COMPETITIVE ADVANTAGE

Claus Meyers activities in NYC. Finally, it was discovered that the attributes associated the most with the Scandinavian COO was ‘high quality’ and ‘up-and-coming/cool’. Based on this knowledge we will argue that having a Danish COO will most likely have a positive effect on O&S when they enter the US market.

The following section will provide further argumentation for differentiation being the competitive strategy of O&S. The ways in which O&S’ differentiate, will be identified and analysed as resources using the RBV and the VRIN model. The purpose is to determine to which degree these resources work as a competitive advantage for O&S.

5.4.1.1 High Quality as a Resource

It is evident that O&S is pursuing a strategy of differentiation, as it is important for them “to present something, that is unique for the market” (A1, 155). One of the ways O&S differentiates themselves in the market is on the high quality of their products. Jesper Dixen - Head of Business Development, states: “When we ask our customers why they visit Lagkagehuset, 90% answers that it is because of our products (…) the products are the core of our concept, and we provide a high quality of products, to be successful in the market”

(A1, 44-47). The high quality does not only serve as a mean of differentiation, but is also a valuable resource for O&S. According to Barney (1991), resources are valuable if they add financial value to the company. As 90% of ‘Lagkagehuset’s’ customers visit the store due to their high quality products, this must be presumed to generate financial value to the company.

Thereby the high quality premium products becomes a valuable resource which work as a mean of competitive advantage for O&S. This statistic regarding the importance of high quality, is drawn from the Danish market. However, differentiation on high quality products is also a strategy pursued by O&S on the international market scene. Gabriel Sorgi - US Director, states: “There is a segment of the market in NYC that is missing high quality breads and pastry and cakes” (A3, 193-194). This is the segment that O&S will try to reach in NYC, by leveraging their resource of high quality products.

Euromonitors International (2017), has identified a heightened focus on premium products in their 2017 report on mega trends. They call it the ‘Premiumisation Trend’, which is driven by maturing markets and growing product selection, along with consumers having more expendable funds to use on better quality products (Euromonitor International, 2017).

Similarly, Mehmeti and Xhoxhi (2014) have identified premium quality food as a current food trend in the international market, which sees consumers increasingly indulge in premium products (Mehmeti & Xhoxhi, 2014). Despite a heightened focus on health in the market, Mehmeti and Xhoxhi (2014) argue that consumers are still indulging in foods which are perceived as unhealthy, such as e.g. cakes. However, consumers now have a heightened

focus on the quality of these foods, which they allow themselves to indulge in, despite of them being unhealthy.

According to the VRIN framework, as proposed by Barney (1991), a resource is valuable if it helps the company to exploit market opportunities. Based on the above we will identify the

‘premiumisation’ and ‘indulgence in premium products’ trends, as being market opportunities which O&S can exploit. By offering high quality premium products, O&S are well suited to capitalise on these current market trends.

In conclusion, it has been discovered that O&S’ high quality premium products can work as a resource to gain a competitive advantage, as it plays well within the current market trends of premiumness and indulgence.

5.4.1.2 Production Facilities as a Resource

As described in the theoretical framework, the RBV builds on the founding principle, that for a strategy to be sustainable it must be imbedded in the company’s resources and capabilities.

Previously it was identified that O&S is seeking differentiation as a mean of competitive strategy. One of the areas of differentiation is based on O&S’ high quality premium products.

The following will be an elaboration on this focus on high quality, and how it is deeply imbedded in the way O&S has organized their business around their production facilities.

Previously it has been indicated how the production facilities plays a key role in the way O&S structures their business. When O&S enters a new market, finding a location for the production facility is one of the top priorities. This is due to the fact that O&S needs to be able to deliver fresh bread and pastries to their stores three times during the day (A1, 118-119). The fact that O&S has designed their entire business around the freshness and quality of their products, proves how important high quality is to the company. The high quality of the products is the core of the O&S business, and the entire operation of O&S is build to continuously provide this high quality to their customers.

VRIN Model Applied

Putting this resource into context of the VRIN model, it can be argued that the production facility constitutes a value-adding resources, as it ensure a constant quality of products, which is one of the reasons why customers visit O&S. The production facilities thereby serves as a resource which leads to a competitive advantage (Peng, 2009). Looking at the rarity aspect of the VRIN model, we do not have sufficient insights into the NYC market to argue whether or not this type of production facility is rare. However, as already stated by Gabriel Sorgi, there is a segment of the market in NYC that is missing high quality breads, pastry, and cakes (A3, 193-194). Therefore, because the production facility works to meet this need for high quality in large scale, we will argue that this could be perceived as a rare resource in the NYC market. It would most likely be costly for competitors to invest in a large scale production facility in Manhattan, as well as having to invest in the numerous of stores eventually needed to provide the sales that will make the business economically feasible. For this reason it could be argued that the production facility of O&S is imperfectly imitable, and can work as a competitive advantage for O&S in NYC (Peng, 2009). Since O&S’ entire business is build around the fact, that they need a central production facility in a given market, in order to provide high quality products for their stores, we will argue that the production facility as a resource is non-substitutable. As the production facilities is a central part of a complex structure within O&S’ strategy, it would be highly complicated for a competitor to implement the same strategy and substitute the central production facility with another solution.

Therefore we will argue that the production facilities, being part of O&S’s strategy, is in fact non-substitutable and work as a competitive advantage for the company.

In conclusion, we will argue that O&S’ high quality bread and pastries, and the way in which they have organized their entire business around being able to provide this high standard of quality in terms of central production facilities, is not only a value adding resource but also a sustainable competitive advantage, since is fulfil the ‘VRIN’ criteria as proposed by Barney (1991).

