Chapter 1 – Market-Oriented Perspectives Underlie Successful Corporate

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Marketing Strategy A Decision Focused Approach (6th Edition)

Orville C. Walker, Jr.John W. Mullins

Jean-Claude Larréché



Case Study: IBM Quality differentiation strategy;

Offering superior products

Providing customers with excellent technical service

Selling them at premium prices

On the marketing side; Substantial advertising budget to keep potential customers informed about its constantly evolving

product lines

Millions of dollars spent to recruit, train and compensate one of the worlds largest and mosttechnically competent sales force

By the mid 1990s, several of IBMs traditional businesses were in trouble; Companys share of worldwide PC market fell to 8% in 1999 (3rd behind Dell and Compaq)

Mainframe business, low growth but highly profitable market, suffered a profit squeeze due to fallingprices & declining demand

IBMs performance problems can be traced to a variety of factors;

Technological changes contributed to declining demand for mainframe computers & centralized dataprocessing systems;

the rapid increase in power of PCs,

the emergence of Internet,

development of Intranets systems.

Emerging group of PC buyers who are;

less technically sophisticated,

more price conscious,

more interested in easy-to-use equipment.



Case Study: IBM A cross-functional team re-examined all the firms business, customer segments,

competitors and potential customers.

Conclusion: The Internet would change everything.

«Real leadership in information technology industry was moving away from thecreation of technology to the application of technology» says Gerstner, who took overIBMs CEO position in 1994.

Sold PC business

Developed new e-business emphasis;

Hook old databases to online systems

Integrate web technologies

Develop & run company web sites

Embraced smaller businesses; Scaled-down versions of its database, e-mail & network management software

Easier to maintain & 80% cheaper than the standard versions

R&D budget now focused on solving business problems rather than improving hardware

Reorganized internally;

Salespeople have been retrained and transferred to the software division or turned into

business consultants



Three Levels of Strategy: Similar Components But Different Issues

What is strategy?

A strategy is a fundamental pattern of present and planned objectives, resource deployments and

interactions of an organization with markets, competitors, and other environmental factors.

A well developed strategy contains five components;

Scope: The breadth of an organizations strategic domain; the number and types of industries,

product lines and market segments it competes in or plans to enter.

Goals & objectives: Desired levels of accomplishment on one or more dimensions of performance,

such as volume growth, profit contribution or ROI, over specified time periods for each of those

product-markets & for the organization as a whole.

Resource deployments: How limited financial & human resources are to be obtained and allocated

across businesses, product-markets, functional departments and activities?

Identification of a sustainable competitive advantage: In order to develop & sustain a differential

advantage over current & potential competitors, managers must examine the market opportunities

and companys distinctive competencies & strengths relative to its competitors.

Synergy: It exists when the firms businesses, product-markets, resource deployments and

competencies complement & reinforce one another.





The Hierarchy of Strategies

Corporate Strategy

Primary focus: Decisions about the organizations scope and resource deployments across itsdivisions or businesses

Essential questions at this level include;

What business(es) are we in?

What business(es) should we be in?

What portion of our total resources should we devote to each of these businesses toachieve organizations overall goals & objectives?

Business Level Strategy

Primary focus: How a business unit competes within its industry?

Essential questions at this level include;

What distinctive competencies can give the business unit a competitive advantage?

Which of those competencies best match the needs and wants of the customers in thebusinesss target segment(s)?

Marketing Strategy

Primary focus: Effectively allocate & coordinate marketing resources & activities toaccomplish the firms objectives within a specific product-market.

Specifying the target market(s) for a particular product or product line.

Marketing mix elements (primarily 4Ps) tailored to the needs & wants of potential

customers.



What Is Marketings Role in Formulating & Implementing Strategies?

Marketing managers not only are responsible for developing strategic plans for their own

product-market entries, but also are often primary participants and contributors of planning

process at the business & corporate level as well.

Marketing managers exert more influence on;

decisions concerning the strategic direction of the business unit,

expansion into new geographic markets,

the selection of strategic business partners,

new product development.

