chapter+1

Imperatives forMarket-Driven

Strategy

CHAPTER 1

OBJECTIVES

Pivotal role of market-driven strategy in designing and implementing business/marketing strategies

Links between business/marketing strategy and corporate strategy

Challenges in the modern environment

Achieving SuperiorPerformance

DeterminingDistinctive

Capabilities

CustomerValue/

CapabilitiesMatch

Becoming Market-Orientation

CHARACTERISTICS OF A MARKET-DRIVEN STRATEGY

MARKET-DRIVEN STRATEGY (1)

Becoming market-oriented Customer focus Competitor intelligence Cross-functional coordination Performance implications

BECOMING MARKET ORIENTED

Customer is the focal point of the organization

Commitment to continuous creation of superior customer value

Superior skills in understanding and satisfying customers

Requires involvement and support of the entire workforce

Monitor rapidly changing customer needs and wants

Determine the impact of changes on customer satisfaction

Increase the rate of product innovation Pursue strategies to create competitive advantage

CHARACTERISTICS OF MARKET ORIENTATION

Customer FocusWhat are the customer’s value

requirements? Competitive Intelligence

Importance of understanding the competition as well as the customer

Cross-Functional CoordinationRemove the walls between business

functions Performance Consequences

Market orientation leads tosuperior organizational performances

Information Acquisition

Cross-Functional Analysis of Information

Shared Diagnosis and Coordinated Action

Delivery of Superior Customer Value

Becoming a Market-Oriented Organization

MARKET ORIENTATION

Information Acquisition Gather relevant information on customers,

competition, and markets Involve all business function

Inter-functional Assessment Share information and develop innovative products with people from different function

Shared diagnosis and action

Deliver superior customer value



Determining distinctive capabilities

DISTINCTIVE CAPABILITIES

“Capabilities are complex bundles of skills and accumulated knowledge, exercised through organizational processes, that enable firms to coordinate activities and make use of their assets.”

George S. Day, Journal of Marketing, October 1994, p.38.

SOUTHWEST AIRLINE’S DISTINCTIVE CAPABILITIES

Organizational ProcessesSouthwest uses a point-to-point route system rather than the hub-and-spoke design used by many airlines. The airline offers services to 57 cities in 29 states, with an average trip about 500 miles. The carrier’s value proposition consists of low fares and limited services (no meals). Nonetheless, major emphasis throughout the organization is placed on building a loyal customer base. Operating costs are kept low by using only Boeing 737 aircraft, minimizing the time span from landing to departure, and developing strong customer loyalty. The company continues to grow by expanding its point-to-point route network.

Skills and Accumulated KnowledgeThe airline has developed impressive skills in operating its business model at very low cost levels. Accumulated knowledge has guided management in improving the business design over time.

Coordination of ActivitiesCoordination of activities across business functions is facilitated by the point-to-point business model. The high aircraft utilization, simplification of functions, and limited passenger services enable the airline to manage the activities very efficiently and to provide on-time point-to-point services offered on a frequent basis.

AssetsSouthwest’s key assets are very low operating costs, loyal customer base, and high employee esprit de corps

CompellingLogic of Distinctive

Capabilities

Disproportionate (higher)contribution to superiorcustomer value

Provides value tocustomers on a morecost-effective basis

Capabilities

Source: George S. Day, Journal of Marketing, October 1994, p. 38.

CAPABILITIES

DesirableCapabilitiesDesirable

Capabilities

Applicable to Multiple

Competition Situations

Difficult toDuplicate

Superior to the Competition

Source: George S. Day, Journal of Marketing, October 1994, 49.



Determining distinctive capabilities Types of capabilities

TYPES OF CAPABILITIES

Outside-InProcesses

Inside-OutProcesses

SpanningProcesses

ORGANIZATION’S PROCESS

Source: George S. Day, Journal of Marketing, October 1994, 41.

Spanning Processes

Outside-In Processes

Inside-Out Processes

EXTERNAL EMPHASIS

INTERNAL EMPHASIS

Market sensing Customer linking Channel bonding Technology

monitoring

Customer order fulfillment

Pricing Purchasing Customer service

delivery New product/service

development Strategy development

Financial management Cost control Technology

development Integrated logistics Manufacturing/

transformation processes

Human resources management

Environment health and safety



Determining distinctive capabilities Types of capabilities Creating value for customers

Value Requirements

Distinctive Capabilities

MATCHING CUSTOMER VALUE AND DISTINCTIVE CAPABILITIES

CREATING VALUE FOR CUSTOMERS

Customer Value: Value for buyers consists of the benefits less the costs

resulting from the purchase of products. Superior value: positive net benefits

Creating Value:“Customer value is the outcome of a process that begins with a business strategy anchored in a deep understanding of customer needs.”

Source: C. K. Troy, The Conference Board Inc., 1996, 5.

CREATING VALUE FOR CUSTOMERS

Benefits Costs

CustomerValue

VALUE COMPOSITION

Monetary costs

Time

Psychic and physic costs

Product

Services

Employees

Image

Benefits

Costs(sacrifices)

Value(gain/loss)


Becoming market-driven Marketing sensing capabilities Customer linking capabilities Aligning structure and processes

BECOMING MARKET DRIVEN

MARKET – DRIVEN

STRATEGIES

Market Sensing Capabilities

Customer LinkingCapabilities

MARKET DRIVEN INITIATIVES

Market Sensing CapabilitiesEffective processes for learning about

marketsSensing:

Collected information needs to be shared across functions and interpreted to determine proper actions.

Customer Linking CapabilitiesCreate and maintain close customer

relationships

Aligning Structure and Processes Potential change of organizational design

Improve existing processesProcess redesign

Cross-functional coordination and involvement Primary targets for reengineering:

Sales and marketing, customer relations, order fulfillment, and distribution

CORPORATE, BUSINESS AND MARKETING STRATEGY (1)

What is corporate strategy?

