JOURNAL OF

MARKETING
MANAGEMENT

Management framework guiding strategic thinking

in rapidly changing markets
David W. Cravens, M. J. Neeley School of Business, Texas Christian
University, USA
Nigel F. Piercy, University of Warwick, UK*
Artur Baldauf, University of Bern, Switzerland
Abstract Developing a management framework to guide strategic thinking
in changing markets is increasingly critical for researchers and executives in
coping with the complex and rapidly changing global business environment.
Conventional training and practices have too often led strategy researchers and
executives to assume a stable competitive box around existing businesses, not
recognising the effects of radical and increasingly disruptive change on markets
and competitive space. New strategic thinking logic and initiatives require a
conceptual framework to guide obtaining information, perceptive interpretation
of strategic issues and trends, and choice of the right strategic initiatives. The
conceptualisation begins by determining the market-based strategic capabilities
needed to identify the nature and scope of determinants of market changes.
These changes must be identified, driven by new competition, new business
models, and creativity and innovation. Understanding fast changing markets
requires identifying new market space, conducting strategic segmentation
analysis, and determining customer value requirements. Finally, this knowledge
guides strategic vision and formulation and implementation of market-driven
strategies for changing markets. The framework is based on conceptual logic
and empirical findings from multiple disciplines including marketing strategy
and strategic management
Keywords Market dynamics, Market-based capabilities, Customer value,
Strategic market vision

*Correspondence details and biographies for the authors are located at the end of the article.
JOURNAL OF MARKETING MANAGEMENT, 2009, Vol. 25, No. 1-2, pp. 31-49
ISSN0267-257X print /ISSN1472-1376 online Westburn Publishers Ltd.

doi: 10.1362/026725709X410025

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INTRODUCTION
Volatility, reinvention, and fundamental changes in markets pose unprecedented
challenges to researchers and executives. Unfortunately, too often traditional
conceptual models and theories fail to provide adequate insight for coping with this
new and rapidly changing business environment. Traditional market perspectives and
conceptual logic may even blind researchers and strategic decision makers to the real
threats present in the changing competitive landscape and new market space, and to
opportunities for added value which can be uncovered and exploited (Eisenhardt and
Brown 1998; Huyett and Viguerie 2005).
Executives and strategy researchers need a strategic thinking framework to guide
how they examine all markets that are relevant to the core business of interest and
how to determine the strategic implications for the relevant markets. Strategic
thinking in changing markets requires developing a revised conceptual perspective
and new thought processes concerning market analysis and targeting and positioning
strategy formulation. The intent of strategic thinking is to more fully capture and
analyse the relevant forces creating new market opportunities and business strategy
requirements. Strategy initiatives may require altering market target and positioning
strategies, adopting new business designs, and/or entering new markets. In extreme
situations the change pressures may result in exiting from the core business.
Illustrative of the challenges of the turbulent and demanding business environment
are Eastman Kodaks delayed responses to the potential impact of digital photography
(The Economist 2005; The Wall Street Journal 2007). The disruptive and pervasive
repercussions of digital imaging technology on traditional camera and film markets
demanded a rapid transformation of Kodaks strategic vision, business design and
market-driven strategy. The severe consequences of delayed responses to the changing
markets included major financial losses, extensive layoffs, and plant closures. By
2007 digital overhaul had reduced the 1600 acre Kodak Park in Rochester, N.Y. to
700 acres. Factories producing film, paper, and related products were disappearing
rapidly. Two-thirds of U.S. households had digital cameras in 2006. Kodaks
prior management (new CEO in June 2005) had failed to estimate the speed and
rate of decline of purchases in film markets around the world. Moreover, digital
photography was rapidly cannibalising sales in developing countries where a much
slower transformation of photography markets was expected by management. While
Kodak has gained the lead position in the US digital camera market, adding to Kodaks
financial problems are the very small margins on digital cameras.
The reality is that while some markets are stable, many are changing rapidly and
sometimes without warning. These markets require modifications in managements
strategic thinking (Eisenhardt and Brown 1999). Signals may be given by shifting
customer value requirements, emerging technologies, new competition, and new
business models resulting from industry and value chain modifications. In some
situations changes in markets may be difficult to predict and strategy initiatives
may require trial and adjustments guided by market responses. The danger is not
proactively responding to the threats and requirements of fast changing markets.
Many companies and industries are confronted with an array of changes in their
core markets, presenting strategy researchers and executives with complex challenges
but also exciting opportunities. These new challenges are driven by demanding
customers with altered value requirements, aggressive global competition, market
turbulence, rapid emergence of new technologies, and the escalating globalisation
initiatives of many companies (Chakravarthy 1997).

Cravens, Piercy and Baldauf Management framework guiding strategic thinking

The conceptual logic underlying strategic thinking in rapidly changing markets

has failed to keep pace with the rapid alterations in markets and competitive space.
Strategic thinking is marketing strategy analysis and decision making guided by a
revised strategic framework. The processes for analysing and interpreting the impact
of changing market structures and buyers value requirements need to be critically
examined and revamped to assist strategic thinking in changing markets. The
assumption often made in the past was that market structure would be stable and the
objective was to target the buyers with value requirements (benefits minus costs) that
most closely match the firms capabilities to deliver superior value.
Our objective is to develop a revised conceptual framework to guide strategic
thinking in changing markets. The conceptual logic is presented and described. Next,
each of the major dimensions of the conceptual model is examined. Finally, important
implications of the framework are considered.

