Lecture 03 DMC and Strategy

Digital Marketing Communications & Corporate Strategy

5G3190 DMCDavid Edmundson-Bird

DMC & Corporate Strategy

• So what’s the problem?– You have to identify the strategic direction of your

organisation– You have to identify the digital marketing opportunity

based on the strategic direction of the organisation

DMC & Corporate Strategy

• So what do you need to learn?– How we define the concept of strategy and

introduce the classical framework for strategic management

– How we deal with Objectives– Whether strategy changes in the Digital economy

THE CONCEPT OF STRATEGY AND THE CLASSICAL FRAMEWORK

Business Strategy and the Classical Framework

• Defining the “concept” of “strategy”• Time to refresh your memories

– What is a strategy?

The Concept of Strategy

• A strategy is a plan for how an “organisation” will “compete” in the “marketplace”

• What if you’re– A government?– Or a charity?– Or a city council?– Or some sad old bloke writing songs in your bedroom?

• …..that’s just me then is it?

Strategy Development involves:

Choosing where to competeChoosing where to compete

Where can be defended?Where can be defended?

How to differentiate?How to differentiate?

Where are the tradeoffs?Where are the tradeoffs?

Activities that link to this?Activities that link to this?

Which customers? What products and services? Where will we operate?

What benefits do our customers seek?Do we have the resources, skills and assets to deliver the target benefits better than our competition?

Is proposition different from our top competitor’s?Can customers tell the difference?

Do our resource allocations reflect our differentiation?

Do all of our strategic decisions fit together?Do we create value by providing mutually reinforcing services?

Strategic Management is more than just developing strategy

ImplementationImplementation

Internal (Company) Analysis


External Analysis

External Analysis

Control and

Monitoring

Control and

Monitoring

Strategy Formulation1

Strategy Formulation1 Corporate Business-unit Functional Operating

ObjectivesObjectivesMissionMission

Mission• Strategic Management begins with a Mission• Mission statements set direction• Clear sense of purpose for the organisation• Provides a clear sense of the business you’re in• Expresses organisation’s current business strategy and future

strategic direction• eBay:

– “To pioneer new communities around the world built on commerce, sustained by trust and inspired by opportunity.”

– “To provide online marketplaces for the sale of goods and services as well as other online commerce, or ecommerce, platforms, online payments services and online communications offerings to a diverse community of individuals and businesses.”

• What’s the difference between a mission and a vision?

Objectives• Objectives are SMART• Good strategic management involves objectives that:

– Balance financial and strategic measures– Measure performance of the business at corporate, SBU and function

levels– E.g. Measurable tangible

• Past performance, often incorporating multiple or external variables– Sales targets, Profitability, Stock price

– E.g. Qualitative valued-focus• Operational performance in relation to company’s mission

– Employee retention, Customer satisfaction, Competitive responsiveness, Level of innovation

Analysis Phase

Differentiated Competencies


DifferentiatedResources

DifferentiatedResources

DifferentiatedCapabilities

DifferentiatedCapabilities

Does it contribute to outcomes that target customers want?

Does it contribute to outcomes that target customers want?

Source of Competitive AdvantageSource of Competitive Advantage

YES

Analyse customer by segment• Financial viability• Valued benefits• Desired customer experience

Analyse customer by segment• Financial viability• Valued benefits• Desired customer experience

Competitor analysis by industry• Industry competitors• Nature of customers• Does we want to compete?

Competitor analysis by segment• Can we serve the segment

better than competitors?

Competitor analysis by industry• Industry competitors• Nature of customers• Does we want to compete?

Competitor analysis by segment• Can we serve the segment

better than competitors?

Market Opportunities and Preferences of Desired Target Customers

Market Opportunities and Preferences of Desired Target Customers

EXTERNAL ANALYSISEXTERNAL ANALYSIS INTERNAL ANALYSISINTERNAL ANALYSIS

Creating a Strategy

• Organisations face different decisions when contemplating corporate strategy and SBU strategy

CORPORATE STRATEGYCORPORATE STRATEGY

ALL THAT WE DOHOW RELATED ALL THE THINGSTHAT WE DO ARE

ALL THAT WE DOHOW RELATED ALL THE THINGSTHAT WE DO ARE

SBU STRATEGYSBU STRATEGY

WHAT WE DO IN THIS SBUWHAT ARE OUR GOALSHOW WE ACHIEVE ADVANTAGEHOW WE MANAGE OUR VALUECHAINHOW OUR ACTIVITES RELATETO EACH OTHERWHAT THE BUSINESS FUNCTIONSSTRATEGIES ARE

WHAT WE DO IN THIS SBUWHAT ARE OUR GOALSHOW WE ACHIEVE ADVANTAGEHOW WE MANAGE OUR VALUECHAINHOW OUR ACTIVITES RELATETO EACH OTHERWHAT THE BUSINESS FUNCTIONSSTRATEGIES AREBROAD

FOCUSSED

Creating an Advantage

• Organisations keep striving for that advantage• Do you want more of this? Read G.S. Day and R. Wensley, “Assessing Advantage: A

Framework for Diagnosing Competitive Superiority,” Journal of Marketing 52 (1988): 1-20

Investment to Create and Sustain Advantage

Investment to Create and Sustain Advantage



Competitive Advantages

Competitive Advantages

Performance Outcomes

Performance Outcomes

Digital Marketing StrategyDigital Marketing Strategy

Positioning and target-market selection Marketing tactics (4Ps)

Better customer value

Low-cost producer

Better skills Better

resources

Delight Loyalty Market share Profitability

Competitive advantages are:• Relative to competitors• Not mutually exclusive• Changing over time

Distinctive competencies don’t always translate into value for customers

Sometimes outcomes are competitive advantages

Competitive advantages don’t always translate into superior performance outcomes

The public may not perceive the firm’s superior value

What’s the difference between “Planning” and “Strategy”?

