Chapter 2- Summary

Marketing and customer value

-Value delivery process- Places marketing at the beginning of the planning (Homework), instead of
emphazing on making and selling companies see themselves as value delivery process.

-3 steps involved in the process- choosing the value-segment -select the target-develop offering
(STP)

-2ND phase is providing value (price features etc.)

-3rd phase is communicating the value by utilizing internet, advertising and sales. (Promotion)

-Each phase has a cost implication

Dyson creates value with its innovative products. It can therefore charge significantly more than the
price charged for conventional fans. So, they created a value

Value Chain

1. Ways to create more customer value is value chain

2. Nine strategically designed activities for these -5 primaries and 4 secondaries
Inbound logistics (materials into business)
Operations (raw-finished goods)
Marketing which is inclusive of sales
Outbound logistics (shipping final products)
Service
Support activities handled by -Procurement
Technology
Human resource
Firm Infrastructure

Any companies basic task is to examine cost and performance at each stage of value creating
process and benchmarking against competitors

Success depends on interdepartmental coordination to conduct core business activities. The process
is

 Market sensing process-gathering information and acting upon information about market
 New-offering realization process- R and D and launch of products at budget
 Customer Acquisition process- Defining target market for new customers
 Customer relationship management process- Understanding + relationships + offering
 Fulfillment management process- receiving, shipping and approving orders and payment
collection

Example: Ford developed a cross functional team to reduce water usage per vehicle by 30%

Core competencies

 Companies today outsource less critical resources if they can obtain better quality at lower
cost
 Core competency has three characteristics
 o It has a source of competitive advantage and makes significant contribution to
customer benefits
o Applications in wide variety of markets
o Difficult for competitors to imitate
o Distinctive capabilities-market sensing -customer linking-channel bonding
o Learning from past, evaluating the present and envisioning future

Business need to re-align when and where necessary to increase core competitiveness

- Steps of realignment are

- Re-defining
- Re-positioning
- Re-shaping

Ex: Panasonic “ideas for life” generated good products like rugged tough notebook as economy feel
people began treating LCD televisions as commodity and further the manufacturing costs increased
made it difficult for Panasonic to compete on price. Anti-Japanese sentiments was a stumbling block
in China. Finally, a restructuring scaled back manufacturing in Japan abandoned mobile market
overseas and cut back investment in solar panels and rechargeable batteries hence business was
streamlined

Central role of strategic planning

 Accept the customer is king

 Strong marketing leadership (CMO ROLE)

Strategy has to be based on the following key points

a) Managing business as an investment portfolio
b) Assessing growth rate and position
c) Establish a game plan

Large companies have four levels

 o Corporate planning includes designing strategy and make resource allocation decision
o Each division establishes a plan covering the allocation of funds to each business unit within
the division
o Each business unit plans to drive growth and profits
o Each product level develops a marketing plan for achieving objectives.

Marketing plan levels

i. Strategical- Target market and value proposition on analysis of market opportunities

ii. Tactical -marketing tactics (Marketing mix)
iii. So, we have 3 steps planning – implementation and controlling

Corporate division and Strategic Planning

A. Defining the corporate mission

B. Establishing SBU (Strategic business units)
C. Assigning resources
D. Assessing the growth

Defining the corporate mission

 Ex: -Amazon went from being the largest online book store to aspiring to be the world’s
largest online store
 Dunkin Donuts shifted from Donuts to coffee

Questions to be asked for defining mission

What is our business?

Who is customer?
What is the value?
What will our business be and what should it be in future?

Steel case: World’s bestselling maker of office furniture describes itself as global leader. They
decided to go beyond office (Homes schools and healthcare). Steelcase used 23 people team
to get insights and conduct surveys use sensors to see how workers use rooms and
furnishing. Few cubical and filling cabinets and café seating to brainstorm and collaborate.
Trend change from I/fixed to We/Mobile. Steel case can convince a firm to modernize

Product oriented VS market Oriented

Union Pacific Railroad. We run a railroad We are a goods mover.

