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REI & Core Competencies/Competitive Advantages

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Identify an organization. Review the organization's competitive advantages and disadvantages, evaluate the company's performance on the four generic building blocks of competitive advantage, and describe the company's distinctive competencies. Next describe the varying roles of strategy and luck in developing the firm's competencies and decide whether their firm's strategies are building upon distinctive competencies, as well as whether the firm is developing new competencies. Finally, evaluate barriers to imitation that benefit the firm, and whether and why the firm is experiencing difficulty in adapting to changing industry conditions.

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Solution Summary

This detailed solution involves the identification of an orgnization (REI) in regards to its' competitive advantages and disadvantages. It evaluates the company's performance on the four generic building blocks of competitive advantage and describes the company's distinctive compentencies. It also describes the role of strategy and luck in developing the company's competencies, and if the company is developing new competencies. It also discusses barriers to imitation that favor REI and if the company is having trouble adapting to changing industry conditions. It includes examples and references.

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REI is a sporting good company that specializes in quality outdoor gear. The company started in 1938 as a gear co-op, and has grown to include more than 3.5 million active members, which it serves through 30 stores, as well as catalog and Internet operations. REI has successfully built a competitive advantage through the four generic building blocks of efficiency, quality, innovation and customer responsiveness.

REI has a distinct competitive advantage, relying on economy of scale to offer members a 10 percent annual refund on all purchase. It also runs an extremely efficient operation. All customer transactions are stored in the computer system to facilitate returns and exchanges- as well as track purchases. This allows REI to understand their customer better and target advertising appropriately. Also, the company has consolidated its' distribution and logistics to source product more efficiently and economically. The company has two "500,000+ square foot Distribution Centers located in Sumner, Washington and Bedford, Pennsylvania" (www.REI.com) which are state of the art facilities, fully automated to take advantage of cost savings.

REI is unique among the sporting good companies in not offering discounted prices or weekly sales. It does periodically send 20 percent off coupons to members but it primarily generates sales by developing customer loyalty, unique product offerings, and a sense of community. This lack of discounted pricing and mass-market product offerings could be seen as a competitive disadvantage by some.

REI is known for quality among outdoor enthusiasts. The company offers quality and innovative private label product under the REI and Novara brands, in addition to top quality national brands. The private label brands are priced lower; yet develop more profit margin than the national brands. They also practice ...

Solution provided by:
Sally Baldwin, Ed.D
Education
  • BA, University of Southern California
  • MSS, United States Sports Academy
  • Ed.D, Boise State University
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