STRATEGIC THINKING IN CHANGING MARKETS

Traditional market analysis and planning efforts typically assume that a market and the
accompanying market structure are in place, the market is then segmented, and one or
more market segments are targeted. However, when market boundaries reconfigure
due to new technologies, new competition, and the creation of new business designs,
markets and competitive space may be drastically altered (Eisenhardt and Martin
2000). The reality is that sustaining and building competitive advantage in markets
increasingly requires altered strategic thinking.
The proposed conceptual framework for guiding strategic thinking in rapidly
changing markets is shown in Figure 1. The continuous process consists of four
inter-related stages. First, an organisation must have, or develop, three market-based
FIGURE 1 Management framework guiding strategic thinking in rapidly-changing
markets
MARKET-BASED
STRATEGIC
CAPABILITIES
Becoming Market-Oriented
Market Sensing and Learning
Capabilities
Becoming Customer Centered
STRATEGIES FOR
CHANGING MARKETS

NATURE AND SCOPE

OF MARKET CHANGES

Strategic Vision
Strategy Implementation

New Competition
New Business Models
Creativity and Innovation
UNDERSTANDING FAST
CHANGING MARKETS
Identifying New Market Space
Strategic Segmentation Analysis
Customer Value Requirements

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strategic capabilities: (1) a market oriented culture and processes, (2) well developed
market sensing and learning competencies, and (3) customer centered processes. The
lack of these organisational strengths may account for many companies failure to
identify rapidly changing markets and the strategic implications. Second, the nature
and scope of market changes and their impact on customer value requirements must
be identified. Third, gaining an understanding of what is happening in fast changing
markets requires determining if new market space has emerged, applying strategic
segmentation analysis, and examining the resulting customer value requirements.
Fourth, market-focused strategies must be developed for the relevant market(s). This
may require changing the firms strategic vision about the future and/or altering
market targeting and positioning strategies.
The purpose of the framework is to provide a conceptual logic for strategic analysis
of markets encountering rapid changes. Strategic thinking in changing markets is
a continuing process. Markets are impacted by new customer value requirements,
new technologies, new competitors, and new business designs. Stable markets are
increasingly the exception. Change has become the norm in contemporary markets
and competitive space. In more than a few situations market changes can be predicted
and strategies adapted to the expected conditions. In some situations unstable
and unpredictable markets may occur, demanding responsive actions involving
strategic risks and rapid shifts that are improved over time, guided by learning and
experience.
The mandate for perceptive strategic thinking in turbulent and fast changing
markets is dramatically illustrated in telecommunications markets. The rapid global
expansion of the cell phone market; TV, broadband, and phone services from cable
firms; and rapid emergence of Voiceover Internet Protocol (VOIP) are redefining the
traditional telecoms markets and their structures, incumbents business designs, and
competition into new market space. Telecommunications markets are experiencing
a huge transformation. Fixed-line telephone services are being negatively impacted
by an array of disruptions. For example, industry authorities expect consumer long
distance revenues in 2008 to decline to only one-half of the revenues obtained
five years previously. Digital technology is the driver. The traditional telecoms are
encountering severe competitive challenges. The availability of free voice services via
VOIP threatens to destroy the pricing models of the telecommunications industry
(The Economist 2006). Importantly, the speed of change continues to escalate,
further compressing the time available for management to develop effective responses
and for researchers to study markets. Recall, it took 50 years for the telephone to
gain widespread diffusion and a decade for the cell phone to do the same. Internet
telephony should reach a critical mass in only a few years. Markets have become
increasingly complex and hypercompetitive and these changes are often global in
scope (DAveni 1994). Excess capacities in many markets are drastically altering
opportunities and competitive space.

MARKET-BASED STRATEGIC CAPABILITIES

The conceptual logic for guiding strategic thinking in changing markets begins
with the development of market-based strategic capabilities (Figure 1). Essential
organisational initiatives are: (1) creating a market-oriented culture and capabilities
for providing superior customer value, (2) developing effective market sensing and