We make copying equipment We help improve office
Xerox productivity

Ex in crafting a mission – Making impossible possible: Sony’s former president, Akio Morita, wanted
everyone to have access to “personal portable sound,” so his company created the Walkman and
portable CD player. Fred Smith wanted to deliver mail anywhere in the United States before 10:30
am the next day, so he created FedEx.
The keys of a good mission will contain:

They focus on a limited number of goals- No vague ideas, crisp and clear
Ex- Google’s ambitious but more focused mission statement, “To organize the world’s
information and make it universally accessible and useful.”
They stress the company’s major policies and values.
Competitive spirit
Long term view
Short-memorable and meaningful

Establishing SBU’S

1. It is a single business, or a collection of related businesses, that can be planned separately from
the rest of the company.

2. It has its own set of competitors.

3. It has a manager responsible for strategic planning and profit.

Assigning Resources to Each SBU

 Once it has defined SBU, must decide how to allocate resources. The GE/McKinsey Matrix
classified each SBU by the extent of its competitive advantage and the attractiveness of its
industry
 BCG’s Growth-Share Matrix used relative market share and annual rate of market growth as
criteria for investment decisions.
 SBUs as dogs, cash cows, question marks, and stars.

Assessing Growth Opportunities

 Assessing growth opportunities includes planning new businesses, downsizing, and

terminating older businesses

 The first option is to identify opportunities for growth within current businesses
(intensive opportunities)- This includes “product-market expansion grid,” The company
first considers whether it could gain more market share with its current products in their
current markets, using a market-penetration strategy. Second it tries for new markets-
market development strategy. Then it considers whether it can develop new products
for its current markets with a product-development strategy. Later the firm will also
 review opportunities to develop new products for new markets in a diversification
strategy
 The second is to identify opportunities to build or acquire businesses related to current
businesses (integrative opportunities)
 . The third is to identify opportunities to add attractive unrelated businesses
(diversification opportunities)

Ex: ESPN Through its singular focus on sports programming and news, ESPN grew from a small
regional broadcaster into the biggest name in sports. In the early 1990s, the company crafted a well-
thought-out plan: Wherever sports fans watched, read, and discussed sports, ESPN would be there.
It pursued this strategy by expanding its brand and now encompasses 10 cable channels, a Web site,
a magazine, a few restaurants (ESPN Zone). Now owned by The Walt Disney Company, ESPN
contributes $9.4 billion a year in revenue, or roughly three-fourths of Disney’s total cable network
revenues.

ESPN’s flagship SportsCenter program is an anchor of its television network and related sports
businesses.

Integrative Growth: A business can increase sales and profits through backward, forward, or
horizontal integration within its industry.

United and Continental Airline mergers are notoriously tricky, laden with regulations and a host of
potentially conflicting considerations about safety, cost, style, reliability, convenience, speed, and
comfort. United’s merger with Continental made sense strategically and financially, but logistical
problems seemed endless because the two airlines ran their businesses in very different ways, from
boarding procedures to the way they brought planes into the gate. Even coffee was a thorny issue;
United served Starbucks while Continental used a company called Fresh Brew. After extensive
research, a suitable compromise was identified—a lighter fresh blend called Journeys—but
customers were unimpressed until the company discovered the two airlines had different brew
baskets and United’s was actually leaking water and diluting the coffee. New pillow packs were
commissioned to solve the problem.

Diversification Growth

Diversification growth makes sense when good opportunities exist outside the present businesses—
the industry is highly attractive and the company has the right mix of business strengths to succeed.
Conglomerate strategy needed

From its origins as an animated film producer, The Walt Disney Company has moved into licensing
characters for merchandised goods, publishing general interest fiction books under the Hyperion
imprint, entering the broadcast industry with its own Disney Channel as well as ABC and ESPN

Business Unit Strategic Planning

The business unit strategic-planning process consists of the steps shown.

External Environment (Opportunity and Threat) Analysis: Assess the microeconomic and macro-
economic factors that affect its ability to earn profits

There are three main sources of market opportunities.

