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Lecture 2 Driving Value

Value: worth, cost, rate, assessment, importance, significance, usefulness, consequence, merit, help, appreciate, respect, esteem, cherish, set great store by, assess, estimate, evaluate, appraise(profit, price, charge)
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Session Objectives
Reinforce Situational Analysis Understand value in context of company point of view: Alignment & Adaptation Understand value from customer point of view Understand value from value chain point of view

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Review
Page 109: Exhibit 3.12: Which segment will have the most potential? Why? If Ivory needs to survive what will you do?

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Calculating Market Size

Start with available information Macro data (census) etc Competition (similar product, technology, same customers) Extrapolation Industry growth Potential (can and willing to buy) Penetration (share - $, volume etc)
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Characteristics of a Market-Driven Strategy (Fig 1.1)

Becoming MarketOrientation

Achieving Superior Performance

Determining Distinctive Capabilities

Customer Value/ Capabilities Match

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What is market orientation?

Strong customer focus: creating customer value NOT customer orientation Intelligence management: acquisition, evaluation, dissemination and action (formal/informal) Alignment of goals/structure internally (coordination and cascading) by managing resources (identifying distinct capabilities) and stakeholders Adaptation to changing external conditions: macro and competition Long-term orientation
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Becoming Market Driven: What capabilities should I focus on?

Market Sensing Capabilities

Internal Orientation AND Mkt-driven Strategies

Customer Linking Capabilities

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Alignment and Adaptation

EXTERNAL EMPHASIS Outside-In Processes
Capabilities

INTERNAL EMPHASIS Inside-Out Processes

Spanning Processes
Customer order fulfillment Pricing Purchasing

Market sensing Customer linking Channel bonding Technology monitoring

Financial management Cost control Technology development Integrated logistics Manufacturing/ transformation processes Human resources management Environment health and safety

Customer service delivery New product/service development Strategy development

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

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

Ideal Capabilities

Applicable to Multiple Competition Situations

Superior to the Competition

Difficult to Duplicate
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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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Adaptation -Making Sense of Perceptions of Reality: managing it.

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Value Composition
Product Services
Employees
Benefits
Relationships Emotions Experiences Social Interaction WOM

Image Monetary costs Time

Psychic and physic costs Effort
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Value (gain/loss) Costs (sacrifices)

Value for Soap?

Need Analysis (Kotler)

Latent Need (needs that exist but not aware of) Hidden Needs (exists aware but thinks cannot be got) Stated needs (what customer says he values) Real Needs(what he actually values) Unstated Needs (he values but does not mention) Delight Needs (thrills him) Secret Needs (wants but scared to mention)
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Other Stakeholders
Relationships: With Whom? (Value chain, influencers, internal partnerships, governments) Product modularity 15-20% of total co. resources are based on strategic alliances Benefits: access to markets; enhance value; reduce risk; share complementary skills; acquire knowledge; build/sustain close relationships; access to resources
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Reasons for Strategic Alliances

Enhance value for customer (CPV benefits/costs) Reduce risk due to environmental uncertainity and exploit opportunities presented Gain access to markets (places, spaces, minds) Gain access to/develop competencies and resources for SCA (technology/knowledge etc) Build bonds/relationship with key stakeholders
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P&G is a Fortune 500 brand. Main Business beauty and household FMCG. Most brand are No1 or 2. Got 23 brands over $1 billion in annual sales 18 more brands between $500 million and $1 billion

Marico: created in 2003, many brand category leaders in FMCG, first comp oil in India. Has 2.5 mn distribution ou India. Main areas Edible oil, beauty a healthcare, some laundry.

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Evaluating Potential for Collaboration

Which company? Why? What's in it for each? Is the demarcation clear? Costs of collaboration. Is it essential? The organizational fit: Sony/Apple

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Types of Relationships
Joint Ventures Internal Partnering (agreements) Strategic Accounts Others? NokiaMorph

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Questions
Outsourcing and Control? Long-term or short-term? Transfer of competitive advantage? Insularity or loss of innovation? Control and adaptability? Exit clause Relationship management and culture compatibility Read Ikea case study (case 2-2)