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End User

customer
Strategic Relationship (Chapter 7) Intermediate
Suppliers customer
An important transformation of business has
taken place in industry after industry.. Joint Strategic
Competitor
First, the age of mass production is over and vantures Relationship
customer demand unique value, so value is
shifting from product to solution and Strategic
experiences, and consequently relationships are Internal
alliances partners
taking over as the central element of exchange. External
Second, no single business is likely to be big partner
enough to cope with complex and diverse
customer demand.
The rationale for inter-organizational Relationships
This underlines the importance of alliances and
networks to deliver customer value At one time companies mainly established relationships with other
constellations of suppliers that can be configured organizations to achieve tactical objectives, such as selling in smaller
in different ways to meet different customer overseas markets.
need.
However, the modern reality is that strategic relationships among
organizations relate to the key elements of overall competitive strength
technology, costs, and marketing. Unlike tactical relationships, the
IBM has been collaborative projects business : Top effectiveness of these strategic agreements among companies can affect
US science and engineering universities are funded
their long-term performance and even survival.
to create a new academic discipline called Service
Science and engineering, a partnership with Sony The various drivers of relationships fall into four broad categories : 1.
and Toshiba produced a new processor that is in opportunities to enhance value by combining the competencies of two or
Sonys Play-station and Toshibas TVs, and will be more organizations, 2. environmental complexity, 3. competitive strategy,
the foundation for IBMs next generation of computers and 4. skills and resource gaps.
; computer code is given to external developer; joint
with Linux and independent research establishments
throughout the world
Opportunities to Enhance Value nization compete primarily through its relationships with other
organizations to deliver value to end-user. This strategy relies on
The opportunity present in many markets today is that the ability to manage an array of strategic relationships with
organizations can couple their competencies to offer superior outsourcers, suppliers, and alliances.
customer value. Even when partnering is not required, a
relationship strategy may result in a much more attractive value Skill and Resource Gaps
offering. The computer industry has led in advancing the use of
modularity : chip designers, computer manufacturers, component The skills and resource requirements of technologies in many
specialists, and software firm are able to make unique industries often surpass the capabilities of a single organization.
contributions to product design, manufacture, and use by working The sharing of complementary technologies and risks are
within the framework of an integrated architecture, which important drivers for strategic partnerships.
indicates how the modules fit together and the functions each will
perform. Technology Constraints

Environmental Complexity Access to technology and other skills, specialization advantages,


and the opportunity to enhance product value are importance
Environments display escalating turbulence and diversity. motivations for establishing relationships among organizations.
Diversity refers to differences between the elements in the
environment, including people, organizations, and social forces Financial Constraints
affecting resources. Coping with diversity involves both the Many companies must seek partners in order to obtain the
internal organization and its relationships with other resources essential for competing in many industry, or to spread
organizations. Environmental diversity reduce the capacity of an the risks of financial loss with another firm.
organization to respond quickly to customer needs and new
product development. Market Access
Environmental diversity makes it difficult to link buyers and the Inter-organizational relationships are also important in gaining
goods and service that meet buyer needs and wants in the access to markets. Horizontal relationships have often been
market place. Because of this, companies are teaming up to established between competing firms to access global market
meet the requirements of fragmented markets and complex and domestic market segments not served by cooperating firm.
technologies. These strategies may involve supplier and Standard Chartered Bank is an interesting example.
producer collaboration, strategic alliance between competitors,
joint ventures between industry members, and network International strategic alliances are used by many companies
organizations that coordinate partnerships and alliances with competing throughout the world. The legacy is a major strategic
many other organization. constraint on which it has a high level of dependence
Competitive Strategy Information Technology
In some cases, working with other organizations may be a key Advances in information technology provide an important
element of how an organization competes. The hollow-organ.. resources for improving the effectiveness of both internal and
inter-organizational communications.