• Planning– Internal focus– Introspective– Stable environment– Predictable environment

• Goal:– Optimize the

organisation

• Strategy– External focus– Competitive– Unstable environment– Unpredictable

environment

• Goal:– Win the war

HOW WE DEAL WITH OBJECTIVES

The Strategic Waterfall

• Any marketing tools we use must be in pursuit of our communications objectives

• But how do we get there?

The Strategic Waterfall

• We start with the Mission• From there we create business objectives

– Designed to show “how” you’ll achieve your mission

• In order to fulfil our business objectives we need some marketing objectives

Marketing Objectives

• 2 types– Strategic Thrust: Which products are sold in which

markets• Enter new markets, product development, market

penetration/expansion, market development

– Product Level: Build, hold, harvest, divest

Marcomms Objectives

• Once your marketing objectives are in palce you can derive your Marketing Communications Objectives

• These need to be SMART• They are very specific and relate to the

achievement of a given marketing objective• Examples found on page 228 of Chaffey et al

Digital Marcomms Objectives

• They’re digital if they relate to the use of (a) digital marketing lever(s)

• Should be written– Achieve <insert change of state> from <initial

state> to <final state> by <insert time frame> (amongst <insert specific target audience>)

– Use terms such as acquire, convert, retain– Also consider growth, penetration and cost

objectives

DOES STRATEGY CHANGE IN THE DIGITAL ECONOMY?

The 4 Digital Forces affect Strategy

Centricity of TechnologyCentricity of Technology

CustomerGains Control

CustomerGains Control

Strategy Formulation

Fast, UnpredictableCompetition

Fast, UnpredictableCompetition

Rapidly ReconfiguredCompany Resources

Rapidly ReconfiguredCompany Resources

Back office efficiency potential

Face-to-screen not face-to-face

I decide how and when I interact with your organisation

I decide how much info I want to share with you

I can compare prices I need your offering to be

made personal to me

Rethinking relationships with competition

Explore together, exploit separately

Have to respond quickly Not what I can supply but

who actually wants what I’ve got

The Digital Impact on Porter 5 Forces

• New Entrants– Wherever technology enables a task to be easily undertaken,

barriers to entry go down– New market entrants can acquire technology applications easily– Large capital pool has attracted new entrants to many

industries– High technology costs and expertise increase barriers to entry

• Substitutes– Especially for digital technology or services, substitute products

can easily be offered– The Digital Marketplace has introduced new business

methodologies, thus creating additional substitution threats


• Bargaining Power of Suppliers– The digital world provides direct connection to customers; however, it

minimizes suppliers’ bargaining power– Suppliers can access end-users through digital interfaces, minimizing

the need for middlemen– Differentiation becomes more difficult as access to suppliers is

equalized via digital markets and purchases– Fewer barriers to entry result in increased buyer competition, thus

boosting supplier bargaining power• Bargaining Power of Buyers

– Reduces bargaining power of channels– Consumers have more information and ability to search for better deals– Decreases switching costs


• Competitive Rivalry– The digital world minimizes ability to product

differentiate; less differentiation means more competition over price

– Low barriers to entry open markets to heavier competition

– Variable costs decrease as a percentage of fixed costs, leaving price discounting as a primary method of competition

Interactivity & Individualisation• Measuring responsiveness to increasing customer control

High

Low

Low High Individualization

Customization activities initiated by user or firm

Interactivity User’s ability to conduct two-way dialogue through

a digital presence

Digital presence is highly interactivebut is not customisable to theindividual

Digital presence is highly interactiveand is highly customised to theindividual by themselves or the

organisation

Digital presence is highly customisedto the individual by themselves or the

organisation but is not interactive

Digital presence is not interactiveand is not customisable to theindividual

CAN YOU THINK OFAN EXAMPLE?




Resource Insight

High

Low

Low High Quality of Customer Insight

How many customers do we have? How much do we know about them? How quickly can we know about them?

Waiting for Customers tosupport the infrastructure

SO WE SHOULD

Increase the quality ofCustomer Insight

Stronger than competition

SO WE SHOULD

Sell something newForce competition to try

and keep up

In growth or in decline

SO WE SHOULD

Improve the quality ofthe resource system

We’re being copied

SO WE SHOULD

Find a buyerLever the Brand

Low Payoff Sweet Spot

Vulture Victim Resource Contained

Quality of theResource

System Can it be

copied? Is it flexible?

CAN YOU THINK OFEXAMPLES?

“Digital” adds to External Analysis

ImplementationImplementation



External Analysis

External Analysis

Control and

Monitoring

Control and

Monitoring

Strategy Formulation1

Strategy Formulation1 Corporate Business-unit Functional Operating

ObjectivesObjectivesMissionMission

Centricity of Technology

Centricity of Technology

Customer Control and

Power

Customer Control and

Power

Fast, Unpredictable Competition

Fast, Unpredictable Competition

Summary

• We’ve seen what a strategy is• We’ve looked at the basic strategic decisions that

people have to make to develop a competitive strategy

• We’ve seen how to create DMC objectives• We’ve looked at the 4 Digital Economy Forces that

affect strategy formulation• We’ve seen how the classical framework is impacted

by the Network Economy

Education

Lecture 03 DMC and Strategy