How Competitive Strength creates Competitive Advantage

The Royal Crown Derby Porcelain Company manufacturers the highest quality English fine bone china tableware, giftware and collectables. It sells primarily through china and glass retailers in the UK and overseas.

Based in Derby for over 250 years in 2000 became an independent and privately owned business again via an MBO from its parent company Royal Doulton. In spite of its well established reputation it faced formidable challenges. The majority of its competitors have moved their manufacturing offshore, in the UK market there has been a major shift away from formal dining tableware, and the weak US dollar hit profit margins in their most important export markets. Their retail customers are reluctant to hold stocks and have reduced their order lead times significantly.

Crown Derby believes that their history is a key factor in what their customers buy. Royal Crown Derby china still “made in Derby” is a crucial part of this history. They have therefore resisted offshoring any manufacturing even though this put them at a significant cost disadvantage.

What they have done is to focus on Continuous Improvement, in particular the multi-skilling of their workforce. In an industry where traditionally the different “crafts” would never easily interchange their employees now are highly flexible. This has reduced lead times and they can now ship orders in 4/5 days from receipt. In the US, one of their biggest export markets, this enabled them to dispense with their warehousing facility, a significant cost saving coupled with improved customer service. Their competitors still have their warehouses and the costs these entail.

Businesses with high quality upmarket products can often believe that this is enough on its own, but it is not. From a Competitive Strength perspective Royal Crown Derby have moved themselves from a Constrained Condition to the beginnings of Excellence where more dimensions across the business are beginning to match the quality of their products. This has already produced significant competitive advantage.

By contrast their old parent company Royal Doulton in spite of moving all its manufacturing to low cost countries is a still a constrained and struggling business.