Evaluating the potential for Collaboration Forms of organizational relationships
The amount of collaboration may vary substantially across The focal firm may participate in both vertical and horizontal
industries and individual companies. Several criteria are relevant relationships.
when considering possible collaborative relationships with other
organizations. Supplier relationships
What is the strategy? Moving product through various stages in the value-added
process often involves linking suppliers, manufacturers,
The alignment between alliance strategy and business strategy is distributors, and consumer and business end-user of good and
crucial to success in partnering. service into vertical channels.
The costs of Collaboration Strategic suppliers
Strategic relationships are demanding in terms of both time and Relationships with supplier are often managed by a companys
resources. Opportunity cost should form part of this calculation procurement function. However, when a supplier has major
participation in an alliance may restrict a companys freedom to impact on the companys value offering and its relationships with
pursue other strategies. its own customer, the supplier may be regarded as strategic.
Is relationship strategy essential? Outsourcing
Normally, relationships are formed. The strategic relationship are The outsourcing of activities, such as transportation, repair and
more likely to succeed when dependence is important and maintenance services, information systems, and human
equivalent resources functions has become widely use.
Are good candidates available? Intermediate customer relationships
Promising partners may be unwilling to collaborate or already Intermediate customer may include marketing intermediaries and
involved with other organizations, and partnering with weaker producers assembling products for the end-use market.
companies is increasingly undesirable and risky on this sector
End-user customer relationships
Do relationships fit our culture?
The driving force underlying strategic relationships is that a
The corporate cultures of the partners should be adaptable to company may enhance its ability to satisfy customers and cope
partnership, - for partners from countries with substantial national with a rapidly changing business environment through partnering.
cultural differences. The partners approach to business activities
and priorities should be compatible. (The global alliance between Some believe that the future of competition lies in co-creation
British Telecom (BT) and AT&T aimed to combine resources initiative with customers only by letting individual corporate
around Concert a product to provide multinational customers and consumer shape products and service can real fit
corporations with a single, global telecom source based on with customer needs be achieved.
virtual private networks.
Strategic Customers Joint Ventures
Many organizations have moved to the adoption of strategic/key Joint Ventures are agreements between two or more firms
account management structures and global account to establish a separate entity. These relationships may be
management. used in several ways : to develop a new market opportunity,
Dominant customers to access an international market, to share costs and
financial risks, to gain a share of local manufacturing
The strategic significance of dominant customer should not be profits, or to acquire knowledge or technology for the core
underestimated. The merger of Gillette with P&G in 2006 created business. Coca-Cola has a longstanding joint venture with
the world largest consumer brands group, with a combined Nestle Beverage Partner Worldwide.
portfolio of brands that gives the company a much stronger
bargaining position with major retailers like Wal-Mart, Carrefour, Internal Partnering
and Tesco. However, the merger also represents a significant
change to P&G business model with a new focus on lower- Internal partnerships may occur between business units,
income consumers in market like India and China. The result of functional department, and individual employees.
P&Gs strategy should be achieve growth in Asian markets and
reduce dependence on mature markets dominated by powerful Four steps may be important to evaluating internal
dominant retailers. partnering: 1). A cost-benefit analysis of the potential gains
Strategic account management
from improved internal synergies, 2) investigation of why
collaboration is not happening, 3) assessment of what is
Strategic customers are those with which the relationship is needed to unblock the problem, 4) consideration of the
based on collaboration and joint decision making, where both possible downside of efforts to enhance internal
buyer and seller invest time and resources in the strategic collaboration before acting distraction cost, loss of
relationship. For a growing number of companies strategic accountability, initiative, and motivation
account management (SAM) provides an innovative model for
managing relationships with their most important customer. Managing Inter-organizational Relationship
Strategic Alliances The objective of the relationship is first considered, followed
by a discussion of several relationship management
The alliance relationship is intended to be long term and
strategically important to both parties. Objective of the Relationship
Alliance Success New Technologies and competencies
Alliance Weaknesses
Developing New Markets and Building Market Position
Types of Alliances
Market Selectivity;
Requirement for alliance success
Restructuring and Cost-Reduction
Alliance vulnerabilities
Relationship Management Partnering Capabilities
Planning Control and Evaluation
Trusts and Self-Interest Exiting from Alliance
Conflicts Global Relationships Among
Organization
Reputational Risk
Leadership Structure
Flexibility
Cultural Differences
Technology Transfer
Learning from a Partners Strenght
Finding Customer Value Opportunities
Innovation and New-Product
Strategy (Chapter 8) Customer satisfaction indicates how well the product use experience
compares to the value expected by the buyer. The closer the match
Creativity and innovation are essential to all between expectation and the use experience, the better the resulting value
organizations growth and performance in the delivery.
