Strategic Marketing: Business and Market

Driven Strategies

Week 2: Lecture A

Strategic Marketing

Agenda

Business and Market Strategies

Market Driven Strategy

Read. Ch1 & 2 from Strategic Marketing by David Cravens, 6/e.

Strategic Marketing

Business and Market Strategies

Strategy is:

A plan, a "how," a means of getting from here to there A pattern in actions over time; for example, a company that regularly markets very expensive products is using a "high end" strategy A position, that is, it reflects decisions to offer particular products or services in particular markets A perspective, that is, a vision and direction, a view of what the company or organization is to become

Components of a Strategy

Scope Goals and Objectives Resource Deployment Identification of a Sustainable Competitive Advantage Synergy

Strategic Marketing

Business and Market Strategies

Strategy Component Key Issues

Scope

what business should we be in? what customers needs, target segments, and/or technologies should be focused on?

Objectives (SMART)

what performance dimensions? what are the benchmarks? what is the time frame?

Resource Allocation

what financial and non-financial resources are required?

Sources of competitive advantage

what are businesses sources of competitive advantage? how do we do things differently and favorably w.r.t the competition?

Synergy

when activities and departments reinforce and complement each other The whole becomes greater than the parts

Handout: Exhibit 2.5, Ch. 2, Marketing Management-A Strategic Decision Making Approach, Boyd, 4/e, McGraw Hill.

Strategic Marketing

Business and Market Strategies

The Hierarchy of Strategies

Strategic Marketing

Business and Market Strategies

The Hierarchy of Strategies

Corporate Strategy

it is decided in the context of defining the companys mission and vision, i.e, saying what the company does, why and how it exists, and what it is intended to become.

Lays down corporate mission, vision and overall objectives Designing effective organization structures and processes Creating organizational culture and philosophies Deciding on attaining distinctive competencies by generating superior human, financial and technological resources and seeking synergy among the firms various businesses

Strategic Marketing

Business and Market Strategies

The Hierarchy of Strategies

Corporate Strategy

In general:

Corporate strategy is used to identify: Businesses or industries that the company should compete in

Value creation activities that the company should perform in those businesses Method to enter or leave businesses or industries in order to maximize its long-run profitability

Strategic Marketing

Business and Market Strategies

The Hierarchy of Strategies

Corporate Strategy (Some insights) Horizontal Integration

The process of acquiring or merging with industry competitors Expanding operations backward into an industry that produces inputs for the company or forward into an industry that distributes the companys products Letting some value creation activities within a business be performed by an independent entity or performing a strategic alliance or mergers

Vertical Integration

Strategic Outsourcing or Partnering

Strategic Marketing

Business and Market Strategies

Strategic Marketing

Business and Market Strategies

The Hierarchy of Strategies

Corporate Strategy (internal structures) U-form

Unitary form / Functional form Decomposed into specialized/functional units which are similar tasks (such as production and sales)

Executive Human Resource Recruitment

Training

Finnance Accounting
Investment

Marketing Product
Sales

MIS Website
Database

Strategic Marketing

Business and Market Strategies

The Hierarchy of Strategies

Corporate Strategy (internal structures) M-Form

Multi-divisional Form By Alfred Sloan, CEO of GM, 1924 Decomposed into divisional/business units

Headquarter Asia Division Marketing HR America Division Marketing HR Business Consulting CRM B2B Global Service Technical Support Maintenance

Strategic Marketing

Business and Market Strategies

Executive Human Resource Recruitment
Training

Finnance Accounting
Investment

Marketing Product
Sales

MIS Website
Database

Headquarter Asia Division Marketing HR America Division Marketing HR Business Consulting CRM B2B Global Service Technical Support Maintenance

Strategic Marketing

Business and Market Strategies

The Hierarchy of Strategies

Business Level Strategy

Accept and inculcate corporate level business themes and deciding on taking on specific industries/segments Unique and mutually exclusive functions Focusing on distinctive competencies in a specific industry vis--vis competition

Strategic Marketing

Business and Market Strategies

Diversification

Corporate Level Strategy the strategy for a company and all of its business units as a whole

Diversification the primary approach to corporate level strategy

Diversified firms vary according to

Level of diversification Degree of relatedness

Strategic Marketing

Why do Firms Diversify?

When they have excess resources, capabilities, and core competencies that have multiple uses Diminishing growth prospects in present industry Cost saving opportunities Capture strategic fits Capture financial economies Spread business risk Leverage brand name not in unrelated

Strategic Marketing

Business and Market Strategies

The Hierarchy of Strategies

Business Level Strategy (SBU)

a single product or brand a line of products or a mix of related products

meeting a common market need or a group of related needs

The strategies of each business unit is mutually exclusive and each businesses acts as a separate entity
Jaffer Group of Companies Murshid Builders Shoa

JBS

JBL

Strategic Marketing

Business and Market Strategies

The Hierarchy of Strategies

Business Level Strategy (SBU)

Characteristics of Ideal Business Unit

Rationale
Developing a more coherent and specialized approach

Characteristics
Serves a homogenous set of markets

Serves a unique set of product markets

Avoid duplication

Has control and a degree of functional Must have authority to deploy level autonomy resources for sustainable competitive advantage Has responsibility for its own profitability Autonomy is symbiotic to accountability

Strategic Marketing

Business and Market Strategies

The Hierarchy of Strategies

Functional Level Strategies

translates business level decisions into strategic actions by directly impacting the design of operational processes and networks, human and other resources Crafting and/or choosing and implementing effective ways and means to create and deliver value to the stakeholders on a continuous basis.

