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Part 1 Marketing Strategy

Chap. 1 Market-led strategic management

This chapter has sought to review the marketing concept and demonstrate its
importance in providing a guiding approach to doing business in the face of
increasingly competitive and less marketing environments. This approach we
term market-led strategic management. Chapter 1 is a framework for developing
a market-led approach.

Marketing is a simple specialised function in an organisation, it is a process of


value creation (define, develop and deliver value) and deliver it to customers.
And create a sustainable competitive advantage on the market for a long term.
The successful organisation is customer-focused and not product or technological
focused.
Marketing is a concept of how business should run.

This first chapter sets the scene by the marketing concept and market orientation
as the foundation of strategic marketing, the role of marketing in addressing
stakeholders in the organisation and resource-based marketing strategy.

1.1 the marketing concept and market orientation

1.1.1 definition of marketing

Companies or organisations that take notice of customers expectations, wants


and needs and gear themselves to satisfying them better than their competitors.
Definition from Ferrell and Lucas (1987):
Marketing is the process of planning and executing the conception, pricing,
planning and distribution of ideas, goods and services to create exchanges that
satisfy individual and organisational objectives.

This process may or may not be managed by a marketing department. It leads to


a model of mutually beneficial exchanges:

offers
Providers services, products… Customers
goals goals
Survival customers & Solutions
Financial providers satisfaction Benefits
Social Well-being
Spiritual Responses
Purchses, support

Marketing has the most difficulty in defining its position in the organisation!
Marketing involves the following:
 organisational culture: set of values and beliefs for the organisation to serve
customers needs
 strategy: develop effective responses to changing market environments by
defining market segments, and developing and positioning product offerings for
targets.

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 tactics: concerned activities of product management, pricing, distribution and
communications such as advertising, personal selling, publicity and sales
promotion

1.1.2 market orientation

It is to translate the philosophy of marketing into reality, to achieve market


orientation.
Definition from Kohli and Jaworski (1990):
Market orientation are activities toward developing an understanding of
customers current and future needs.
Components and context of market orientation are proposed:
 Customer orientation: understanding costumers well enough, create superior
value for them
 competitor orientation: awareness of the short- and long term competitors
 interfunctional co-ordination: using all resources to create value for target
customers
 organisational culture: linking employee and managerial behaviour to
customer satisfaction
 long-term profit focus: as the overriding business objective

Customer Interfunctional
orientation Co-ordination

Maket-led
Organisational
culture

competitor Focus on the


orientation Long term

There are substantial barriers to achieve market orientation. To overcome the


barriers Webster developed an idea that weave the “fabric of the new marketing
concept”
It is useful to develop a marketing concept as you can see in the framework:

1.2 the resource based view of marketing

Marketing approaches:

 product push marketing: activities on existing products and services and


look for ways to encourage, or persuade customers to buy. This is an
interpretation of the resource-based-view – we have a resource that we are good
at producing and is different to competitors offerings. The key is to make
customer want what we are good at.

 customer-led marketing: Under this approach organisations chase their


customers at all costs. The goal is to find what customers want and give it to
them. This can become to a problem. The retailers react by giving customers
more choice, heavy promotions and deals to stimulate purchases, and aggressive

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sales force targets. Customers get confused because of the over complex
promotions.

 resource based marketing: companies base their marketing strategies on


equal consideration of the requirements of the market and their abilities to serve
it. This is taken in context of other market considerations such as competitors’
offerings and strategies.

Resource based marketing seeks a long term fit between the requirements of the
markets and the abilities of the organisation to compete in it. The resource profile
is not fix it has to be developed continuously to take advantage of new
opportunities.

1.3 Organisational stakeholders

Why do they exist? The answer is to earn returns on their investments for
shareholders and owners of the organisation. For other non profit organisations
(like charities, faith based organisations, public services) is the answer to lie in
the desire or to serve specific communities.

