and or other economic communities have the
potential to cause problems of capability gap for domestic/national companies. Changes in market types
and patterns of interaction between actors in the market, from domestic to international or multinational or
global, make the environment and competition more complex and dynamic, and involve a broader array of
actors and macro forces, while the degree of flexibility and adaptability of domestic/national companies to
respond to those changes is relatively diverse. The company's management is required to continually
revitalize its strategy that allows the company to be highly competitive. The problem lies not only in the
choice of the strategic basis, but also with the strategic orientation. Unique resources of a company can be a
key input in designing and executing the company's strategy, and focusing on superior customer value as its
orientation. This is important to ensure superior performance and enable the company to develop its unique
resources, and maintain/enhance its strategic fit and superiority.
1 INTRODUCTION
Indonesia’s national companies in different
industries and scales face a problem of capability
gap. ASEAN Economic Community (AEC), as an
economic union, has not only agreed to
reduce/remove internal trade constraints among
member countries, but with freedom in the
movement of production factors, and coordination
and harmonization of socioeconomic policies as
well. The pattern of interaction between firms and/or
market actors is very complex, companies with other
companies in AEC, companies in AEC with
companies in other countries and/or economic
communities, and AEC with other companies and/or
economic communities.
The changes in type and/or market coverage,
from domestic to international or multinational or
global, have made the environment and competition
more dynamic, and involved a broader array of
actors and macro forces. For national companies,
this situation can lead to a problem of capability gap.
The shift in market requirements is very dynamic,
while the degree of flexibility and adaptability of
national companies to respond it is relatively diverse
(Agus Rahayu, 2013: 2). This has the potential to
make it difficult for national companies to survive
and/or develop. A study shows that changes in high
and dynamic environmental and market
requirements make it difficult for companies to
understand and fulfill them (Agus Rahayu, 2004:
119). In the long run, national companies deal with
the threat of sustainability issues.
Inability of a company to respond to external
opportunities and threats, or the occurrence of
capability mismatch, will result in a decrease in
competitiveness and / or impediments to the
performance of the company (Agus Rahayu, 2013:
2). Companies will have difficulty in maintaining
and developing their internal resources and
advantage (Day and Reibstein, 1997: 53). National
companies are required to continuously redefine and
revitalize their management and/or strategies to
ensure the suitability of environmental requirements
and competition with their internal strength (Agus
Rahayu, 2013: 2). This is relevant to meeting the
need for effective strategies for managing the above
mentioned sustainability threats.
AEC, as an economic union, is an evolution of
free trade area (FTA), customs union, and common
market. FTA involves two or more countries
agreeing to reduce and/or remove internal
constraints in their trade. Each country,
independently, may continue its trade policies with
other countries outside the countries that agree on
the FTA. There is an additional agreement in the
46
Rahayu, A.
Capability Gap and Strategies for Superior Performance - A Strategic Marketing Perspective.
In Proceedings of the 2nd International Conference on Economic Education and Entrepreneurship (ICEEE 2017), pages 46-49
ISBN: 978-989-758-308-7
Copyright © 2017 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

form of determination of external boundaries and
free movement of production factors, that
individually occurs in the custom union and
common market. In the economic union (Keegan
and Green, 2008: 78-80), member countries do not
only agree to reduce/remove internal constraints in
trade among them, but there is an agreement on the
free movement of production factors (labor, capital,
information, and others), as well as coordination and
harmonization of socioeconomic policies
(establishment of central banks, single currency, and
others).
In the market perspective, the market type and/or
target market of FTA and/or economic union
countries develops from international, multinational
and global markets. There is a difference in business
and/or marketing orientation, product planning, and
marketing mix decisions on/in different market types
(Keegan and Green, 2008: 17; Kotabe and Helsen,
2004). The business environment and/or marketing
environment becomes more widespread, describing
the market situation consisting of environmental
elements, encompassing key actors and macro forces
of international or multinational or global
scope/scale. The environmental elements interact
with patterns that are very diverse and complex. The
interactions in the environment lead elements, key
actors and macro forces to affect each other. An
economic union can be a macro and/or dominant
force against the main perpetrators in the market or
against other economic unions. A careful and
continuous observation or analysis of strategic
factors of dynamic environment is essential for
management to get the right input into its decision. It
requires an effective and efficient support of
information systems.
There is a difference in business and / or
marketing orientation, product planning, and
marketing mix decisions across the different types of
markets (Kotabe and Helsen, 2004). Marketing
orientation in international, multinational, and global
markets is polycentric, regiocentric, and geocentric
respectively. Product planning at each market type is
based on the needs of the target country customers,
regional product standardization, and global
products with local variations. In this context, a
number of issues should be considered, including:
standardization, localization / adaptation, and
production sites and/or methods.