Cravens, Piercy and Baldauf Management framework guiding strategic thinking

learning processes (Slater and Narver 1995), and (3) becoming customer centred.
These characteristics are necessary to effective strategic thinking in rapidly changing
markets. Market-based capabilities are used to determine the nature and scope of
market changes and to identify and analyse new markets and competitive space.
Interestingly, the impressive success of Samsung Electronics is based in part on a
culture of perpetual crisis, a powerful Value Innovation Program, and a long-term
strategic vision of controlling core technologies in an era of digital convergence. The
vision calls for radical cost-cutting to retain short-term competitiveness, but sustained
investment in R&D for long-term competitiveness. The goal of market leadership at
Samsung is based on technology, design, and building brand equity.
Becoming market oriented
Market orientation consists of an organisational culture committed to customers,
and the development of processes for delivering superior customer value (Slater
and Narver 1994). The culture should span the entire organisation to encourage
the support and proactive commitment of all personnel toward the pivotal role of
the market in guiding business strategies. Providing customers with superior value
requires obtaining information concerning customers, competitors, and markets;
sharing the information across business functions; determining the implications of
the information; and making decisions and implementing actions to deliver superior
customer value. Cross-functional information diagnosis and decision making are
essential process activities. There are compelling research findings from many
international studies which indicate market-oriented companies display strong
business performance.
Extensive research has been conducted on market orientation (MO) and its
antecedents and consequences (Deshpand and Farley 2004; Kirca, Jayachandran, and
Bearden 2005). A substantial knowledge base has been accumulated. There is strong
support for a positive market orientation and business performance relationship. The
research findings point to the importance of an active role by top management in
implementing MO. Interestingly, centralised organisational structures apparently do
not hamper MO initiatives. Moreover, the findings from a dozen countries provide
consistent support for the MO and performance relationship. A note of caution
is included in the research findings indicating that MO enhances success, since its
impact needs to be accompanied with other performances antecedents (Hult and
Ketchen 2001).
Pivotal role of market sensing and learning
Effective market sensing and learning capabilities are essential for continuous
monitoring of trends and events in a companys markets, learning from these
activities, and proactively addressing opportunities and threats (Levinthal and Nardi
1993; Cohen and Levinthal 1990). Research sponsored by the Marketing Science
Institute found that market sensing displayed the greatest impact on business process
performance of ten market-based capabilities (Ramaswami, Bharghava, and Srivastava
2004). This research provides strong conceptual and empirical support indicating
that market sensing is important to guiding strategic thinking in rapidly changing
markets. Although the importance of market sensing competencies is recognised,
there are many examples of the failure of businesses to develop and apply these
capabilities. Market sensing is essential in designing business and marketing strategies
to cope with disruptive innovations, commoditisation threats, fast changing markets,

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and creating new market space.

Importantly, business research indicates that many U.S. companies do not
respond to fast-moving markets because they are unable to read their markets to
understand and adjust to what customers want. These companies are struggling to
meet the demands of increasingly competitive international markets and sophisticated
customers (Business Performance Management Forum 2006). Pattern recognition
offers a promising process for new market opportunity recognition (Baron 2006).
Market sensing differs from conventional approaches to market research and
analysis. The goal is not the collection and reporting of data; instead, it is the process
of building managements understanding of markets and competition and how they
are likely to change in the future. The signs of superior market sensing are competitive
insight, advantage, predictive capabilities, and responsiveness to learning. Superiority
in market sensing is the basis for knowledge-based market-driven strategy, which
characterises high performers in diverse sectors - Toyota in automotive, and Target in
retail - all underline the principle that those who know more perform better than
their competitors.
Illustratively, Tesco, the third largest retailer in the world, displays impressive
market sensing and learning capabilities (Rohwedder 2006). Tesco has captured
30 per cent of the British grocery market with a share double that of the nearest
rival. Tescos information sensing is supported by an extensive database. Over twelve
million customers use Tesco Clubcards when making purchases, obtaining discounts,
and receiving incentives on special promotions. Card members generate data on 15
million purchases each week. Importantly, the customer loyalty cards generate a wealth
of information for use in guiding Tescos market targeting and positioning strategies.
Suppliers like Procter & Gamble, Coca Cola, and Kimberly-Clark have access to
the database which guides them in responding to buyers preferences and buying
behaviour. Illustrative of the Tesco emphasis on market sensing, in preparation for
entering the U.S. West coast grocery market, fifty senior executives and researchers
spent two weeks living with American families in California, to better understand
their shopping, eating, and leisure behaviour.
Becoming customer centred
The basic logic underlying market orientation is becoming customer centred. A
customer-centric organisation provides the basis for developing close and profitable
relationships with customers (Shah et al. 2006). Customer centred initiatives are an
important market-based strategic capability. Customer centricity is a process that
seeks to create value for the customer and the enterprise.
The estimates in support of the financial return from customer-centric initiatives
are compelling:
By 2007, marketers that devote at least 50 percent of their time to advanced, customercentric marketing processes and capabilities will achieve marketing ROI that is at least
30 percent greater than that of their peers, who lack such emphasis

(Marcus and Collins 2003, p.1)

These returns highlight the attractive value of developing customer centered
capabilities.
There are many hurdles that prevent organisations from becoming customercentric. Shah et al. (2006) point to four major impediments to implementing
customer-centric processes: (1) organisational culture, (2) organisational structure, (3)

Cravens, Piercy and Baldauf Management framework guiding strategic thinking

existing processes, and (4) financial metrics. Achieving a customer-focused culture is

essential, whereas many companies have traditional cultures in place that are difficult
to change. Moving the organisational structure toward a cross-functional, processdriven enterprise is necessary in placing the customer as the centre of attention.
Cross-functional processes are needed to move toward customer-centric capabilities.
Finally, most companies will need to revise their financial metrics to include customer
equity rather than the traditional product/brand metrics emphasis.
Shah et al. (2006) propose four major organisational change initiatives which
need to be followed in becoming customer centric: (1) leadership commitment, (2)
organisational realignment, (3) systems and process support, and (4) revised metrics.
Top management commitment and support are critical in becoming customer centred.
In most business firms, functionally-organised companies will need to move toward
cross-functional process-driven enterprises. Achieving this form of organisation is
likely to advance in stages. Similarly, cross-functional integrated processes must be
developed to focus on value delivery to the customer. Importantly, change avenues
must be accompanied with revised metrics that are customer centred.
The change process is continuous and is likely to consume substantial effort over
a long time span. Each organisation is unique although the four avenues of change
provide a framework for action. Becoming customer-centric is a major challenge but
the performance returns are attractive.

