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Marketing Strategy A Decision Focused Approach (6th Edition)
Orville C. Walker, Jr.John W. Mullins
Jean-Claude Larréché
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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.
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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
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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.
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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.
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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.
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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.
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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.
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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
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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