2 METHODS
This study is descriptive from various literary
perspectives with case study approach on economic
union. Stages include internal and external
environmental analysis, formulation and selection of
strategies, implementation and evaluation.
The steps taken to achieve the goal are 1) List
all the variables that need to be researched, 2)
Search for each variable on "subject encyclopedia",
3) Select descriptions of necessary materials from
available sources, 4) Check the index that contains
the variables and topics of the problem studied, 5)
Furthermore, the more specific is to look for articles,
books, and biographies that are very helpful to
obtain materials that are relevant to the problem
under study. 6) Once relevant information is found,
the researcher then "reviews" and organizes the
literature in order of importance and relevance to the
problem under study, 7) Information materials
obtained are read, recorded, organized and rewritten.
8) In the last step, the process of research writing of
the materials that have been collected together in a
concept research.
3 RESULTS AND DISCUSSION
3.1 Strategies for Superior Performance
3.1.1 Market Entry Strategies
In accordance with the market types or levels,
international or multinational or global, the target
market involves two or more countries or regions or
across countries and regions. National companies
with a polycentric or regiocentric or geocentric
marketing orientation deal with the issue of
developing and implementing the right strategy to
enter the market. Some activities or options may be
selected in entering international or multinational or
global markets, such as export, overseas
manufacture / production, and investments in local
companies or operations. The selection and
execution of the activities to enter the market is
based on consideration of the market situation and
internal strength of the company. In practice,
company management can work with other agents or
elements in the market (strategic alliances,
collaborations, joint ventures, etc.).
In a market perspective, the substance of an
effective strategy relates to a company's
management capability in achieving capabilities
match or value match. It deals with the ideal
conditions that are required to create and / or offer
superior customer value (value creations) that can be
met.
Capability Gap and Strategies for Superior Performance - A Strategic Marketing Perspective
47

3.1.2 Unique Resources as a Source
Advantage
The unique resources or core-competence of a
company is its source of advantage or superiority
(Agus Rahayu, 2013: 11). Hill and Jones (Agus
Rahayu, 2013: 12) assert that core-competencies or
distinctive competencies are derived from unique
and valuable resources. Not all company resources
are core-competence or source of advantage for the
company concerned. A resource can be categorized
as core-competence or a source of advantage when it
meets the criteria of valuable, rare, perfectly
irreplaceable conditions , and can be organized in
various competitive situations (Hit, Hoskisson, and
Ireland, 2007: 81-84; Barney in Wheelen and
Hunger, 2010: 186).
Companies with unique resources can potentially
respond to existing threats and opportunities so well
that they can survive and thrive. In contrast,
companies with weak internal resources have the
potential to deal with difficulties in responding to
threats and opportunities that result in bankruptcy
and shut-down (Agus Rahayu, 2013: 12). A study by
Mardjo Soebiandono (Agus Rahayu, 2013: 12)
shows that the uniqueness of resources influences
the company’s competitive strategy and
performance. A company considers internal
resources or strengths in formulating its marketing
strategies. In this case, there are efforts to synergize
the scattered resources in all the main functions of
the company even though the proportion is not
optimal (Agus Rahayu, 2004: 227).
The strategy chosen by management should
enable the company to use its core competence in
responding to external environmental opportunities
and neutralizing its threats. Core-competence or
distinctive-competence is a unique strength that
enables a company to achieve superiority in
efficiency, quality, innovation and customer
responsiveness, so as to create superior value and
competitiveness (Hill and Jones 2009: 111). The
ability of the company to understand and develop
continuously within these aspects is a requirement
for the company sustainability.
3.1.3 Strategic Foundation and Direction
A successful competition requires companies to
understand their external and internal environment
in an integrated manner. Understanding the market
needs/demands and meeting them better than
competitors is at the heart of a successful strategy
(Urban and Star, 1991: 6). Strategies that are based
solely on internal environments or internal resources
are not effective enough to achieve superior
performance without being directed or adapted to
external environmental or market conditions.
Conversely, the high potential profitability of a
market will not effectively be a competitive
advantage without being supported or responded by
the company's internal resources (Agus Rahayu,
2011: 9).
In spite of integrated base strategies, many
companies are unable to achieve positional
advantage (Agus Rahayu, 2011: 9). In this case, the
problem does not only lie in the selection of the
strategic foundation, but also with the strategic
direction and/or orientation. The effectiveness of the
strategic foundation and direction chosen and/or
used can be traced by analyzing the benefits
provided and/or received by the customers compared
to the cost incurred. In this context, customer value
must be a strategic orientation (Agus Rahayu, 2013:
15). A study by Agus Rahayu, Suwatno, and Ayu
Krishna (2013: 89) shows that the customer value
orientation of a company has effects on the
company competitiveness.
