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Market-Oriented Perspectives Underlie Successful Corporate, Business, and Marketing Strategies

This is the latest version 12/25/07

Exhibit 1.3

Components of Strategy

Scope Goals and objectives Resource deployments Identification of sustainable competitive advantage Synergy

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Need to be Market Oriented.

Internal Orientation Persuade customers to buy What company has Generic product, production process, and delivery system Lowest delivered cost Market Orientation

Focus

Persuade company to have what customers want Augmented product, customer benefits, and market segments

Competitive Superior customer value Advantage Objectives

Volume, cost, profit margins

Profitable use of resources, market position, customer satisfaction, and loyalty

Short term, reactive

Time Horizon

Medium and long-run view of threats and opportunities

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How to be a Market-Driven Organization.

Keep

close to customers and ahead of competition Love the customer more than the product Our legitimacy is based on customer satisfaction Do business the way the customer wants to do it Our mission is to find needs and fill them, not to make products and sell them If were not customer-driven, our products wont be either

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Strategic Planning.
is the managerial process of developing and maintaining a strategic fit between the organization's objectives and resources and its changing market opportunities.
Resources

Org Objectives Strategic Fit

Changing Environment
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The Role of Strategy.

Corporate Mission & Objectives

Strategy: Corporate Business Functional

Operating Plans

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An Overview of Marketing Strategies.

Strategies based on market dominance: Leader, Challenger, Follower Porter generic strategies (strategy on the dimensions of strategic scope and strategic strength): Cost leadership, Product differentiation, Market segmentation Innovation strategies: Pioneers, Close followers, Late followers Growth strategies: Intensification, Vertical integration, Horizontal integration, Diversification Management style strategies: Prospector, Analyzer, Defender, Reactor Marketing warfare strategies - draws on parallels between marketing strategies and military strategies.
Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

Sun Tzu on Strategy.

Know your enemy, know yourself, and your victory will not be threatened. Know the terrain, know the weather, and your victory will be complete.

(from The Art of War, 6th century BCE)

Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

Strategic Marketing.
Marketing Strategy is a series of integrated actions leading to a sustainable competitive advantage. John Scully
President, PepsiCo (1977-1983) CEO, Apple (1983-1993) Partner, Scully Bros. LLC (1995-Present)

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Discussion Questions
3.

4.

Does having a market orientation make sense? What are the advantages and drawbacks? Why do some firms lack orientation towards the market?

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Organizational Marketing Levels.

Organizations develop strategies at three structural levels: Corporate level(corporate marketing) SBU level(Strategic Marketing) Product/Market level(Functional Marketing)

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What is a Strategic Business Unit? (SBU).

A set of products or product lines

With clear independence from other products or product lines for which a business or marketing strategy should be designed

Characteristics of a viable SBU?

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Characteristics of a viable SBU.

Unique business mission Definable set of competitors Integrative planning done independently Responsible for resource management in all areas Large enough but not so large as to become bureaucratic

(Source: Subhash Jain, Marketing Planning & Strategy, 6th Ed.)

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Strategic Marketing requires

Marketing at the SBU Level - Strategic Marketing.

Detailed understanding of market needs, and Proactive use of competitive intelligence at the corporate as well as SBUs levels

Strategic Marketing

Focuses on what the firm do best at the SBU level To secure and maintain a sustainable
competitive advantage
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Other Characteristics of Competitive Advantage. Substantiality Sustainability Ability to be leveraged

(Source: Strategic Marketing Management, Aakers)

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Seeking Competitive Advantages.

Position advantages

Superior customer value Lower relative total cost Customer satisfaction, Loyalty, Market Share, Profit Superior skills & knowledge, Superior resources, Superior business process
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Performance advantages

Sources of advantages

Key Elements of Marketing Strategy Formulation.

The strategic 3 Cs
- Customers, Competitors & the Corporation

Environment analysis Strategic Marketing Decisions

- Where to compete - How to compete - When to compete

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A Viable Marketing Strategy.

Must have: a clearly defined market a good match between corporate strengths and market needs significant positive differentiation in the key success factors of the business

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Exhibit 1.10

Contents of a Marketing Plan

Executive summary

Current situation and trends Performance review Key issues Objectives Marketing strategy Action plans Projected profit-and-loss statement Controls Contingency plans

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2
Corporate Strategy Decisions and Their Marketing Implications

Corporate Mission.

Broad purposes of the organization General criteria for assessing the long-term organizational effectiveness Driven by heritage & environment Mission statements are increasingly being developed at the SBU level as well

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Exhibit 2.2

Characteristics of Effective Corporate Mission Statements

Broad
Functional Based on customer needs Transportati on business

Specific
Long-distance transportation for large-volume producers of lowvalue, low-density products
Long-haul, coal carrying railroad

Physical Based on existing products or technology

Railroad business

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Corporate Objectives & Goals.