global marketplace. IBM Chairman Samuel J. Customer Value, the objective of customer value analysis is to identify need
Polmisano highlights the following for (1) new product, (2) improvements in existing product, (3) improvements
innovation in the production processes (4) improvements in supporting service.
Innovation as a Customer-Driven Process The intent is to find gaps (opportunities) between buyers value
Types of Innovations (Marissa Mayer Google) expectations and the extent to which they are being met base on product
use experience. (The market driven approach to product planning helps to
Innovations can be classified according to 1)
newness to the market and 2) the extent of avoid a mismatch between technologies and customer needs)
customer value created
Finding New-Product Opportunities
Transformational Innovation
Matching Capabilities to Value Opportunities
Products that are radically new and the value
created is substantial. Each value opportunity should be considered in term of whether the
Substantial Innovation organization has the capabilities to deliver superior customer value.
Partnering with a company that has the needed capabilities is an
Product that are significantly new and create option.
important value for customer
Transformational Innovations
Incremental Innovations
New products that provide improved Customer may not be good guides to totally new-product idea since they
performance or greater perceived value (or create new families of products and business. A good market /
lower cost). New product initiative are guided technology match is important in being successful with radical technology
by customer needs analysis.
Initiative of Successful Innovators
This requires top management to position innovation as a distinct organizational ..
The Evolution of the Creative Company. A new corporate
model is taking shape focusing on creativity and Characteristics of Successful Innovators
innovation.
Step 1 Creating an
Technology and information become commoditized and Innovative
globalized. Suddenly, the advantage of making things Culture
faster, cheaper, better diminishes, and profit margin Selecting the
decline. Right Innovation
Step 2 Leveraging Strategy
Capabilities
With commoditization, core advantages can be shipped
abroad. Outsourcing to India, China, and Eastern Europe
sends a growing share of manufacturing and even the
Knowledge Economy overseas. Strategic
Step 3
Initiatives
Design Strategy begins to replace Six Sigma as a key Developing and
organizing principle. Design plays key role in product Implementing
differentiation, decision-making, and understanding the Making Effective New Product
customer experience. Resource Processes
Step 4 Commitmens

Creative innovation becomes the key driver of growth.


Companies master new design thinking and metrics and
create product that address consumers, and often
unarticulated, desires
Step 5
The successful Creative Corporation emerges, with new
Innovation DNA. Winners build a fast-moving culture that
routinely beats competitors because of a high success rate for
innovation.
Innovation through Collaboration New Product Planning
In complex and fast-moving markets, many organizations are A new product does not have to be a high-technology
pursuing innovation through collaborative with others. Eli Lilly in breakthrough to be successful but it must deliver superior
pharmaceutical created the Innocentive online forum posting customer value (Post it Note 3M).
difficult chemical and molecular problems to a global, virtual R&D
talent pool, and paying for solutions, rather than relying on in- Creating an innovative culture is an important foundation for
house R&D expertise. successful innovation. It is also necessary to set some
boundaries concerning the types of new products to be
As companies increasingly collaborate with outsiders to considered for possible development.
