Strategic Marketing

Term V Indian Institute of Management Trichy Sep- Dec 2012 Prof Natesan Ramesh Session 1

Corporate Strategy
What is it? Why is it important in organizations? Where did it emanate? How has it developed? What are the approaches to Strategy?

Corporate Strategy
Sun-Tzu wrote the treatise on the Art of War; excerpts
from his book : the skillful leader subdues the enemy's troops without any fighting; he captures their cities without laying siege to them; he overthrows their kingdom without lengthy operations in the field. Empire, and thus, without losing a man, his triumph will be complete. This is the method of attacking by stratagem.

With his forces intact he will dispute the mastery of the

It is the rule in war, if our forces are ten to the enemy's

one, to surround him; if five to one, to attack him; if twice as numerous, to divide our army into two. Source: Sun-Tzu Art of War http://www.chinapage.com/sunzi-e.html

Corporate Strategy
Sun-Tzus work is considered to be pre-eminent in terms of historical strategic
THOUGHT! In the 20/21st century business has considered many of Sun-Tzus strategies and tactics in terms of competition and how to strategize business Strategy therefore is the choosing to perform activities differently than rivals do ( source: Michael Porter What is strategy HBR 1996) In the past 2 decades much has been discussed about Strategy and many schools of thought have been developed Starting the 70s Academics & Practitioners in their study of corporations try to put through frameworks and analytical tools to understand how Strategy should be looked at, formulated and implemented Michael Porter took these discussions to a more macro level that a corporation plays in. His seminal work on 5 forces theory is considered still today as a good basis for analysis the environment, understanding competition, the prospect of disruptive technological changes, as well as the role of suppliers and customers in developing a Corporate Strategy Porters macro view of the Strategy process has been deemed simplistic and too static in many quarters CK Prahalad and Gary Hamel brought forth the idea of Strategic INTENT and Strategic Response using CORE COMPETENCES based on their study of Japanese multinationals who had applied a bit of SunTzu tenets to compete against AMERICAN Multinationals

Porters 5 Forces model

Other points of view

Many other points of view in terms of Strategy came into play in the 80s as American MNCs squared off against Japanese companies and in many Cases the Japanese outflanked the Americans Profs CK Prahalad & Gary Hamel suggested that companies need to articulate their STRATEGIC INTENT and work to achieve this. Core Competences dictated competitive advantage and leveraging this required strategic intent. STRATEGIC INTENT is the obsession with winning at all levels of the organization and then sustain that obsession over a 10-20 year quest for global LEADERSHIP! ( eg. Canon sought to beat XEROX; Komatsu encircle Caterpillar) Prahalad and Hamel set out to maintain that Strategic Intent covers both the short term necessities of competition while focusing the company on the long term (Source: Strategic Intent Prahalad & Hamel HBR Jul-Aug 2006)

Other points of view

Porter has responded to these views by restating that Strategy

has been hijacked by Operational Effectiveness (OE) measures such as TQM, Kaizen, Lean Mfg, and other things to make parts of the organization effective and efficient. He maintains that OE means performing similar activities better than rivals perform them Imagine a productivity frontier that is the sum of all existing best practices at any given time. This could be the MAX VALUE A COMPANY delivering a product/service can create at a given cost. Getting here involves using all available technologies, strategies, skills, management techniques and purchased inputs This frontier keeps shifting constantly outward as new technologies and management approaches are developed and as new inputs are available He believes the more companies achieve OE, more the INDUSTRY looks the same. So where is the SUSTAINABLE COMPETITIVE ADVANTAGE needed for L/T success? That is Porters argument on what he believes is the distortion of strategy by OE practitioners

OE vs Strategic Positioning
HIGH
NON PRICE BUYER VALUE DELIVERED Productivity Frontier Productivity Frontier (state of best practice) Productivity Frontier (state of best practice) (state of best practice)

LOW HIGH Relative Cost Position LOW

COMPETITIVE STRATEGY IS THE DELIBERATE CHOICE OF DIFFERENT SET OF ACTIVITIES TO DELIVER A UNIQUE MIX OF VALUE

Other challengers to Porters hypothesis

Besides Prahalad & Hamel, others have challenged

Porters views in terms of competitive strategy Henry Mintzberg and others have maintained that Porters assumption is that Strategy is static and that competitive advantage can be sustained over a long term to ensure high profitability; Mintzberg suggested that changing environments and competition force companies to re-evaluate or adjust their strategies. He suggests that external forces would want you changes and move towards a EMERGING strategies approch to management Porter continues to maintain that Strategy is about TRADEOFFS! without the tradeoffs sustainable competitive advantage is not achievable!!!!!

Henry Mintzberg
Henry Mintzberg & James Waters( McGill Univ Canada) brought
out their hypothesis that while Deliberate strategies is where the companies begin, due to real time conditions/environment, emergent strategies is part of the Strategy continuum. Both deliberate and emerging strategies in their view constitute two ends of the continuum. They define Strategy as a pattern in a stream of decisions Hence their view is that there are INTENDED Strategies and there are REALIZED Strategies Their article talks about - Entrepreneurial strategy - Ideological strategy - Umbrella strategy - Process strategy - Unconnected strategies - Consensus strategy

 They argued that Western companies focus on trimming their

Prahalad/Hamel

ambitions to match resources, as a result, search for ONLY for advantages they can sustain Japanese companies, in contrast, leverage resources by accelerating the pace of organizational learning and try to attain seemingly impossible goals They foster the desire to succeed among their employees and maintain it by spreading the vision of GLOBAL Leadership! These companies use : - building layers of advantage - searching for loose bricks -changing terms of engagement -competing through collaboration Strategic INTENT assures consistency of RESOURCE allocation over the long term!

Corporate Strategy
Despite various debates about Corporate
strategy and what it is and how should one go about it, Porters 5 Forces has remained a fundamental approach to strategy constructs While various OE and emergent strategy concepts have been utilized, by and large the corporate planners have embraced the 5 forces at least as a STARTING point!!! But fundamentally Porters articulation seem to have withstood the test of time as to what is strategy

Relevance from a Marketing perspective

Marketing is a strategic activity It drives revenues, product extensions, market
expansion, innovation, new product development & Various other operational matter of the company Marketing has to tie into the Corporate Strategy in order to achieve the Corporate Strategic goals Marketings influence is both internal and external It is also a listening board in terms of customer, consumers, markets ( current & new) It also helps in countering competition besides positioning the company

Product/market matrix
Current Products Present Markets Market Penetration New Products Product Expansion

New Markets

Market Expansion

Diversification

Other important issues in marketing strategy

Customer Value Proposition (USP, customer
perceptions)

Assets and Competencies (R&D, product

development, Online presence, social media exposure, distribution)

Functional Strategies (eg. Brand Building, CRM) Business criteria (ROI, SCA, Budgets/Plans)

Corporate Strategy

Videos http://www.youtube.com/watch?v=ibrxIP0H http://www.youtube.com/watch?v=mwc073 http://www.youtube.com/watch?v=4srFC0d http://www.youtube.com/watch? v=uhOhlxlCRys&feature=related