Market-Oriented Perspectives Underlie Successful Corporate

Market-Oriented Perspectives Underlie Successful Corporate, Business, and

Marketing Strategies

This is the latest version 12/25/07

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

Scope Goals and objectives Resource deployments Identification of sustainable

competitive advantage Synergy

Exhibit 1.3

Components of Strategy


Need to be Market Oriented.

Persuade customers to buy

What company has

Generic product, production

process, and delivery system

Lowest delivered cost

Volume, cost, profit margins

Short term, reactive

Persuade company to have

what customers wantAugmented product, customerbenefits, and market segments

Superior customer value

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

Medium and long-run view of threats and opportunities

Internal Orientation Market Orientation

Focus

CompetitiveAdvantage

Objectives

Time Horizon


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 we’re not customer-driven, our products won’t

be either


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.

Org Objectives Resources

Changing Environment

Strategic Fit


The Role of Strategy.

CorporateMission &Objectives

Strategy:•Corporate•Business•Functional

Operating Plans


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.


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)


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)


Discussion Questions

3. Does having a market orientation make sense? What are the advantages and drawbacks?

4. Why do some firms lack orientation towards the market?


Organizational Marketing Levels.

Organizations develop strategies at three structural levels:

Corporate level—(corporate marketing) SBU level—(Strategic Marketing) Product/Market level—(Functional

Marketing)


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?


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.)


Marketing at the SBU Level - Strategic Marketing.

Strategic Marketing requires Detailed understanding of market needs,

and Proactive use of competitive intelligence

at the corporate as well as SBU’s levels

Strategic Marketing Focuses on what the firm do best at the

SBU level To secure and maintain a sustainable

competitive advantage


Other Characteristics of Competitive Advantage.

Substantiality Sustainability Ability to be leveraged

(Source: Strategic Marketing Management, Aakers)


Seeking Competitive Advantages.

Position advantages Superior customer value Lower relative total cost

Performance advantages Customer satisfaction, Loyalty, Market Share,

Profit Sources of advantages

Superior skills & knowledge, Superior resources, Superior business process


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


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

A Viable Marketing Strategy.


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

Exhibit 1.10

Contents of a Marketing Plan

Corporate Strategy Decisions and Their Marketing Implications

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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


Exhibit 2.2

Characteristics of Effective Corporate Mission Statements

Broad SpecificFunctional

Based on customer needs

Transportation business

Long-distance transportation for large-volume producers of low-value, low-density products

Physical

Based on existing products or technology

Railroad business

Long-haul, coal carrying railroad


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


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?


How do Firms Compete.

Value proposition Assets & competencies Function area strategies and programs Implementation


Discussion Question

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


Sources of Synergy1.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 & G’s Ivory,

Pampers, cheer, Clairol, Olay, etc.

4.Shared resources-based synergy

Business Strategies and Their

Marketing Implications

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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 product-

markets requiring similar technologies,

production facilities, and employee skills

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

Low-cost defenderMature/stable/well-defined domain; mature tech.and cust. segments

Very little

Low

HighGenerate excess cash (cash cows)

Need to seekoperating synergies to achieve efficiencies

Differentiated defenderMature/stable/well-defined domain; mature tech.and cstmr segment

Little

Low

HighGenerate 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

ProspectorBroad/dynamic domains; tech. and cust. segments not well-established

Extensive

HighLowNeed cash for product dev. (? or *)

Danger in sharing operating fac. and programs - better to share tech./mktg skills

AnalyzerMixture 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

Understanding Market Opportunities

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The Seven Domains of Attractive Opportunities

Macro Level

Micro Level

Market Domains Industry Domains

Mission, Ability toAspirations, Execute Propensity on CSFsfor Risk

Connectedness up and down Value Chain

Team Domains

Market Attractiveness

Target Segment Benefits and Attractiveness

Industry Attractiveness

Sustainable Advantage


Discussion Question

1. What’s a market?

2. What’s an industry?

Is the market vs. industry distinction important?

Why or why not?


Macro Trend Analysis

Demographic environment

Sociocultural environment

Economic environment

Regulatory environment

Technological environment

Natural environment

Think of an example of each and its impact


Discussion Questions

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

A Tool for Assessing Industry Attractiveness:

Porter’s Five Forces

Rivalry among Rivalry among existing industry existing industry

firmsfirms

Threat of substitute Threat of substitute productsproducts

BargainingBargainingpowerpower

of buyersof buyers

Bargaining Bargaining powerpower

of suppliersof suppliers

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

Threat of newThreat of new entrantsentrants


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


Understanding Markets at the Micro LevelInvolves looking individually at customers to understand

the attractiveness of the target segment.

Attractive opportunities exist when: 1. there is a clearlydefined source of customer pain, for some in the targetsegment, which the offering resolves, 2. the offeringprovides customer benefits that others do not 3. thetarget segment is likely to grow and 4. the current segment may provide a springboard for future entry intoother segments.


Understanding Industries at the Micro Level

• Involves looking at the company

and whether it has a sustainable

competitive advantage


The Team Domains

• Opportunities are only as good

as the people who will pursue them

Measuring Market Opportunities: Forecasting and Market Knowledge

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Market-Oriented Perspectives Underlie Successful Corporate