IDENTIFYING THE NATURE AND SCOPE OF MARKET CHANGES

Perceptive strategic thinking requires determining the nature and scope of market
changes. When and where are the changes occurring? What forces are driving the
changes? Indications of fast changing markets are new forms of competition, new
business models, and creativity and innovation. Market-based strategic capabilities
are necessary to identify rapidly changing markets and the implications for a specific
firm and the relevant industry(ies).
New competition
Often, conventional training and practices have pushed strategy researchers and
executives toward defining a stable competitive box around existing businesses defined by technology, geography, competitors, and the present customer base. Based
on the false security of the competitive box, analytical tools can be successfully applied,
research can be carried out, and plans can be made. But such static and artificial
processes deny the reality that the real threats as well as important opportunities may
be found outside the competitive box shown in Figure 2. With increasing frequency,
the future belongs to new types of competition and new business models, which both
drive market growth and attack the existing customer base of incumbents markets.
The result is the creation of one or more new customer bases. Understanding fast
changing markets and guiding the strategic initiatives appropriate for these markets
requires incorporation of new strategic thinking conceptual logic and perspectives
that break executives and researchers mind-sets away from the potentially fatal
traps of conventional thinking (Sull and Escobari 2004).
It is important to identify and evaluate the challenges occurring in each market
of interest to the organisation. Consideration of opportunities and threats outside
the competitive box is an essential part of the process and applying techniques such

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FIGURE 2 Opportunities outside the competitive box

THE COMPETITIVE BOX

New Types
of
Competition

New
Customers

TRADITIONAL
COMPETITORS

Conventional Value
Propositions

New
Business
Models

New
Customers

Existing
Customer
Base

New
Customer
Base(s)

as scenario planning may provide an enhanced vision of the periphery (Day and
Schoemaker 2005). These initiatives should bring into clear focus how the market of
interest is changing and help to highlight the resulting strategy implications. Marketbased capabilities need to be applied to determine the relevant market structure(s)
and how each market is expected to change in the future.
New business models
New business models are likely to impact existing firms and industries by offering
buyers alternative customer value options. A market-driven company may identify a
new business model opportunity that appears promising. Alternatively, new business
models may emerge that pose potential threats to existing firms. The challenge in
strategic thinking by a company is to identify new business model opportunities and
decide whether to pursue them. Those options not of interest to management may,
nevertheless, present competitive threats.
Successful management initiatives to respond and shape market change may
challenge existing cultures and processes within companies. Faced with the mission
to find market areas that were entirely new to IBM, and capable of growing
profitable billion-dollar-plus businesses in five to seven years, IBMs management
developed an emerging-business opportunities (EBOs) programme (Baghai, Coley,

Cravens, Piercy and Baldauf Management framework guiding strategic thinking

and White 2000). The challenge was to break away from a culture where the most
prestigious executive assignments were to manage large established businesses, and
pursue opportunities where the most talented and experienced executives work on
new ventures rather than focusing on short-term results in current markets. EBOs
frequently cut across IBMs organisational structure. In the first five years of the
initiative, IBM launched 25 EBOs, with two being closed after the pilot stage, but
the remaining 23 produced annual revenue of $15 billion, and were growing at more
than 40 percent a year. The IBM initiative recognises the need to manage multiple
strategic horizons where EBO businesses are speculative and visionary and may not
pay off for 5 to 10 years or longer.
Critical to the success of initiating successful processes for strategic thinking in
changing markets is a strong commitment and involvement by top management. Top
executives must recognise and support the possibility that change initiatives may be
necessary. The life cycle stage of the industry and the rate of technological change
are important indicators of the need for strategic and organisational change (Lei and
Slocum 2005). Assessment of these change dimensions provides top management
with a basis for determining the extent that strategy and organisational modifications
are needed.
Challenges to management commitment and vision from realignments may be
substantial. For example, at Kodak radical restructuring and transformation were
necessary to align the business model with a converging, digital marketplace. Dramatic
change to Kodaks deeply-engrained core business model of film photography
includes: partnership with Motorola to extend camera-based imaging; partnership
with Skype to create digital storytelling combining live voice with online photosharing; large investments in digital commercial print and medical imaging; and,
plans for search software, such as facial recognition.
Creativity and innovation
Innovation is critical to growth and performance in the marketplace. Importantly,
innovation is a key contributor to rapidly changing markets. Initiatives may result in
new goods and services, organisational processes, and business models. Identifying
changes in markets and competitive space requires monitoring emerging technologies
as well as pursuing innovation opportunities by companies. Successful firms must
develop business processes to identify and pursue promising innovation ideas. There
is substantial research support that creativity and innovation create competitive
advantage and value for customers (Christensen and Raynor 2003).
Innovations range from radical (and sometimes disruptive) initiatives to
incremental improvements in products and processes. Radical innovations have the
greatest impact on market changes. Google is an impressive example of innovation in
action. The firm has developed a powerful innovation culture and processes. Google
is recognised as one of the most innovative companies in the world (ranked No. 2
behind Apple by Business Week in 2007).
Disruptive innovations. Disruptive innovations provide simpler and less costly
options to the customer value contributed by the products of incumbent firms serving
the market (Christensen, Roth, and Anthony 2004). Conceptual logic underlying
the disruptive model of innovation is very relevant in predicting industry change
(Christensen and Raynor 2003, Chapter 2). Examples of disruptive innovations and
new business models are illustrated by the impact of Amazon.com on traditional
bookstores, discount brokering by Charles Schwab, e-mail on postal services, and