CORPORATE STRATEGY

Deciding the Scopeand Purpose ofthe Business

Business Objectives

Actions and Resources for Achieving Objectives

CHARACTERISTICS OF SUCCESSFUL STRATEGY

Unique competitive position for the company.

Activities tailored to strategy. Clear trade-offs and choices vis-à-vis

competitors. Competitive advantage arises from fit

across activities. Sustainability comes from the activity

system not the parts. Operational effectiveness a given.

Source: Michael E. Porter, “What Is Strategy,” Harvard Business Review, November-December 1996, 74.


What is corporate strategy? Corporate strategy framework

Deciding corporate vision Objectives Resources Business composition Structure, systems and processes

CORPORATE STRATEGYCOMPONENTS

Management’s long-term vision for the corporation

Objectives Assets, skills, and capabilities Businesses in which the corporation competes Structure, systems, and processes Creation of value

Source: David J. Collis and Cynthia A. Montgomery, Corporate Strategy, Chicago: Irwin, 1997, 7-12.


Business and marketing strategy Business and marketing strategy relationships Strategic marketing

CORPORATE, BUSINESS AND MARKETING STRATEGY


The marketing strategy process Markets, segments and customer value

Markets and competitive space Strategic market segmentation Strategic customer relationship management Capabilities for continuous learning about markets


Designing market-driven strategies Market targeting and strategic positioning Strategic relationships Innovation and new product strategy

Market-driven program development Strategic brand management Value chain strategy Pricing strategy Promotion strategy


Implementing and managing market-driven strategy Designing market-driven organizations Marketing strategy implementation and control

MARKETING STRATEGY PROCESS

Markets,SegmentsAnd Value

Market-DrivenProgram

Development

Implementingand ManagingMarket-Driven

Strategy

DesigningMarket-Driven

Strategies

CHALLENGES IN THE MODERN ENVIRONMENT

Escalating globalization Technology diversity and uncertainty The Web 2.0 Ethical behavior and corporate social

responsiveness

STRATEGIC MARKETING PLANNING

Developing the strategic plan for each business Preparing the marketing plan

Planning relationships and frequency Planning considerations

Responsibility for preparing plans Planning unit

Preparing the marketing plan

MARKETING PLANOUTLINE

I. Strategic Situation Summary

Summarize the key points from your situation analysis (market analysis, segments, industry/competition) in order to recount the major events and provide information to

better understand thestrategies outlined in the marketing plan.

II. Market-Targets and Objectives

The market target may be defined demographically (key characteristics only), geographically, or in social/economic terms. Each market target should have needs and

wants that differ to some degree from other targets. These differences may be with respect to types of products purchased, use situation, frequency of purchase, and other variations that indicate a need to alter the positioning strategy to fit the needs

and wants of each target. An objective is a quantified goal identifying what is expected when. It specifies the end results expected. The objectives should be written for each

target market. Objectives should also be included for the following program components: (1) product,

(2) price, (3) distribution, (4) promotion (salesforce, advertising, sales promotion, and public relations), and (5) technical services.

III. III. Positioning StatementsPositioning Statements

Write statements that describe how you want each marketWrite statements that describe how you want each market target to perceive each product relative to competition. State thetarget to perceive each product relative to competition. State the core concept used to position the product (brand) in the eyes andcore concept used to position the product (brand) in the eyes and

mind of the targeted buyer. The positioning statement shouldmind of the targeted buyer. The positioning statement should describe: (1) What criteria or benefits the customer considers whendescribe: (1) What criteria or benefits the customer considers when

buying a product along with the level of importance, (2) What webuying a product along with the level of importance, (2) What we offer that differentiates our product from competition, and (3) Theoffer that differentiates our product from competition, and (3) The

limitations of competitive products.limitations of competitive products.

MARKETING PLANMARKETING PLANOUTLINEOUTLINE

A. Product Strategy Identify how each product fits the market target. Other issues that may be addressed would

be new product suggestions, adjustments in the mix of existing products, and productdeletion candidates.

B. Price StrategyThe overall pricing strategy (I.e., competitive, premium-priced, etc.) should be identified along with a cost/benefit analysis if applicable. Identify what role you want price to play, i.e.,increase share, maintenance, etc.

C. Distribution StrategyDescribe specific distribution strategies for each market target. Issues to be addressed are intensity of distribution (market coverage), how distribution will be accomplished, andassistance provided to distributors. The role of the sales force in distribution strategy should also be considered.

D. Promotion StrategyPromotion strategy is used to initiate and maintain a flow of communication between the company and the market target. To assist in developing the communications program, theattributes or benefits of our product should be identified for each market target. How our product differs from competition (competitive advantage) should be listed. The sales force’sresponsibilities in fulfilling the market plan must be integrated into the promotion strategy. Strategies should be listed for (1) personal selling, (2) advertising, (3) sales promotion, and(4) public relations.

IV. Market Mix Strategy for Each Market Target

E. Marketing ResearchDescribe the market research problem and the kind of information needed. Include a statement which addresseswhy this information is needed. The specific marketresearch strategies can be written once the above twosteps have been followed.

V. Coordination with Other Business FunctionsIndicate other departments/functions that haveresponsibilities for implementing the marketing plan.

VI. Sales Forecasts and Budgets

VII. Contingency PlansIndicate how your plans should be modified if eventsshould occur that are different from those assumedin the plan.

chapter+1

Documents

market oriented customer

customer satisfaction

loyal customer base

superior performance

changing customer needs

strong customer loyalty

businessmarketing strategy

processes source