Imperatives for Market-Driven Strategy

McGraw-Hill/Irwin

Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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Characteristics of a Market-Driven Strategy

Becoming MarketOrientation

Achieving Superior Performance

Determining Distinctive Capabilities

Customer Value/ Capabilities Match

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1. Market Orientation
Information Acquisition Gather relevant information on customers, competition, and markets Involve all business function Inter-functional Assessment Share information and develop innovative products with people from different function Shared diagnosis and action Deliver superior customer value
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Characteristics of Market Orientation

Customer Focus What are the customers value requirements? Competitive Intelligence Importance of understanding the competition as well as the customer Cross-Functional Coordination Remove the walls between business functions Performance Consequences Market orientation leads to superior organizational performances

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BECOMING MARKET ORIENTED

* Customer is the focal point of the organization * Commitment to continuous creation of superior customer value * Superior skills in understanding and satisfying customers * Requires involvement and support of the entire workforce * Monitor rapidly changing customer needs and wants * Determine the impact of changes on customer satisfaction * Increase the rate of product innovation * Pursue strategies to create competitive advantage
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Becoming a Market-Oriented Organization

Information Acquisition Cross-Functional Analysis of Information Shared Diagnosis and Coordinated Action Delivery of Superior Customer Value
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2. DISTINCTIVE CAPABILITIES

Capabilities are complex bundles of skills and accumulated knowledge, exercised through organizational processes, that enable firms to coordinate activities and make use of their assets.
George S. Day, Journal of Marketing, October 1994, p.38.

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Capabilities
Desirable Capabilities

Applicable to Multiple Competition Situations Difficult to Duplicate

Source: George S. Day, Journal of Marketing, October 1994, 49.

Superior to the Competition

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Types of Capabilities
Outside-In Processes Spanning Processes

Inside-Out Processes

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Organizations Process
EXTERNAL EMPHASIS Outside-In Processes
Market sensing

INTERNAL EMPHASIS
Inside-Out Processes
Financial management Cost control Technology development Integrated logistics Manufacturing/ transformation processes Human resources management Environment health and safety
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Spanning Processes
Customer order fulfillment Pricing Purchasing Customer service delivery

Customer linking Channel bonding Technology monitoring

New product/service development Strategy development

Source: George S. Day, Journal of Marketing, October 1994, 41.

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3. Matching Customer Value and Distinctive Capabilities

Value Requirements

Distinctive Capabilities

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CREATING VALUE FOR CUSTOMERS

Customer Value:
Value for buyers consists of the benefits less the costs resulting from the purchase of products.
Superior value: positive net benefits

Creating Value:
Customer value is the outcome of a process that begins with a business strategy anchored in a deep understanding of customer needs.
Source: C. K. Troy, The Conference Board Inc., 1996, 5.

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Creating Value for Customers

Customer Value

Benefits

Costs
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Product Services
Employees

Value Composition

Benefits
Value (gain/loss)

Image
Monetary costs

Time
Psychic and physic costs

Costs (sacrifices)

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Becoming Market Driven

Market Sensing Capabilities

MARKET DRIVEN STRATEGIES

Customer Linking Capabilities

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Market Driven Initiatives

Market Sensing Capabilities * Effective processes for learning about markets * Sensing: * Collected information needs to be shared across functions and interpreted to determine proper actions. Customer Linking Capabilities * Create and maintain close customer relationships
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* * * Aligning Structure and Processes

* Potential change of organizational design * Improve existing processes * Process redesign * Cross-functional coordination and involvement * Primary targets for reengineering: * Sales and marketing, customer relations, order fulfillment, and distribution
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Corporate, Business and Marketing Strategy (1)

* What is corporate strategy?

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CORPORATE STRATEGY
Deciding the Scope and Purpose of the Business Business Objectives

Actions and Resources for Achieving Objectives

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CHARACTERISTICS OF SUCCESSFUL STRATEGY Unique competitive position for the company. Activities tailored to strategy. Clear trade-offs and choices vis--vis competitors. Competitive advantage arises from fit across activities. Sustainability comes from the activity system not the parts. Operational effectiveness a given.
Source: Michael E. Porter, What Is Strategy, Harvard Business Review, November-December 1996, 74.