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steel mini-mills on integrated mills. Opportunities are created for innovations when
the products of incumbent firms in the market exceed the value requirements of
buyers. Disruptive innovations may meet the needs of new segments or entire markets.
Digital cameras in cell phones are dramatically expanding the digital photography
market. A disruptive innovation has the potential to negatively alter a market and
the firms serving the market when there is not a good fit between customer value
requirements and incumbents products.
Discount airlines such as JetBlue, Ryanair, Southwest Airlines and AirAsia have
disrupted the markets of traditional airlines, forcing several major carriers into
bankruptcy. However, what is also increasingly clear is that even when disruptive
innovation is recognised by incumbent firms, simple imitation will rarely provide an
effective response. Faced with disruptive innovation by no-frills airlines like easyJet
and Ryanair in Europe, conventional full-service airlines responded to the challenges.
After an initial period of denial based on the optimistic and incorrect assumption that
Europeans would not fly on aircraft with no food, the conventional airlines offered
their own no-frills services. British Airways launched Go and KLM launched
Buzz. Both ventures were ineffective in competing with easyJet and Ryanair, and
succeeded only in cannibalising BA and KLM sales. Go and Buzz operated for
a short period, and then were sold to easyJet and Ryanair, further increasing their
passenger capacity. By 2010 the no-frills airlines are likely to hold more than a third
of the European internal flight market. Importantly, no-frills operators employ a
different business model which it is very difficult for full-service flyers to replicate.
Similarly, the dominance of the personal computer (PC) business by the Big Three
Microsoft, Intel, and Dell is changing because the market is developing in ways
that these companies can no longer control. The emphasis by Microsoft on software
upgrades, by Intel on faster chips and by Dell on supply chain efficiency, is increasingly
seen by users as resulting in bloated software with too many functions, faster but
inefficient chips, and poor customer service. In 2006, Microsoft was struggling to get
a new version (incremental innovation) of Windows to market and trying to imitate
Googles approach to software development. Intels strategy has been undermined by
AMDs better designed chips which Intel now has to equal, and Dell is establishing
additional distribution channels to access consumer buyers. Remarkably, others have
found ways to make money from the PC a computing platform that was considered
secure in the hands of Microsoft, Intel, and Dell (Walters 2006).
Identifying disruptive innovation threats and developing counter-strategies are
important initiatives for the incumbents in the market. However, incumbent firms
may not proactively respond to disruptive threats, or may be slow in responding.
Failure to respond may threaten the survival of a business. Disruptive innovations
are increasingly likely across various technologies and industries. Analysis of these
challenges to incumbent firms can often be identified through perceptive market
sensing (Ramaswami, Bharghava, and Srivastava 2004). A major hurdle is complacency
and managements hesitancy to shift attention outside the competitive box (Figure
2). When early signals begin appearing that markets are changing, strategic thinking
initiatives need to be evaluated and implemented.
Commoditisation threats. When product architectures (designs) become
modularised (comprised of standardised components) commoditisation occurs,
making it difficult to earn anything more than subsistence returns (Christensen and
Raynor 2003). When commoditisation occurs, the opportunity for profits is likely
to move to another stage in the value chain and may lead to business model changes.
For example, the personal computer (PC) market has become commoditised and the

Cravens, Piercy and Baldauf Management framework guiding strategic thinking

opportunity for profits has shifted to microprocessors and operating system software.
Commoditisation was an important driver for IBMs management in its decision to
exit from the PC market, selling the business to Chinas leading PC company.
The potential impact of commoditisation in markets underlines the importance
of developing a vision about the market and how it is likely to change in the future,
and determining the business strategy implications. In advance of commoditisation,
strategies need to be shaped to counter the effects of profit shifts in the value chain.
Strategies to counter commoditisation threats may involve competing at a different
stage in the value chain or moving into a different product category that offers
attractive growth and profit opportunities.
Interestingly, Dell Inc. has used the effects of commoditisation to create a
competitive advantage by focusing innovation initiatives on its effective and efficient
value chain business model. Dells market entry strategy is to leverage its value chain
capabilities into markets where commoditisation is underway. Modular product
architectures enable the use of standardised components and partnering with suppliers
as illustrated by Dells move into the printer market. Dells competitive edge is low
costs achieved from its very efficient value chain processes. Nonetheless, the slowing
of Dells growth in 2005 saw the cost advantage over rivals narrowing, raising the
question of whether Dell faces threats from new competitors with disruptive business
models of their own, particularly in challenging new markets like China. Dell spends
less on research and development than Apple Computer Inc., yet Dells revenues are
four times larger (Lee 2006).

