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Chapter 1 Imperatives for Market Driven Strategies (1)
Chapter 1 Imperatives for Market Driven Strategies (1)
Chapter 1 Imperatives for Market Driven Strategies (1)
Imperatives for
Market-Driven
Strategy
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
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
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
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
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
Business
Objectives
Actions and
Resources for
Achieving
Objectives
CHARACTERISTICS OF SUCCESSFUL
STRATEGY
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
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.
During the recession, as business forecasts based on seemingly plausible swings in sales smacked up
against reality, executives discovered that strategic planning doesn't always work.
Some business leaders came away convinced that the new priority was to be able to shift course on
the fly. Office Depot Inc., for example, began updating its annual budget every month, starting in
early 2009. Other companies started to factor more extreme scenarios into their thinking. A few
even set up "situation rooms,'' where staffers glued to computer screens monitored
developments affecting sales and finances.
44
Coke Bottle Is Part Plant
But It Feels and Functions Like a Regular Plastic Container
By CHRIS HERRING
Coca-Cola Co., under fire from environmentalists for using plastic bottles, has
introduced a new packaging material made partly from plants. The container has
"the same weight, the same feel, the same chemistry, and functions exactly the
same way" as a regular plastic bottle, a Coke spokeswoman says.
Coke isn't the only beverage concern trying to reduce its carbon footprint. Rival
PepsiCo Inc. has introduced a compostable bag made from plants for its SunChips
snacks. But Coke is the world's biggest drink maker, and Coke Chairman and Chief
Executive Muhtar Kent calls the new container, which uses material derived from
sugar cane, "the first generation of the bottle of the future."
Coke touted its "plantbottle" at the Climate Change Summit in Copenhagen last
month, and it plans another push next month at the Winter Olympics in Vancouver,
where all the sodas and water it provides will be packaged in the plantbottle.
"Preliminary research" shows the new container leaves a smaller carbon footprint
than regular plastic bottles, Coke says.
45