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Corporate, Business and Marketing Strategy (2)

* What is corporate strategy? * Corporate strategy framework
* * * * * Deciding corporate vision Objectives Resources Business composition Structure, systems and processes

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CORPORATE STRATEGY COMPONENTS

Managements long-term vision for the corporation Objectives Assets, skills, and capabilities Businesses in which the corporation competes Structure, systems, and processes Creation of value
Source: David J. Collis and Cynthia A. Montgomery, Corporate Strategy, Chicago: Irwin, 1997, 7-12.

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Corporate, Business and Marketing Strategy (3)

* Business and marketing strategy
* Business and marketing strategy relationships * Strategic marketing

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CORPORATE, BUSINESS AND MARKETING STRATEGY

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Corporate, Business and Marketing Strategy (4)

* The marketing strategy process
* Markets, segments and customer value
* * * * Markets and competitive space Strategic market segmentation Strategic customer relationship management Capabilities for continuous learning about markets

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Corporate, Business and Marketing Strategy (5)

* Designing market-driven strategies
* Market targeting and strategic positioning * Strategic relationships * Innovation and new product strategy

* Market-driven program development

* * * * Strategic brand management Value chain strategy Pricing strategy Promotion strategy

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Corporate, Business and Marketing Strategy (6)

* Implementing and managing marketdriven strategy
* Designing market-driven organizations * Marketing strategy implementation and control

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MARKETING STRATEGY PROCESS

Markets, Segments And Value

Implementing and Managing Market-Driven Strategy Market-Driven Program Development

Designing Market-Driven Strategies

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Challenges in the modern environment

* * * * Escalating globalization Technology diversity and uncertainty The Web 2.0 Ethical behavior and corporate social responsiveness

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Strategic Marketing Planning

* Developing the strategic plan for each business
* Preparing the marketing plan
* Planning relationships and frequency * Planning considerations
* Responsibility for preparing plans * Planning unit

* Preparing the marketing plan

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I.

MARKETING PLAN OUTLINE

Strategic Situation Summary

Summarize the key points from your situation analysis (market analysis, segments, industry/competition) in order to recount the major events and provide information to better understand thestrategies outlined in the marketing plan.

II.

Market-Targets and Objectives

The market target may be defined demographically (key characteristics only), geographically, or in social/economic terms. Each market target should have needs and wants that differ to some degree from other targets. These differences may be with respect to types of products purchased, use situation, frequency of purchase, and other variations that indicate a need to alter the positioning strategy to fit the needs and wants of each target. An objective is a quantified goal identifying what is expected when. It specifies the end results expected. The objectives should be written for each target market. Objectives should also be included for the following program components: (1) product, (2) price, (3) distribution, (4) promotion (salesforce, advertising, sales promotion, and public relations), and (5) technical services.
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MARKETING PLAN OUTLINE

III. Positioning Statements
Write statements that describe how you want each market target to perceive each product relative to competition. State the core concept used to position the product (brand) in the eyes and mind of the targeted buyer. The positioning statement should describe: (1) What criteria or benefits the customer considers when buying a product along with the level of importance, (2) What we offer that differentiates our product from competition, and (3) The limitations of competitive products.

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A.

IV. Market Mix Strategy for Each Market Target

Product Strategy
Identify how each product fits the market target. Other issues that may be addressed would be new product suggestions, adjustments in the mix of existing products, and product deletion candidates.

B.

Price Strategy
The overall pricing strategy (I.e., competitive, premium-priced, etc.) should be identified along with a cost/benefit analysis if applicable. Identify what role you want price to play, i.e., increase share, maintenance, etc.

C.

Distribution Strategy
Describe specific distribution strategies for each market target. Issues to be addressed are intensity of distribution (market coverage), how distribution will be accomplished, and assistance provided to distributors. The role of the sales force in distribution strategy should also be considered.

D.

Promotion Strategy
Promotion strategy is used to initiate and maintain a flow of communication between the company and the market target. To assist in developing the communications program, the attributes or benefits of our product should be identified for each market target. How our product differs from competition (competitive advantage) should be listed. The sales forces responsibilities in fulfilling the market plan must be integrated into the promotion strategy. Strategies should be listed for (1) personal selling, (2) advertising, (3) sales promotion, and (4) public relations.
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E. Marketing Research Describe the market research problem and the kind of information needed. Include a statement which addresses why this information is needed. The specific market research strategies can be written once the above two steps have been followed. Coordination with Other Business Functions Indicate other departments/functions that have responsibilities for implementing the marketing plan. Sales Forecasts and Budgets
Contingency Plans Indicate how your plans should be modified if events should occur that are different from those assumed in the plan.

V.

VI. VII.

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