Objective: a long-range purpose

Not quantified and not limited to a time period - e.g. increasing the return on shareholders equity

Goal: a measurable objective of the business

Attainable at some specific future date through planned actions - e.g. 10% growth in the next two years
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Corporate Culture.

The most abstract level of managerial thinking How do you define culture? What is the significance of culture to an organization? How does marketing affect culture in
the organization?

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How do Firms Compete.

Value proposition Assets & competencies Function area strategies and programs Implementation

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Discussion Question
5. Ansoff says there are four strategies for growing a business. What are their merits and drawbacks?.

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Sources of Synergy
1. Knowledge-based synergies 2. Corporate identity-based synergies 3. Corporate branding-based synergies

GE, IBM, Amazon etc. Virgin Records, Virgin Airlines, etc. Individual brands such as P & Gs Ivory, Pampers, cheer, Clairol, Olay, etc.

4. Shared resources-based synergy

Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

3
Business Strategies and Their Marketing Implications

How SBUs are Defined

Product-markets should be clustered into an SBU on the bases of

Technical compatibility Similarity in customer needs Similarity in customer characteristics or behavior

In practice SBUs are defined by productmarkets requiring similar technologies, production facilities, and employee skills
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How Business Strategies Differ in Scope, Objectives, Resource Deployments, and Synergy Exhibit 3.4.
Dimensions Scope

Low-cost defender Mature/stable/welldefined domain; mature tech.and cust. segments

Very little Low High Generate excess cash (cash cows) Need to seek operating synergies to achieve efficiencies

Differentiated defender Mature/stable/welldefined domain; mature tech.and cstmr segment Little

Goals and obj. Adaptability (new product success) Effectiveness ( mrkt share) Efficiency (ROI) Resource deployment Synergy

Low
High Generate excess cash (cash cows) Need to seek operating synergies to achieve efficiencies

How Business Strategies Differ in Scope, Objectives, Resource Deployments, and Synergy Exhibit 3.4.
Dimensions Scope
Goals and obj. Adaptability (new product success) Effectiveness ( mrkt. share) Efficiency (ROI) Resource deployment Synergy Prospector Broad/dynamic domains; tech. and cust. segments not well-established Extensive Analyzer Mixture of defender and prospector strategies Mix. of defender & prospector strats. Mix. of defender & prospector strats. Mix. of def. & prosp. strats Need cash for prod. dev. but < prospectors Danger in sharing operating fac. and programs - better to share tech./mktg. skills

High Low Need cash for product dev. (? or *) Danger in sharing operating fac. and programs - better to share tech./mktg skills
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4
Understanding Market Opportunities

The Seven Domains of Attractive Opportunities

Market Domains Macro Level
Market Attractiveness
Mission, Aspirations, Propensity for Risk

Industry Domains
Industry Attractiveness
Ability to Execute on CSFs

Team Domains Connectedness up and down Value Chain

Micro Level

Target Segment Benefits and Attractiveness

Sustainable Advantage

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Discussion Question
1. Whats a market? 2. Whats an industry?
Is the market vs. industry distinction important? Why or why not?

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Macro Trend Analysis

Demographic environment Sociocultural environment Economic environment Regulatory environment Technological environment Natural environment Think of an example of each and its impact

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Discussion Questions
6. Does industry attractiveness matter? Why or why not?

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A Tool for Assessing Industry Attractiveness: Porters Five Forces

Threat of new entrants Bargaining power of suppliers Rivalry among existing industry firms Threat of substitute products

Bargaining power of buyers

Source: Adapted from Michael E. Porter, Industry Structure and Competitive Strategy: Keys to Profitability, Financial Analysts Journal, July-August 1980, p. 33.

Identifying an Industry

A firm is a pert of an industry where suppliers of key inputs, processes which create added value, and buyers are similar to other firms in the industry of which the company considers itself a part. Sources of information for macro-level industry analysis: Exhibit 4.12, p. 99

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Understanding Markets at the Micro Level

Involves looking individually at customers to understand the attractiveness of the target segment. Attractive opportunities exist when: 1. there is a clearly defined source of customer pain, for some in the target segment, which the offering resolves, 2. the offering provides customer benefits that others do not 3. the target segment is likely to grow and 4. the current segment may provide a springboard for future entry into other segments.

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Understanding Industries at the Micro Level

Involves looking at the company and whether it has a sustainable competitive advantage

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The Team Domains

Opportunities are only as good as the people who will pursue them

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5
Measuring Market Opportunities: Forecasting and Market Knowledge