1. The first is to offer something that is in short supply

2. The second is to supply an existing product or service in a new or superior way
3. Consumption chain method asks them to chart their steps in acquiring, using, and disposing
of a product

Ways of analyzing opportunity

 Introduce hybrid products or services new to the market:

EX: Cell phone manufacturers have released phones with digital photo and video
capabilities, Global Positioning Systems (GPS), and so on
 A company may make a buying process more convenient or efficient.
EX: Mobil introduced Speed Pass, one of the first widely deployed RFID (radio-frequency
identification) payment systems, to allow consumers to quickly and easily pay for gas at the
pump
 A company can customize a product or service
EX: Any customisation
 A company can introduce a new capability.
Ex: Consumers can create and edit digital “iMovie’s” with the iMac and upload them to an
Apple Web server or Web site such as YouTube to share with friends around the world
  A company may be able to deliver a product or service faster
Ex: FedEx
 A company may be able to offer a product at a much lower price
Ex: Generic medicines

Market Opportunity Analysis (MOA)

• Can we articulate the benefits convincingly to a defined target market(s)?
• Can we locate the target market(s) and reach them with cost-effective media and trade
channels?
• Does our company possess or have access to the critical capabilities and resources we need
to deliver the customer benefits?
• Can we deliver the benefits better than any actual or potential competitors?
• Will the financial rate of return meet or exceed our required threshold for investment?

SWOT Analysis of Dell

Strength: was selling more effectively and efficiently directly to consumers than IBM and Compaq, its
hardware competitors at the time.

Weakness: Brand was not strong and lacked channel infra and solid dealer leaderships.

Opportunity: consumer market was becoming more sophisticated and customers increasingly knew
exactly what they wanted.

Threat: would fail to generate a big enough customer base in the face of strong competitors and
demanding channel partners.

Dell’s business strategy combined direct sales, Internet marketing, mass customization, and just-in-
time manufacturing to capitalize on the market opportunity it was offered.

Checklist:< For SWOT> <THINK & ANALYSE ON THESE WRT DEPT’S>

Marketing Company reputation, Market share.,. Customer satisfaction, Customer retention, Product
quality, Service quality, Pricing effectiveness, Distribution effectiveness, Promotion effectiveness,
Sales force effectiveness, Innovation effectiveness, Geographical coverage

Finance Cost or availability of capital, Cash flow, financial stability

Manufacturing Facilities Economies of scale, Capacity, Able, dedicated workforce, Ability to produce
on time, technical manufacturing skill

Organization Visionary, capable leadership, Dedicated employees

Goal Formulation

• Unit’s objectives must be arranged hierarchically

• Objectives should be quantitative

• Goals should be realistic

• Objectives must be consistent

Ex: Many believe adopting the goal of strong market share growth may mean foregoing strong short-
term profits. Volkswagen has 15 times the annual revenue of Porsche—but Porsche’s profit margins
are seven times bigger than Volkswagen’s.

Porter’s Generic Strategies

Overall cost leadership, differentiation and focus: Firms work to achieve the lowest production and
distribution costs so they can under-price competitors and win market share.

The online air travel industry has provided a good example of these three strategies: Travelocity has
pursued a differentiation strategy by offering the most comprehensive range of services to the
traveller; Lowest fare has pursued a lowest-cost strategy for the leisure travel market; and Last
Minute has pursued a niche strategy by focusing on travellers who have the flexibility to travel on
very short notice.

Boston Consulting Group Matrix

COCO-COLA

STARS:

The products or business units that have a high market share in high growth industry are the stars of
the organization. Kinley and Dasani: Kinley and Dasani are still bottled water brands owned by Coca-
Cola and offered in different countries in markets. While Kinley is quite a popular bottled water
brand in European and Asian countries, Dasani has a quite a stronghold in US market.
QUESTION MARK:

There are products that formulate a part of the industry that is still in the phase of development and
the organization is trying to create a significant position in the industry. The small market share
obtained by the organization makes the future outlook for the product uncertain, therefore
investing in such domains is seen as a high-risk decision.

With an aim to cater to the changing needs of consumers to zero calories and no sugar drinks< Diet
Coke, minute maid.

DOGS:

Dogs are those products that were perceived to have the potential to grow but however failed to
create magic due to the slow market growth.

Coke – Declining demand for carbonated soft drinks due to increasing demand for low calorie and
healthy beverages and snacks is what is attributing the diminishing sales of Coke brand.

CASH COWS:

Cash cows are the products that have a high market share in a market that has low growth.

Ex: Coke, Coke brand which is currently regarded as a cash cow for the company will eventually fall
in quadrant to quadrant in the future due to various factors. (Can come under dogs also).

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