UNDERSTANDING FAST CHANGING MARKETS

Once the nature and scope of market changes are determined it is important to gain
a depth of understanding of the fast changing markets of interest to the researcher
and/or the executive. As conceptualised in the third stage of Figure 1, new market
space must be defined and analysed. Where customer value requirements have been
altered due to changes in the market(s) of interest, strategic segmentation analysis is
required. Finally, customer value requirements must be spelled out for each market
segment of interest.
Identifying new market space
Kim and Mauborgne (2005) offer compelling conceptual logic into how companies can
create new market space. These initiatives involve finding and pursuing opportunities
to offer new value in markets and segments that are not being served. The intent is to
find new opportunities that have customer value requirements which are not being
satisfied by existing products. As an illustration, unit sales of camera phones are
several times greater than digital camera sales. By incorporating the camera into the
cell phone, customers have access to digital photography at minimal cost, since the
camera is subsidised by the wireless subscription charges. This creates new users of
digital cameras and new applications by existing users.
Further evidence that convergence is back in fashion comes with Sprints attack
on Apples iTunes business, with the 2005 launch of the Sprint Music Store enabling
subscribers to download music to their cellphones (and a copy to their PCs). New
generations of cellphones will be capable of downloading movies and television
and even providing shopping services, such as price comparisons from an online

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database, triggered by the phone user capturing an in-store barcode. Importantly,

while the business opportunities in new markets are awesome, finding new market
space requires changing managements normal strategic perspective of looking for
market opportunities inside the competitive box as discussed earlier (see Figure 2).
Creating new market space should be a proactive initiative that may be undertaken
by an existing firm or a start-up like Google Inc. Every company should devote
attention to identifying and evaluating new market space opportunities. The extent
of corporate effort will depend on size, resources, distinctive capabilities, and the
attractiveness of the core business.
By the early 2000s it was apparent that Limited Brands had accomplished a major
diversification from its core womens retail apparel business into skin-care products,
cosmetics, and lingerie. During the decade ending in 2004 Limiteds apparel business
declined from 70 percent of total sales to 30 percent while the accessories business
expanded to 70 percent of the total. Importantly, these major changes in Limiteds
business composition were guided by managements strategic thinking in its changing
markets and the resulting perceptive vision about how Limited Brands markets were
expected to change. Management correctly anticipated the growth slow down in
apparel sales and strong competition from discount retailers coupled with attractive
and expanding opportunities in the accessories markets. By 2008 Limited Brands had
spun off or sold most of its apparel business.
Actual and potential challenges to an organisations existing market(s) must
be identified and evaluated. The danger is dismissing a future threat (e.g. digital
photography) as unlikely to impact the incumbent business when the reality is that
the threat should be investigated. Out-of-the box strategic thinking is essential and
should not be constrained by loyalty to the core business. Potential market changes,
their challenges, and the strategy implications for each market of interest to the
business should be determined. This process must be ongoing rather than initiated as
market change situations occur, since such reactive initiatives are often too late.
Defining and analysing markets and competitive space are essential to guiding
strategic thinking in changing markets. Too often over-simplified views of markets
have negatively impacted business and marketing strategies. The reality is that
markets have been increasingly complex, turbulent, and interrelated. An oversimplified understanding of markets occurs when market boundaries are perceived
to be too narrow in scope and fail to include relevant buyers and competitors. Using
an industry rather than a product-market focus is likely to mask alternative ways of
meeting buyers needs through products available from other industries. Assuming
the stability of the market is also a potential danger. Increasingly, markets are in
transition from stable to fast changing (Eisenhardt and Martin 2000). Continuous
market sensing will provide important change warnings as illustrated by Limited
Brands perceptive sensing of unfavourable changes in its apparel markets.
Strategic segmentation analysis
Market segmentation is a critical part of the strategic thinking process in changing
markets. Application of market-based capabilities is essential in guiding strategic market
segmentation initiatives. The core focus is on finding and exploiting customer valuedriven segmentation opportunities. Segmentation groupings may require changes as
markets grow and move toward maturity, and when disruptive innovations occur.
Importantly, while market segmentation is a conventional management concept and
process, recent research indicates that in changing markets, executives are likely to

Cravens, Piercy and Baldauf Management framework guiding strategic thinking

focus too much on narrow, demographic segments and trivial product extensions,
instead of examining what jobs customers need to get done and pursuing innovation
initiatives to meet those needs (Christensen, Cook, and Hall 2005). Segmentation
guided by customer value analysis provides the opportunity to re-think and redesign
the business model.
Segments exist when responsiveness differs between groups of buyers concerning
reactions to the organisations customer value delivery efforts (product, value chain,
price, and promotion strategies). Response differences occur when customers value
(benefits-costs) requirements differ across segments and the segments can be identified
and accessed by marketing initiatives.
Identifying buyers value requirements and placing those which are similar into
each segment is increasingly difficult to accomplish in complex and dynamic markets.
Too often researchers and strategists focus on finding differences concerning buyers
characteristics (e.g. income, age, lifestyle, etc.), but do not relate this information to
buyers value requirements. Not surprisingly, the result is often flawed segmentation
logic. Improving value-driven segmentation initiatives is a major challenge in the
increasingly diverse and complex market structures that exist today. Segmentation
on an international scale compounds the analysis and decision-making challenges.
Nonetheless, guided by sound conceptual logic and the use of well developed market
sensing capabilities, effective segmentation is both feasible and cost-effective.
Customer value requirements
Market segmentation is essential in identifying the customers who offer the most
promising value and cost opportunities to an organisation. These customers display
strong buying power and the costs of serving them are acceptable. Valuable customers
may be present in the existing customer base, or in other markets served by disruptive
innovations. Segmentation efforts to find valuable customers may be guided by how
the goods or services are used, buyers needs and preferences, and purchase behaviour
and loyalty.
Consider, for example, the success of Whole Foods Market, a U.S. retailer serving
buyers with value preferences for organic and natural foods. Whole Foods entered
the highly competitive retail grocery market nearly 30 years ago and double digit
growth rates rapidly advanced the retailers sales to an estimated $7.5 billion in
2008. An important success factor was managements decision to target middle
income consumers with value requirements for natural foods.
Developing customer relationships provides important insights into customer value
requirements. There is a high level of interest in customer relationship management
(CRM) by academics and executives around the world, although the success record
for planning and implementing CRM strategies has been mixed (Payne and Frow
2005). Nonetheless, the importance of CRM is widely acknowledged. Effective
CRM requires a deep understanding of customers value requirements matched
with effective management processes for meeting the requirements. Applying CRM
requires that organizations (a) identify and focus resources on high-value customers,
and (b) attract them by capturing and using knowledge about them by maximizing the
value of their relationship with the organization. (Ramaswami, Bharghava, Srivastava
2004, p. 53). A new research stream is generating important findings concerning
CRM (see, for example, Journal of Marketing Special Issue on Customer Relationship
Management, October 2005).
Delivering superior value to customers is an essential requirement of market-