innovative, there are several forms of collaboration to consider :
Developing a Culture and Strategy for Innovation
The elite circle in which a company chooses participants,
defines the problem and chooses the solution Open communications throughout the organization and high
levels of employee involvement and interest are characteristic of
Innovation mall where a company post a problem and anyone innovative cultures.
can propose a solution
Innovation Culture
The innovation community where anybody can propose
problems, offer solutions and decide which solution to use Creating (and strengthening) an innovation culture can be
encouraged by several interrelated management initiatives :
The consortium which operates like a private club with
participants jointly selecting problems, deciding how to work on Plan and implement a two-day innovation workshop of top
them and choosing solutions executive to develop an innovation plan. This would
involve use of cross-functional teams, resource
Recognizing the Realities of Product Cannibalization allocations, reward, and innovation performance metrics.
Cannibalization occur when a new product attracts sales from Develop an innovation statement highlighting the
existing product. Proactive cannibalization consists of the pursuit companys objectives and senior management roles and
of a deliberate, ongoing strategy of developing and introducing responsibilities.
new product that attract the buyers of a companys existing
products. The strategic logic of this concept is offering buyers a Conduct innovation training programs for employees and
better solution to a need currently being satisfied. The reality is manager to encourage commitment and involvement.
that changes in market requirements and customer value
opportunities will result in competitor threats for existing products Communicate the priority of innovation via article,
and technologies. newsletters, and presentations to employees,
shareholders, and customers
There are various examples of the negative consequences of
avoiding cannibalization initiative in the communication, financial Schedule innovation speakers on a regular basis to
service, retailing, and other sectors.
Strategy for Innovation Responsibility for New-Product Planning
A major benchmarking study of 161 business units across a Various organizational designs may be employed to coordinate
broad range of industries in the US, Germany, Denmark, and inter-functional interactions that are necessary in developing
Canada indicates that a carefully formulated and communicated successful new products, including :
new-product innovation strategy is a cornerstone of superior
new-product performance. A successful new-product strategy - Coordination of new-product activities by a high-level
includes : business manager.
1. Setting specific, written new-product objectives - Cross-functional coordination by a new-product-planning
team.
2. Communicating throughout the organization the role of
new products in contributing to the goals of the business. - Creation of a cross-functional project task force
responsible for new product planning
3. Defining the areas of strategic focus for the corporation in
terms of product scope, markets, and technologies. - Designation of a new-product manager to coordinate
planning among departments.
4. Including longer-term, transformational projects in the
portfolio along with incremental projects. - Formation of a matrix organizational structure for
integrating new-product planning with business functions.
- Creation of design center, the center is permanent part of
Developing Effective New-Product-Planning Process the organization.
Developing successful new products requires systematic Idea Generation
planning to coordinate the many decisions, activities, and
functions necessary to identify and move a new-product idea to Guided by the new-product innovation strategy, finding promising
commercial success. new ideas is the starting point in the new-product development
process.
Successful new-product planning requires (1) generating a
continuing stream of new-product ideas that required for new Sources of Idea
products, and (2) putting in place people, processes, and
methods conducting activities and evaluating new-product ideas Sources of new-product ideas include R&D laboratories,
as they move through each of the planning stages. employees, customers, competitors, outside inventors,
acquisition, and value chain members. Both solicited and
The following initiatives are important in effectively applying the spontaneous ideas may emerge from these sources.
planning process. First involves cross-functional activities, Increasingly, companies are developing open-market innovation
Second compressing the time span for, Third delivering customer approaches to generating ideas using licensing, joint ventures,
satisfaction at acceptable costs and strategies alliances.
The search process
For most companies, the idea search process should be targeted
within a range of product and market involvement that is
consistent with corporate mission and objectives and business
unit strategies. However, management should be proactive in
monitoring potentially disruptive innovations and opportunities
beyond the core of product and market focus. New product planning Process
Idea sources Customer needs
Many new-product ideas originate from the users of products and analysis
service.