But marketing managers may not play as pervasive a strategic role in other cultures as

they do in United States.

The study found that marketers influence on both strategic & tactical issues was significantly

lower in German firms. As one of the studys authors points out, «Germany has traditionally stressed technology &

operations more than customer-oriented aspects central to marketing»

In the industrial goods firms, the influence of sales executives was perceived even greater than

that of marketing managers since they have direct & continuing contact w/ existing & potential

buyers.



Market-Oriented Management

Market-oriented organizations operate according to business philosophy known as the

marketing concept .

The planning & coordination of all company activities around the primary goal of satisf ying

customer needs is the most effective means to attain & sustain a competitive advantage &

achieve company objectives over time.

Market-oriented firms adopt a variety of organizational procedures & structures; more detailed environmental scanning & continuous, real time information systems

coordinating plans with key customers & suppliers

decentralizing strategic decisions

encouraging entrepreneurial thinking among lower-level managers

cross-functional teams to analyze issues & initiate strategic actions outside the formal

planning process

Studies involving more than 500 firms or business units across a variety of industries

indicate that

marketing orientation has a significant positive effect on various dimensions of performance,

including return on assets, sales growth & new product success.



Factors That Mediate Marketings Strategic Role

Among the reasons firms are not always in close touch with their market environments

are these:

Competitive conditions may enable a company to be successful in the short run without being

particularly sensitive to customer desires.

Production-oriented firms: Newly emerging industries, particularly based-on new

technologies Sales-oriented firms: Increasing competition; focus on selling what the firm wants to make

rather than on customer needs; easily matched aggressive sales tactics by competitors.

Market-oriented firms: Mature industries; technological differences among brands tend to

disappear as manufacturers copy best features of each others products.

Different levels of economic developments across industries or countries may favor different

business philosophies

Industries that are in earlier stages of their life cycles, benefit from barriers to entry or

other factors reducing the intensity of competition, are likely to have relatively fewer

market-oriented firms.

Firms can suffer from strategic inertia, the automatic continuation of strategies successful in

the past, even though current market conditions are changing.



Recent Developments Affecting the Strategic Role of Marketing

Globalization

Differences in market & competitive conditions across country borders require firms to adapttheir competitive strategies & marketing programs

Increased importance of service

Service businesses account for two-thirds of all economic activity in U.S.

Creative design & effective delivery of supplemental services have become crucial in crowdedmarkets with global competitors offering similar products at ever-lower prices

New information & communication technologies

Identify & target smaller target segments; customize 4Ps to fit such segments

New channels for comm. & transactions btw. suppliers & customers

Alliances with major retailers (e.g. automatic restocking systems; Procter & Gamble & Kroger)

Relationships across functions & firms

Firms are trying to develop & nurture long-term alliances (e.g. 3M & Wal-Mart)

Such cooperative relationships are thought to;

improve each partners ability to adapt quickly to environmental changes or threats

gain greater benefits at lower costs from its exchanges

increase life value of its customers

Planning & execution are now coordinated and carried out by cross-functional teams



Corporate and business-level objectives & strategy

Marketing objectives & strategy should be consistent with the direction & allocation of resources inherent in the firms corporate & business-level strategies

Market opportunity analysis

The analysis necessary to provide the foundation for a good marketing plan should focus on 4Cs;

companys internal resources, capabilities & strategies

environmental context social, economic and technology trends

relative strengths & weaknesses of competitors

needs, wants and characteristics of current & potential customers

Understanding market opportunities

Measuring market opportunities (evidence-based forecast of sales over short & intermediateterm)

Market segmentation, targeting & positioning decisions Formulating strategies for specific market situations (new market entries, growth

markets, mature & declining markets and new economy)

Implementation & control

Implementing business & marketing strategies

Evaluating marketing performance and develop contingency plans

The Process of Formulating & Implementing Marketing Strategy

Documents

Chapter 1 – Market-Oriented Perspectives Underlie Successful Corporate