Chapter 1 Market-Oriented Perspectives Underlie Successful Corporate, Business, and Marketing Strategies

Fundamental pattern of: What is a Strategy? Fundamental pattern of: Present and planned objectives Resource deployments Interactions of an organization with markets, competitors, and other environmental factors

Components of Strategy Scope Goals and objectives Resource deployments Identification of sustainable competitive advantage Synergy Scope – Breadth of its strategic domain. Number and types of industries. Product lines. Market segments it competes in or plans to enter. Goals and objectives Should detail desired levels of accomplishment on one or more dimensions of performance. Resource deployments Deciding how the resources are to be obtained and allocated across businesses. Identification of a sustainable competitive advantage Specification of how the organization will compete in each business and product market within its domain. Synergy Enables the total performance of the related businesses to be greater than it would otherwise be.

The Hierarchy of Strategies Three major levels of strategy Corporate strategy Business-level strategy Functional strategy Corporate strategy Managers must coordinate the activities of multiple business units. Essential questions at this level What business(es) are we in? What business(es) should we be in? What portion of our total resources should we devote to each of these businesses to achieve the organization’s overall goals and objectives? Business-level strategy How a business unit competes within its industry is the critical focus. Major issue is that of sustainable competitive advantage. Marketing strategy Effectively allocates and coordinates marketing resources and activities to accomplish the firm’s objectives within a specific product market.

Variations in Marketing’s Strategic Influence Strength of influence exerted by marketing managers varies across organizations Variables that impact marketing's influence Amount of focus on R and D activities Customer connecting capabilities

Market-Oriented Management Marketing concept: Planning and coordinating all company activities around satisfying customer needs Effective means to attain and sustain a competitive advantage and achieve company objectives Consistent focus by personnel in all departments and at all levels

Market-Oriented Management Adopts different organizational procedures and structures to: Improve the responsiveness of decision making

Exhibit - 1.4 Guidelines for Market-Oriented Management Source: Reprinted with permission from Marketing Management, published by the American Marketing Association, Frederick E. Webster Jr., “Executing the New Marketing Concept,” Marketing Management 3, 1 (1994), p. 10.

Do Customers Always Know What They Want? Most consumers have little knowledge of scientific advancements and emerging technologies Do not play role in influencing how firms allocate their basic research dollars Customer focus is critical to development

Does Being Market-Oriented Pay? Pays dividends in a developed economy Has a positive effect on various dimensions of performance Organizations can enhance, accelerate, and reduce the volatility and vulnerability of their cash flows by: Paying careful attention to customer needs and competitive threats and acting upon them carefully. Focusing on activities across all functional departments.

Factors that Mediate a Firm’s Market Orientation Competitive conditions Different levels of economic development across industries or countries Strategic inertia Product oriented or production-oriented Focus attention and resources on: Product and process engineering. Production. Finance in order to acquire and manage the resources necessary to keep pace with growing demand. Sales oriented response Aims to maintain market share and hold down unit costs with aggressive promotional activities Hiring more salespeople. Increasing advertising budgets. Offering frequent price promotions. Focuses on selling what the firm wants to make rather than on customer needs.

Exhibit 1.6 - Differences between Production-Oriented and Market-Oriented Organizations

Recent Developments Affecting the Strategic Role of Marketing Globalization Increased importance of service Information technology Relationships across functions and firms Globalization International markets account for a large and growing portion of the sales of many organizations. Increased importance of service Service businesses account for two-thirds of all economic activity in the United States. Fastest-growing sector of most other developed economies around the world. Information technology New technologies are making it possible for firms to collect and analyze more detailed information about potential customers and their: Needs, preferences, and buying habits Competitors’ offerings and prices. Open new channels for communications and transactions between suppliers and customers. Relationships across functions and firms Cooperative relationships are emerging inside companies as firms seek mechanisms for more effectively and efficiently coordinating across functional departments.

Exhibit 1.8 - Categories of E-Commerce

Future Role of Marketing Firms should be: Market-oriented Tightly focused on customer needs Highly adaptive Marketing activities critical for effective performance Tracking, analyzing, and satisfying customers’ needs

Formulating and Implementing Marketing Strategy Decision-making focus Analysis of the four “Cs” Integrating marketing strategy with the firm's other strategies and resources Market opportunity analysis Understanding market opportunities Measuring market opportunities Market segmentation, targeting, and positioning decisions Instructor: See Exhibit 1.9 4 Cs Company’s internal resources, capabilities, and strategies. Environmental context - Broad social, economic, and technology trends in which the firm will compete. Relative strengths and weaknesses of competitors and trends in the competitive environment. Needs, wants, and characteristics of current and potential customers. Market segments: Distinct subsets of people with similar needs, circumstances, and characteristics that lead them to respond in a similar way to a particular product or service offering or to a particular strategic marketing program.

Formulating and Implementing Marketing Strategy Process Formulating marketing strategies for specific situations Implementation and control of the marketing strategy

Details current situation with respect to: The Marketing Plan Details current situation with respect to: Customers Competitors The external environment Provides guidelines for: Objectives Marketing actions Resource allocations

Contents of a Marketing Plan Executive summary Current situation and trends Performance review Key issues Objectives Marketing strategy Action plans Projected profit-and-loss statement Controls Contingency plans