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oriented companies. Customer value is achieved by offering benefits that exceed the
costs of the benefits provided. The challenge in delivering superior value is finding the
best match between customers value requirement and the organisations distinctive
competencies for meeting value requirements. Customer value delivery results in
finding the most promising high-value opportunities and developing effective CRM
processes for delivering value and monitoring results.

STRATEGIES FOR CHANGING MARKETS

The final stage in the conceptual framework for strategic thinking in changing markets
is developing strategies for gaining competitive advantage in fast-changing markets
(Figure 1). Strategy development requires forming a strategic vision and selecting and
implementing the market targeting strategy, and positioning strategy for each market
target. At the centre of the process is understanding markets and competitive space.
Strategic vision
Selecting strategies for fast changing markets begins with the identification and
evaluation of potential market changes and the strategy implications. Emerging from
this process should be a strategic vision for the future. This vision provides the basis
for developing strategic targeting and positioning changes (if required) based on the
implications of the vision (e.g. changes in market boundaries and structure). Targeting
and positioning matches customer value opportunities against the firms distinctive
core capabilities (new product management, customer relationship management, and/
or value chain management) (Hagel and Singer 1999; Srivastava et al. 1998, 1999).
In dynamic markets the thrust of corporate capabilities is centred on these processes.
The customer value requirements of segments which correspond best to the firms
capabilities are selected to become one or more market targets and a positioning
strategy is developed to deliver superior customer value in each target.
Developing a vision about the future concerning markets and competitive space is
essential in guiding strategic initiatives. Addressing the questions shown in Figure 3
provides the basis for formulating the vision. The importance of this vision capability
is demonstrated by the perceptive shifts in IBMs business and marketing strategies
over the last decade, guided by managements vision about how its markets and
competitive space were expected to change. These changes in strategic direction
were influenced by managements belief that commoditisation would negatively
impact large segments of computer hardware and software businesses. Managements
strategic vision indicated the need to align IBMs business design to a different stage
in the value chain (business services) to avoid the negative impact of commoditisation
on the firms market and financial performance.
Market sensing is an essential capability in guiding development of a strategic
vision about the future. Information must be acquired about the market(s) of
interest, shared across functions, assessed as to the present and future implications,
and strategic initiatives pursued which are based on managements expectations
about the future (Slater and Narver 1994). Strategic vision guides innovation, the
organisations product and market scope, segmentation, and market targeting and
positioning strategies.

Cravens, Piercy and Baldauf Management framework guiding strategic thinking

FIGURE 3 Developing a strategic vision

At what life-cycle stage is the product-market (new, growth, maturity, decline) and
how fast is the life cycle advancing?
Are product-market boundaries and composition undergoing transformation?
How and to what extent is the end-user customer base changing?
Are the scope and structure of competitor space changing due to market and industry
transformation and entry/exit of competitors?
Are there potential threats from disruptive technologies and/or commoditisation?
Are the composition and structure of the value chain(s) serving the end-user
market(s) changing?
Do other influences operating in the product-market have the potential to significantly
transform the product?

Strategy implementation
The implementation challenges for strategy researchers and executives in developing
and refining the strategic thinking process are considerable. Strategic thinking in
changing markets is a continuing process rather than ad hoc initiatives. The process
begins with identifying opportunities and threats outside the competitive box. The
framework for strategic thinking in changing markets (Figure 1) highlights important
action requirements for developing strategies in changing markets. Achieving the
potential benefits requires several initiatives:
Make the challenge for new vision explicit across and throughout the
organisation.
Challenge the definitions of markets and segments used by consultants and
executives who produce marketing and business plans, and actively pursue
what if questions about new types of customers and new types of competition.
Encourage executives to consider the entire value chain and the changing pattern
of profit pools within it, as a basis for long-term business development and
investment choices.
Question the logic and process of market segmentation pursued and determine
whether segmentation is based on traditional demographic classifications or
understanding of value-seeking differences between customers.
Identify and pursue efforts to enhance market sensing and learning capabilities
as a source of competitive advantage and strategic vision.
Examine the possible need to establish new business models, separate from the
core business, to pursue emerging business initiatives.

An important challenge to implementing strategic changes is determining the extent

and structure of organisational design adaptation. Depending on the nature of strategic
change a new type of organisation may be necessary to navigate the competitive
landscape and build competitive advantage (Hitt, Keats, and DeMarie 1998). In
turbulent environments, traditional hierarchy structures constrain implementation;
cross-functional process-oriented structures may be essential. Shifting emphasis
toward innovation, pro-activeness, and risk taking is necessary in responding to
the innovation challenges and speed requirements of strategic change initiatives.