5.4.1.3 Scandinavian COO as a Resource

Previous in the analysis it was found that products from Denmark and Scandinavia seem to have positive associations for the American consumers. Moreover, due to Claus Meyer and his restaurants and businesses, NYC has seen a rise in popularity of the Nordic cuisine, and a positivity surrounding Scandinavia in general. This is something that O&S can possibly benefit from, and which could work as a competitive advantage for the company in the NYC market. In the following we will identify how the Scandinavian COO of O&S is apparent in their stores and products. By applying the VRIN framework we will analyze to which degree the Scandinavian COO serves as a resource of sustainable competitive advantage of O&S.

As already accounted for, O&S is pursuing a competitive strategy of differentiation. One of the areas in which they differentiate is on their product range, which is founded on their Scandinavian heritage. While this product range is relatively traditional in the Danish market scene, Jesper Dixen - Head of Business Developments describes it as being; “relatively unique in the international context” (A1, 62). The Danish COO is in particular distinct in the naming of some of the pastries, which have been kept close to the original Danish names.

Examples include: Christianshavner Cake, Copenhagener, and Spandauer (Ole and Steen, 2018). Moreover, O&S focus on products and ingredients that are associated with the Scandinavian heritage: “We want to keep the elements of our Scandinavian food culture, and focus on being authentic to our heritage and what we stand for” (A1, 157-158). This is done by e.g. introducing the open-faced sandwich using ingredients with roots back to Scandinavia like blue cheese, salmon and mackerel (A1, 160-161). Moreover, more obvious Scandinavian products like rye bread and cinnamon buns alo takes a significant role in the differentiation on products based on the Scandinavian COO.

Throughout the interviews with the NYC influencers, is has been mentioned how having a product offering with a Scandinavian COO can serve as a benefit. One influencer states: “I would expect them (O&S) to have some specialty food from the area (Scandinavia), (...) I think that cinnamon bun is a great example of this” (A6, 137-141). The ‘Cinnamon Social’, known in Denmark as a ‘Kanelstang’, is mentioned in positive terms by several of the influencers. It is also one of the most popular products in the London stores, where one

‘Cinnamon Social’ is sold every two minutes in their location at Haymarket (A2, 177-178).

One influencer explains how the cinnamon pastry is associated with Scandinavia, and that people in NYC tend to want to try something new and different (A6, 16-17). The UK Director regards these particularly popular products as being the ‘Hero Product’ of O&S.

Another ‘Hero Product’ in the UK market, as described by the UK Director, is the Danish rye bread: “I think the rye bread in particularly (...) people really do like that product. It's just so unique. So yeah I think the UK public has really fallen in love with our product range” (A2, 184-186). An influencer suggest that these ‘Hero Products’ will also work well in the NYC market: “If they (O&S) have a dish that is especially photo-worthy, or they do something that is very unique or different, maybe coming up with this traditional Scandinavian cinnamon bun (...) It’s all about coming up with one or two things that is a little bit different. I think that can really go a long way” (A6, 196-201). Based on this it seems that the Scandinavian COO is a valuable asset for the O&S product range. Moreover, data from the survey shows that more than 50% of the respondents state, that a differentiated product range is important to them when going to a café or bakery (A18). This result further underlines that O&S’

differentiation of products, based on their Scandinavian heritage, is something that will likely also appeal to the NYC market.

VRIN Model Applied

It has been identified that the Nordic cuisine has seen a rise in popularity in the NYC market.

Moreover, we have found that Denmark and Scandinavia seem to create positive associations amongst our American respondents and influencers. We will therefore, based on these finding, argue that having a Scandinavian COO is a valuable resource for O&S in the NYC market.

We have not conducted a thorough market analysis regarding high-end bakeries in the NYC market, as this would be beyond the scope and resources of this thesis. However, based on the knowledge gained through interviews with experts and influencers, we have come to the understanding that high-end bakeries with a Scandinavian COO is rather uncommon in the NYC market. For this reason, we will argue that O&S’ Scandinavian COO is in fact rare.

The Scandinavian COO being an intangible resource, will be hard for competitors to imitate in the NYC market, as they would not possess the Danish heritage which constitutes a big part of the O&S concept. It is not impossible for competitors to imitate the product offering, store design, or other elements of the O&S concept. However, if another bakery in NYC did

attempt to imitate the O&S concept, it would likely lack the authenticity that O&S possess by being a legitimate Danish bakery.

If a competitor were to recreate the same concept as O&S, they would not be able to achieve the same performance by substituting the resource of the Scandinavian COO with an alternative heritage. O&S’ product range carries a lot of uniquely differentiated products, which are based on their Danish heritage, and has proven to be highly valued by customers.

We will therefore argue that if a competitor were to reach the same customer segment as O&S, the Scandinavian COO would in fact be non-substitutable.

In conclusion, we will argue that the resource O&S holds in their Scandinavian COO serves as a sustainable competitive advantage in the NYC market. This is based on the fact that it lives up to the VRIN criteria as proposed by Barney (1991).

The aim of this chapter has been to answer the research question: What is Lagkagehuset’s competitive advantage. Through the analysis it has been found that O&S pursues differentiation as a competitive strategy. Three main resources was identified as areas in which O&S differentiates themselves, these being: high quality premium products, production facilities, and a Scandinavian COO. These three resources constitutes the competitive advantage of O&S, and will presumably benefit O&S when entering the NYC market.