CHAPTER 1
Imperatives for
Market-Driven
Strategy
OBJECTIVES
Pivotal role of market-driven strategy in designing and
implementing business/marketing strategies
Links between business/marketing strategy and corporate
strategy
Challenges in the modern environment
CHARACTERISTICS OF A MARKET-DRIVEN
STRATEGY
Becoming Market-
Orientation
Achieving Superior Determining
Performance Distinctive
Capabilities
Customer
Value/
Capabilities
Match
MARKET-DRIVEN STRATEGY (1)
Becoming market-oriented
Customer focus
Competitor intelligence
Cross-functional coordination
Performance implications
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
CHARACTERISTICS OF MARKET
ORIENTATION
Customer Focus
What are the customer’s 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
Becoming a Market-Oriented
Organization
Information
Acquisition
Cross-Functional
Analysis of Information
Shared Diagnosis
and Coordinated
Action
Delivery of
Superior Customer
Value
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
MARKET-DRIVEN STRATEGY (2)
Becoming market-oriented
Customer focus
Competitor intelligence
Cross-functional coordination
Performance implications
Determining distinctive capabilities
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.
SOUTHWEST AIRLINE’S DISTINCTIVE CAPABILITIES
Organizational Processes
Southwest uses a point-to-point route system rather than the hub-and-spoke design used by many
airlines. The airline offers services to 57 cities in 29 states, with an average trip about 500 miles. The
carrier’s value proposition consists of low fares and limited services (no meals). Nonetheless, major
emphasis throughout the organization is placed on building a loyal customer base. Operating costs are
kept low by using only Boeing 737 aircraft, minimizing the time span from landing to departure, and
developing strong customer loyalty. The company continues to grow by expanding its point-to-point
route network.
Skills and Accumulated Knowledge
The airline has developed impressive skills in operating its business model at very low cost levels.
Accumulated knowledge has guided management in improving the business design over time.
Coordination of Activities
Coordination of activities across business functions is facilitated by the point-to-point business model.
The high aircraft utilization, simplification of functions, and limited passenger services enable the
airline to manage the activities very efficiently and to provide on-time point-to-point services offered
on a frequent basis.
Assets
Southwest’s key assets are very low operating costs, loyal customer base, and high employee esprit de
corps
Capabilities
Disproportionate
(higher)
contribution to
superior
customer value Compelling
Logic of Distinctive
Capabilities
Provides value to
customers on a more
cost-effective basis
Source: George S. Day, Journal of Marketing, October 1994, p. 38.
CAPABILITIES
Desirable
Desirable
Capabilities
Capabilities
Applicable to Superior to the
Multiple Competition
Competition
Situations
Difficult to
Duplicate
Source: George S. Day, Journal of Marketing, October 1994, 49.
MARKET-DRIVEN STRATEGY (3)
Becoming market-oriented
Customer focus
Competitor intelligence
Cross-functional coordination
Performance implications
Determining distinctive capabilities
Types of capabilities
TYPES OF CAPABILITIES
Outside-In
Processes
Spanning
Processes
Inside-Out
Processes
ORGANIZATION’S PROCESS
EXTERNAL INTERNAL
EMPHASIS EMPHASIS
Outside-In Inside-Out
Processes Processes
Spanning Processes
Market sensing Financial management
Customer order
Customer linking fulfillment Cost control
Channel bonding Pricing Technology
development
Technology Purchasing
monitoring Integrated logistics
Customer service
delivery Manufacturing/
transformation
New product/service processes
development
Human resources
Strategy development management
Environment health and
Source: George S. Day, Journal of Marketing, October 1994, 41.
safety
MARKET-DRIVEN STRATEGY (4)
Becoming market-oriented
Customer focus
Competitor intelligence
Cross-functional coordination
Performance implications
Determining distinctive capabilities
Types of capabilities
Creating value for customers
MATCHING CUSTOMER VALUE AND
DISTINCTIVE CAPABILITIES
Value Requirements
Distinctive
Capabilities
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.
CREATING VALUE FOR CUSTOMERS
Customer
Value
Benefits Costs
VALUE COMPOSITION
Product
Services
Benefits
Employees
Image Value
(gain/loss)
Monetary costs
Costs
Time (sacrifices)
Psychic and
physic costs
MARKET-DRIVEN STRATEGY (5)
Becoming market-driven
Marketing sensing capabilities
Customer linking capabilities
Aligning structure and processes
BECOMING MARKET DRIVEN
Market Sensing
Capabilities
MARKET –
DRIVEN
STRATEGIES
Customer Linking
Capabilities
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
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
CORPORATE, BUSINESS AND MARKETING
STRATEGY (1)
What is corporate strategy?
CORPORATE STRATEGY
Deciding the Scope
and Purpose of
the Business
Business
Objectives
Actions and
Resources for
Achieving
Objectives
CHARACTERISTICS OF SUCCESSFUL
STRATEGY
Unique competitive position for the company.
Activities tailored to strategy.
Clear trade-offs and choices vis-à-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.
CORPORATE, BUSINESS AND MARKETING
STRATEGY (2)
What is corporate strategy?
Corporate strategy framework
Deciding corporate vision
Objectives
Resources
Business composition
Structure, systems and processes
CORPORATE STRATEGY
COMPONENTS
Management’s 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.
CORPORATE, BUSINESS AND
MARKETING STRATEGY (3)
Business and marketing strategy
Business and marketing strategy relationships
Strategic marketing
CORPORATE, BUSINESS AND MARKETING
STRATEGY
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
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
CORPORATE, BUSINESS AND
MARKETING STRATEGY (6)
Implementing and managing market-driven strategy
Designing market-driven organizations
Marketing strategy implementation and control
MARKETING STRATEGY PROCESS
Markets,
Segments
And Value
Implementing
and Managing Designing
Market-Driven Market-Driven
Strategy Strategies
Market-Driven
Program
Development
CHALLENGES IN THE MODERN
ENVIRONMENT
Escalating globalization
Technology diversity and uncertainty
The Web 2.0
Ethical behavior and corporate social responsiveness
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
MARKETING PLAN
OUTLINE
I. 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.
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.
IV. Market Mix Strategy for
Each Market Target
A. 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 force’s
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.
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.
V. Coordination with Other Business Functions
Indicate other departments/functions that have
responsibilities for implementing the marketing plan.
VI. Sales Forecasts and Budgets
VII. Contingency Plans
Indicate how your plans should be modified if events
should occur that are different from those assumed
in the plan.