Strategic Marketing

Business and Market Strategies

The Hierarchy of Strategies

Functional Level Strategies

Finance
Eg. Capital acquisitions Resource allocation Production & Operations Eg. Manufacture or outsource develop or attain technology location and workshopsequipment and supplies Human Resource Eg. Talent Acquisition work arrangements and training Motivation and Appraisal

Marketing
Eg. Penetration strategy Product development strategy Diversificatio n strategy Marketing Mix

Dividends, stocks or reinvestments

Strategic Marketing

Business and Market Strategies

The Flow
Marketing Strategy

Corporate Strategy

Business Level Strategy

Operations

Human Resource

Strategic Marketing

Business and Market Strategies

"A company's primary responsibility is to serve its customers, to provide the goods or services which the company exists to produce. Profit is not the primary goal but rather an essential condition for the company's continued existence. Other responsibilities and functions exist to support the company's continued ability to carry out its primary purpose." Peter F. Drucker.

Strategic Marketing

Business and Market Strategies

Companies are adopting market drivenstrategies guided by the logic that all business strategy decisions should start with a clear understanding of the customers and forces affecting their behavior! This leads to what we call as Market Driven Strategy

Strategic Marketing

Market Driven Strategy

Market Driven Strategy

Market and the customers that form the market should be the starting point in business strategy formulation. Characteristics of Market Driven Strategy
Market Orientation

Delivering Superior Value Customer Value/Capabilities Match

Leveraging of core competencies

Strategic Marketing

Market Driven Strategy

1. Market Orientation

A business is market-oriented when its culture is systematically and entirely committed to the continuous creation of superior value for the customers David Cravens, pp. 6 Becoming market oriented requires the involvement of

Entire set of skills, infrastructure, processes and resources to Continuously monitor the changing needs of the customers Determine The impact of competitive forces Implement Strategies that safeguard and harness the corporate image

Strategic Marketing

Market Driven Strategy

1.

Market Orientation

contd

Customer Focus/Marketing Concept Marketing is managing profitable customer relationships.

Goals: Attracting or retaining customer by promising superior value and harness the relationship through continuous satisfaction.

Market Orientation is simply not a philosophy but a process of deploying skills and resources systematically to achieve the marketing concept.

Strategic Marketing

Market Driven Strategy

1.

Market Orientation

contd

Competitor Intelligence

Superior value requires that the company should identify and understand the principal competitor's short term strengths and weaknesses and long-term capabilities and strategies.

Cross Functional Co-ordination

All business functions must perform together for a common goal; superior value. Reading: Rubbermaid, pg. 9, Ch1, Craven 6/e.

Strategic Marketing

Market Driven Strategy

2. Capabilities

competencies inherent in a business: sources

Skills of cross functional teams and their accumulated knowledge

Co-ordination of Activities Organizational processes: Operational Effectiveness Assets Physical as well as goodwill

Distinctive Capabilities: Something that you are good at

Sources of capabilities must make you stand out Singapore Airlines: ? Nike: ? Walmart: ?

Strategic Marketing

Market Driven Strategy

Typology of Capabilities and Business Structures

Outside-In Processes

Connects the organization to its external environment Relationships with stakeholders Feedback

Inside-Out Processes

Activities necessary to connect to the customers.

Spanning Process

Outside-In Processes

In-Side Processes

Market Sensing Customer Linking Logistic Bonding PEST monitoring

Customer order Fulfillment 4ps Strategies Purchasing etc

Finance Technological developments Supply Chain Mgmt HR Mgmt Environment

Strategic Marketing

Market Driven Strategy

3. What is customer value?

the customer evaluation of the differences between all the benefits and all the costs of a marketing offering relative to those of the competition. benefits should match or outweigh the costs! Costs:

Monetary Costs Time and physical energy Psychic Cost (risk and opportunity costs)

Strategic Marketing

Market Driven Strategy

3. What is customer value?

Its all about perceived value

can the customer see differences between two products in terms of value? the perceived value can emanate from product/brand/service or the price!

Strategic Marketing

Market Driven Strategy

Delivering the value

Offer benefits and solutions and not product features

A small company in the US sells lubricants to a large number of earth equipment contractors Every hour if this or that is not functioning will cost him more than he spends on lubricant for the entire year!

How to deliver the value? keep your promise

Analyzing customer needs at all times Improving product performance and service excellence Achieving operational excellence and synergy

Strategic Marketing

Defining Strategic Marketing

the

bottom line

The focus of strategic marketing is on organizational performance rather than on simply increasing sales!

It is a process of combining the customer-influencing strategies of the business into a coordinated set of market-driven actions as well as link it with the external environment to create and deliver value!

Marketing is now seen as a central to business strategy planning process and not a function alone!

Strategic Marketing

Marketing Strategy Process

Situation Analysis Designing Marketing Strategy

Marketing Program Development

Implementing and Managing Marketing Strategy

Strategic Marketing

Marketing Strategy Process

Situation Analysis

Markets need to be defined

There must be sizeable number of people Must have purchasing power

Demand estimation and forecasting Analyze and predict consumer behavior Analyze and predict competitors behavior

Designing Market Driven Strategies

Segment, Target and Position Building strong relationships with suppliers and customers Choice of marketing mix elements

Strategic Marketing

Marketing Strategy Process

Market-focused Program Development

Product portfolio and Strategic Brand Management

Decide to invest or divest in products and services Entering into similar or dissimilar product categories

Value chain, price and promotion strategies

Implementing and Managing Market-Driven Strategy

Preparing the marketing plan and budget Implementing the plan using the tools to gauge the performance of the plan