Chapter 2

Corporate Strategy
Decisions and
Their Marketing
Implications

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Exhibit 2.1 Corporate

Strategy Components and
Issues

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Exhibit 2.1 Corporate

Strategy Components and
Issues

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Mission Statement

Guides managers to identify market

opportunities:
To be pursued
Out side the firms strategic domain

Helps instill:
A sense of direction, relevance, and

achievement amongst employees

Defines the organizations strategic

scope
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Exhibit 2.2 - Characteristics of

Effective Corporate Mission
Statements

Source: Adapted from Strategy Formulation: Analytical Concepts, 1st edition, by C. W. Hofer and D. Schendel, Thomson
Learning, 1978.
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Social Values and Ethical Principles

Important to craft mission statements

specifying explicit social values, goals
and programs
Ethics: Development of moral
standards by which actions and
situations can be judged

Proactive than the law

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The Marketing Implications of Ethical Standards

Unethical practices can:

Damage the trust between a firm and its
suppliers or customers
Disrupt the development of long-term
exchange relationships
Result in the likely loss of sales and
profits over time

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Corporate Objectives

Components of an objective
Performance dimension
Measure or index
Target or hurdle
Time frame

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Corporate Objectives

Must be SMART

Specific
Measureable
Attainable
Relevant
Time bound

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Enhancing Shareholder Value

Requires balancing the interests of:

Corporate constituencies
Employees
Customers
Suppliers
Debt holders
Stockholders

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Enhancing Shareholder Value

Managements primary objective

Capital investments
Acquisitions
Business strategies

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Enhancing Shareholder Value

Requires firm to set explicit
objectives

Can be expressed in terms of one of the

following

Economic value added

Market value added

Objectives are sometimes expressed

in terms of market value added
(MVA)

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Dangers of Shareholder Value

Objectives
Standard accounting measures are
not always reliably linked to the true
value of a companys stock
Narrow focus on objectives lead
managers to:

Pay little attention to actions necessary

to provide value to the firms customers

and sustain a competitive advantage
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The Marketing Implications of Corporate Objectives

Managers can reconcile conflicting

goals by:
Prioritizing them
Stating one of them as a constraint

Customer-focused objectives
Satisfaction
Retention
Loyalty
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Competitive Advantage

Is based on company resources that:

Other firms do not have

Take a long time to develop
Are hard to acquire

Requires developing a:
Competitive strategy for each division
Strategic marketing program for each

product
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Competitive Advantage

Should provide one or more superior

benefits
Should be effectively communicated to

potential customers

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Corporate Growth Strategies

Directions that firms can go for future

growth

Expansion of its current businesses and

activities
Diversification into new businesses

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Exhibit 2.5 - Alternative Corporate Growth Strategies

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Allocating Corporate Resources

Sets of analytical tools are used in

making decisions
Portfolio models
Value-based planning
Models that measure customer equity

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Portfolio Models

The Boston Consulting Groups (BCG)

growth-share matrix
Market growth rate: Proxy measure for
the maturity and attractiveness of an
industry
Relative market share: Proxy for its
competitive strength within its industry

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Exhibit 2.6 - BCGs Market Growth Relative Share Matrix

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Exhibit 2.7 - Cash Flows across

Businesses in BCG Portfolio
Model

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Value-Based Planning Method

Resource allocation tool that:

Addresses questions pertaining to

worthiness of businesses by assessing

the shareholder value a given strategy is
likely to create
Provides a basis for comparing the
economic returns

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Value-Based Planning

Assess the economic value of a

strategy by examining the cash flows
it will generate
Estimate the shareholder value
produced by:

Discounting forecasted cash flows by the

businesss risk-adjusted cost of capital

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Value-Based Planning

Evaluates strategies based on the

likelihood that:

Investments required by a strategy will

deliver returns greater than the cost of
capital

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Exhibit 2.8 - Factors Affecting the Creation of Shareholder Value

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Using Customer Equity to Estimate the Value of Alternative Marketing

Actions

Calculates the economic return for a

prospective marketing initiative based
on:
Its likely impact on the firms customer

equity

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Sources of Synergy

Knowledge-based synergies

Function of the corporations scope and

mission

Corporate identity and the corporate

brand

Flows from the communications,

impressions, and personality projected by
an organization

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Corporate Branding Strategy

Companys own name and logo serves
as the brand name of all or most of the
firms products
Dual branding strategy - Each offering
carries a corporate identifier and an
individual product brand
Each product offering might be given a
unique brand and identity

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Synergy from Shared

Resources
Inherent in sharing operational
resources, facilities, and functions
across business units
Helps increase economies of scale or
experience-curve effects

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