In situations where a company can create and / or
offer higher customer values that those offered by
competitors, the company is superior. In contrast,
the lower customer values will not encourage the
company to be superior (Agus Rahayu, 2013: 15).
The performance and sustainability of a company
depends on its unique resources and strategies
chosen to empowering those resources to respond to
and enhance streamline market attractiveness or
profitability potential. The ability of a company to
match unique resources with its market attraction or
profitability potential enables the company to
achieve strategic fit (Agus Rahayu, 2013: 15). This
potential becomes the company's unique strength in
creating and/or offering a unique customer value.
The condition is highly relevant to achieving
superior performance and enables the company to
maintain and improve its strategic fit by investing in
the development of its unique resources. In the long
term, the company will attain a high degree of
sustainability.
4 CONCLUSIONS
The phenomenon of AEC and or other economic
communities lead to changes in market types and
patterns of interaction between firms in the market,
from domestic to international or multinational or
global. The environment and competition become
very complex and dynamic, and involve a broader
spectrum of actors and macro forces. The marketing
orientation develops into polycentric or regiocentric
or geocentric patterns.
ICEEE 2017 - 2nd International Conference on Economic Education and Entrepreneurship
48

Companies that possess unique resources can
potentially respond to threats and opportunities so
well that they can survive and thrive. Meanwhile,
companies with weak internal resources may deal
with potential difficulties in responding to threats
and opportunities that result in bankruptcy and
discontinuation or cessation. A company's unique
resources can be the main input in designing and
executing its strategy to achieve superior
performance. Company management must be able to
identify, develop and empower its unique resources
to respond to the increasingly complex and dynamic
environmental opportunities and threats of the
economic community.
The ability of a company to match unique
resources with its market attractiveness (domestic,
international, multinational, and global) enables it to
achieve strategic fit. This potential becomes its
unique strength in creating and/or offering its unique
customer value. The condition is highly relevant to
achieving superior performance and enables the
company to maintain and improve its strategic fit by
investing in the development of its unique resources,
while maintaining and / or enhancing its advantage.
Achievement of superior performance and/or
sustainability of the company is ultimately
determined by its management competence in
addressing the situation during the process of
formulating and executing the strategy. Management
needs to continuously observe the strategic situation
in order to identify or analyze the unique resources,
and develop and empower them to respond to
market attractiveness or streamline the potential
profitability of a market (domestic, international,
multinational, or global).
REFERENCES
Day, Geoge S. and Reibstein, David J. 1997. Dynamic
Competitive Strategy. John Willey and Sons, Inc.,
New York.
Hill, Charles W.L. dan Gareth R. Jones. 2009. Strategic
Management Theory: An Integrated Approach.
Seventh Edition. Houghton Mifflin Company. Boston
New York.
Hitt, Michael A., Robert E. Hoskisson, dan R. Duane
Ireland. 2007. Management of Strategy:Concept and
Cases. Thomson South-Western. Mason USA.
Keegan, Warren J. dan Green, Mark C. 2008. Global
Marketing. Fifth Edition. Person Prentice Hall.USA.
Kotabe, Masaaki. and Helsen, Kristiaan. 2004. Global
Marketing Management. John Wiley anad Sons, Inc.
Rahayu, A. 2013. “Nilai Pelanggan Unik: Basis dan
Orientasi Strategi Pemasaran untuk Kinerja Unggul
Berkelanjutan”. Pidato Ilmiah. Universitas
Pendidikan Indonesia.
________, Suwatno, dan Krisna A. 2013. Penciptaan
Daya Saing melalui Value Creation dan Co-Creation
Strategi. Laporan Penelitian. Sekolah Pascasarjana
UPI.
________. 2011. Strategi Pemasaran: Model untuk
Keunggulan. Edisi Kedua. Rizqi Press. Bandung.
________. 2004. Pengaruh Kekuatan Lingkungan Mikro
dan Lingkungan Internal terhadap Strategi
Pemasaran serta dampaknya pada Hasil Penjualan:
Studi terhadap Industri Pakaian Jadi di Jawa Barat.
Disertasi Doktor. Universitas Padjadjaran.
Urban, Glen L. dan Steven H. Star. 1991. Advanced
Marketing Strategy: Phenomena, Analysis, and
Decision. Prentice Hall. New Jersey.
Wheelen, Thomas L. and David J. Hunger. 2010. Strategic
Management and Business Policy. Pearson Education,
Inc. New Jersey.
Capability Gap and Strategies for Superior Performance - A Strategic Marketing Perspective
49