Motivations and expectations of the various stakeholder groups:

 shareholders: there are two main types: a) the individuals who ties to the
business, b) financial investors who are individuals or institutional, they want to
maximise the long-term value of their investments, the long time shareholder
value is driven many firms to make short term decisions, to maximise share price
or dividends

 employees: may also have long-term commitment to the firm. Their priorities
are generally compensation (through wages and salaries), job satisfaction and
security. These may be with the value of the firm to shareholders. Job loss may
cause to increase the shareholder value.
 managers: also get rewards in the form of salaries and prestige. Managerial
success is measured by short term gains (in sales for example)
 customers: are the ultimate source of shareholder value. The price and
quality of offerings are very important. If customers are not prepared to pay the
price the firm will not remain in business very long. Nowadays customer value
creation must be balanced with other issues like Internet etc.
 suppliers and distributors: also have a stake in the business. Suppliers
serve to ensure the achievement of their own goals. Distributors are stakeholders
too like franchises. They seek from predictabilities and continuity at satisfactory
margins. (Vorhersagen und fortlaufende zurfriedenstellende Handelsspanne)

For non profit organisations the identification of stakeholders and their


requirements are more complex.

 owners: hard to identify and the interests are difficult to define. Like who
owns the Catholic Church, or greenpeace? Hard to answer! Many may argue that
the owners are those who support the organisation like the members…
 customers: defined as those who attend to mass on Sundays, who seeks to
serve.

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 employees: in the non profit sector employees do not receive financial
rewards. Their prime motivators are not financial but satisfaction which they
cherish or value.

1.3.1 contribution of marketing to stakeholder objectives

Firms who adopting to market-oriented culture perform financially better than


others. WHY? The effect of market oriented culture on firm activities and
performance shows the following figure. The degree of market orientation is an
embedded cultural aspect.

Market Marketing resource market performance financial


Oriented performance
Culture Assets customer satisfaction
Capabilities sales volume &
Market share

High market orientation means that they are focused on their role in and
contribution to creating superior customer value. For example a human resource
management and training is directed toward customer awareness and service,
reward structures are designed to encourage customer satisfaction. Fulfilled
employees take pride in their jobs and give better service.
Well developed marketing resources can lead to a market performance. Satisfied
and well-motivated staff can make a significant contribution to creating satisfied
customer and consequently increased sales volume and market share.
Customer satisfaction leads to greater sales volume and market shares which
leads to financial performance. Firms with higher market shares perform
financially better.

Marketing’s contribution will be to develop strategies that deliver cash flows


through successful new product launches, or creation of strong brands. The focus
or marketing is on developing and protecting assets such as brands or market
shares.
It concentrate on the satisfying the needs of employee and manager stakeholders
through providing security, compensation and job satisfaction. To achieve the
profit and performance desires of the supply chain partners is through market
success (partnership) which creates more stability and predictability in the supply
and distribution chain.

1.4 Marketing fundamentals

Marketing principles serve to guide marketing thought and action.

Principle 1: Focus on the customer


Financial and social objects are best served by achieving a high degree of
customer focus. The quality or services will be judged by the customers on the

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basis of how well their requirements are satisfied or fit for purpose. Basic
questions for adopting a market-led approach:
What business are we in? What business could we be in? What business do we
want to be in? What must we do to get into or consolidate in that business?

Principle 2: Only compete in markets where you can establish a


competitive advantage
Key task for any organisation

Principle 3: Customers do not buy products


They buy what the product can do for them or the problem it solves. Customers
are less interested in technical features or service than in what benefits they get
from buying using or consuming the product or service. Mission of Marketing is to
ensure that the organisation gears itself to solve customers’ problems, rather
than exclusively promoting its own current solution. Retailers are defining
categories around customers needs, not manufacturers’ brands. One common
category is ready meal replacement. The challenge is to prove to the retailer
what their products and brands add to the value of the category. Example: the
manufacturer makes potato crisps; the retailer merchandises salty snacks; the
customer buys lunch!

Principle 4: Marketing is too important to leave to the marketing


department (even if there still is one)
Marketing is everyone’s job in the organisation.

Principle 5: Markets are heterogeneous


Different customers, sub-markets and segments; buy a car for cheap transport
from a to b or for comfortable or save travel; different benefits requirements
Principle 6: markets and customers are constantly changing
Markets are dynamic and products have a limited life; need product and service
improvement; customer expectations change;

Two main processes of improvement; innovation and changes in technology


(which is a continuous process);

1.5 The role of marketing in leading strategic management

The role of marketing in the organisation can be: (that role is threefold)

 identity and communicate customers want and need throughout the


organisation

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Identify the requirements of customers and communicate them effectively;
who the customers are and what will give them satisfaction or create
“customer delight”
Customers expectations, wants and need must be understood and
communicated

 determine the competitive positioning to match the needs of the customers


with company
capabilities
Various market segments and each have different requirements; decide which
target markets the organisations will seek to serve; two main sets of factors:
first, how attractive the alternative potential targets are; second, how well the
company can hope to serve potential target relative to the competition;

 marshal all relevant organisational resources to deliver customer satisfaction


Implementing the marketing strategy; no gaps between offer, design,
production and delivery;

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