Lead user analyses. Lead user identify gaps to meet their needs. Idea generation
Web-search inquiries product preference. Involving customer in
the innovation process goes beyond obtaining direct customer
feedback.
Screening and
Methods of Generating Ideas evaluation
Search
New-product idea publications. News about the new-product Business analysis
activities of competitors. Trade publications.
Marketing research
Marketing strategy
Survey product user, focus group. Ethnographic research for Product development
development
unsatisfied needs. An Advisory panel.
Internal and External Development
Other idea-generation methods Testing
Incentives may be useful to get new-product ideas from
employees, marketing partners, and customer
Commercialization
Screening, Evaluating, and Business Analysis In an age of disruption, marketers need new
knowledge and new models on designing, developing,
Screening and bringing new products, services, and experiences
Concept Evaluation to market. In addition, marketers are seeking new
approaches to enable them to forecast, identify, and
Important of Concept Evaluation respond to market disruption and next-generation
business models.
Concept Tests
Business analysis
This initiative is spot-on for MSI, says Executive
Director Kay Lemon. 'Innovation, design, and
Revenue forecast strategy in an age of disruption is one of our five
research priorities for 2016-2018. As our members
Preliminary Marketing Plan have told us: We need new models for innovation and
Cost estimation
product development in an age of big data and
analytics. We need to be able to systematically
Profit projections evaluate innovation using quantitative tools. We need
to put more science into innovation.
Product and Process Development
A Marketers Roadmap to Sustainable Innovations,
Product Development Process From a marketing perspective, a firms sustainable
Product specifications innovations capabilities are critical. In addition to
offering a competitive differentiation advantage, the
Industrial Design sustainability-related attributes of a firms product
offerings are potential bases for market segmentation,
Prototype target marketing, and positioning. Such capabilities
Use Tests are increasingly important from the standpoint of
organizational legitimacy, he says. Various
Process Development stakeholders including customers, employees,
shareholders, and suppliers expect that firms in
Marketing Strategy and Market Testing generaland large firms in particulardemonstrate a
Marketing strategy Decisions commitment to and a proven record of innovating for
sustainability.
Market Targeting, Positioning
5 Things I Know About Marketing GEs Sean Burke
Market Testing
Strategic Brand Management The opportunity for using brand strength to build customer value and competitive
advantage has encouraged manager to focus attention on global estimates of the
Strategic brand management requires several value of brands and the concept of brand equity. The financial value of brands is
interrelated initiatives designed to build strong an important indication of how well a brand is being manage by a company.
brand and a powerful portfolio. Sustaining and building brand strengths is a continuing challenge for manager.
Several internal and external forces create hurdles for product and brand
managers in their effort to build strong brands
A brand is the product offered by a specific company. - Intense price and other competitive pressures
A name, term, design, symbol, or any other feature
that identifies one sellers good or service as distinct - Fragmentation of markets and media
from those other sellers. (TradeMark, Trade-name).
- Complex brand strategies and relationships
The Strategic Role of Brands
- Bias against Innovation
A strategic brand perspective requires executive to
decide what roles brands play for the company in - Pressure to Invest Elsewhere
creating customer value and shareholder value.
- Short-term pressures
For buyers, brands reduce
Brand Management Responsibility
- Customer search cost; Buyers perceived risk
Product/Brand Management ; Product Group/Marketing Management
- The social and psychological risk
Product Portfolio Management ; Market-Driven Management
For sellers, brands facilitate
- Repeat purchases; The introduction of new Strategic Brand Management
product; Premium pricing; Market segmentation; Strategic Brand Analysis ; Brand Equity Measurement and management
- Brand loyalty (Microsoft, Google, GE, HP, Nokia)
Brand Identity Strategy ; Managing Brand Strategy ; Managing brand portfolio.