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Surprisingly, the progress in organisational design transformation has been slow

compared to strategy initiatives. Exceptions include IBM and Procter and Gamble.
Creating separate business units may be necessary for strategy initiatives involving
major shifts away from the core business strategies.

IMPLICATIONS AND RESEARCH DIRECTIONS

As evidenced by our development and discussion of the Figure 1 conceptual framework,
there is substantial research support for several dimensions of the conceptualisation.
However, the contributions are fragmented and, in some instances, incomplete. Our
objective has been to incorporate relevant concepts, research findings, and other
knowledge in developing an integrated conceptual framework of strategic thinking
in rapidly changing markets. The conceptualisation can be used in research studies
conducted in rapidly changing markets and by executives competing in these
markets.
Research findings and conceptual support for the Figure 1 framework differ
across the four dimensions. Market-based Strategic Capabilities appears to be the
most well developed portion of the framework. The capabilities have been examined
by researchers and companies, or knowledge exists as to how to do so. Identifying
the Nature and Scope of Market Changes is best characterised as at the developing
stage. Research has been reported on new forms of competition and new business
models. Innovation processes have received substantial attention by researchers and
executives. Clayton Christensen at Harvard Business School has been the primary
contributor to the study of disruptive innovation. More research on this phase of
strategic thinking is needed.
Processes for Understanding Fast Changing Markets are advancing but more
attention is needed. The need to identify new market space is clearly recognised,
although the concepts and capabilities for doing so require additional research
attention. Segmentation analysis is well developed but applying this knowledge in
fast changing markets needs to be expanded. The attention in recent years given to
customer relationship management has contributed substantially to understanding
customer value requirements.
Knowledge about developing Strategies for Changing Markets is limited. The
value of strategic vision is recognised but processes for vision development require
executive and research attention. Similarly, the need for strategy implementation
is apparent but the challenges of implementation in rapidly changing markets are
complex. In business practice trial and error approaches have been used.
One factor which has contributed to the difficulty of development of conceptual
logic for strategic thinking in rapidly changing markets is that much of the research
on the dimensions of the Figure 1 framework has been accomplished in different
disciplines. Market-based strategic capabilities have received extensive attention by
marketing academics. Leadership concerning the nature and scope of market changes
has been provided by researchers in strategic management. Understanding fast
changing markets has been of interest to both marketing and strategic management
scholars. Research interest in strategies for changing markets has not been extensive,
with strategic management scholars the most active in the topic area. Of course,
traditional approaches to market targeting and positioning are of continuing interest
to marketing scholars and executives.

Cravens, Piercy and Baldauf Management framework guiding strategic thinking

Progress in developing and testing the conceptual framework will benefit from
involvement by research teams from the relevant academic disciplines. The next
stage proposed is further development of the Figure 1 framework followed by
formulation of research propositions. After additional conceptual study, empirical
testing should be considered. However, the number of constructs and relationships
will be challenging.

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ABOUT THE AUTHORS AND CORRESPONDENCE

David W. Cravens is Emeritus Professor of Marketing and previously the Eunice and
James L. West Chair of American Enterprise Studies, M. J. Neeley School of Business,
Texas Christian University. He has published over 150 articles and 30 books. He has
taught and conducted executive seminars in many countries. He is the co-author of
Strategic Marketing, McGraw-Hill/Irwin, 2009, and former editor of the Journal of
the Academy of Marketing Science. He received the American Marketing Association
Selling and Sales Management Lifetime Achievement Award in 2002. He was selected
as the 1996 Academy of Marketing Science Outstanding Marketing Educator.
Professor David W. Cravens, M. J. Neeley School of Business, Texas Christian
University, TCU Box 298530, Fort Worth, TX 76129, USA
T +1 817 257 7555
F +1 817 257 7227
E d.cravens@tcu.edu
Nigel F. Piercy is Professor in Marketing and Strategic Management, Warwick Business
School, The University of Warwick, UK. He holds a PhD from the University of
Wales and a higher doctorate (DLitt) from Heriot-Watt University, Edinburgh. His

Cravens, Piercy and Baldauf Management framework guiding strategic thinking

current research interests focus on strategic sales and account management. His work
has been published in many journals including Organizational Dynamics, the Journal
of World Business, the British Journal of Management, the Journal of Marketing, and
the Journal of the Academy of Marketing Science.
Corresponding author: Professor Nigel F. Piercy, Warwick Business School, The
University of Warwick, Coventry CV4 7AL, UK
T +44 24 7652 3911
F +44 24 7652 4628
E Nigel.Piercy@wbs.ac.uk
Artur Baldauf is a Professor of Management and Chair of the Management
Department at the University of Bern, Switzerland. He has also been a Visiting
Marketing Professor at Texas Christian University, USA and at Bocconi University,
Italy. He researches strategic management and sales force management focusing on
sales management control and effectiveness issues. His research has been published in
international and national journals. Artur teaches Strategy and Business Research at
the University of Bern and several other educational institutions. Consulting advice
has been given to clients such as Amway, Coca Cola Amatil, Swisscom, Siemens.
Professor Artur Baldauf, Management Department, University of Bern,
Engehaldenstrasse 4, 3012 Bern, Switzerland
T +41 31 631 5331
F +41 31 631 5332
E baldauf@imu.unibe.ch

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