Strategic relationships and networks: Building the infrastructure to deliver the strategy Lecture 8

A route-map for market-led strategic change Part I Customer value imperatives Part II Developing a value-based marketing strategy Part III Processes for managing strategic transformation The strategic pathway Change strategy Market sensing and learning strategy The Customer is always right-handed Strategic gaps Strategic market choices and targets Strategic thinking and thinking strategically New marketing meets old marketing Organization and processes for change Customer value strategy and positioning Implementation process and internal marketing Value-based marketing strategy Strategic relationships and networks

The strategic pathway Strategic thinking and thinking strategically Market sensing and learning strategy Strategic market choices targets Customer value positioning relationships networks Strategic thinking and thinking strategically transformation and strategy implementation

Agenda Customer relationships Competitor and contingent relationships Collaborator relationships Co-worker relationships The network of key relationships

Strategic relationships and networks Customer relationships Competitor and contingent relationships Strategic relationships and networks Collaborator relationships Co-worker relationships

Customer relationships Do we know what we want the customer relationship to be? Do we have that relationship or can we get it? Can we deliver that relationship? Do we understand the link between the strength of the customer relationship and the attractiveness of that customer’s business?

Customer relationship The dancehall dilemma Customer relationship Strong Weak Prime target customers - achieve synergy as we retain the “best” customers (we hope) Targets for conversion - are they attractive enough to be worth chasing? High Customer attractiveness Sticky customers - they want us, we don’t want them, so what do we do? Mutual antipathy - they don’t want us, we don’t want them, end of discussion Low

Competitor and contingent relationships Some fundamental issues: every organization has competitors every company says “we know who our competitors are” and frequently get it wrong most think that “competitors are in our industry” – see back to the Competitive Box to dispel that myth

Competitor and contingent relationships Really understanding the competition conventional analysis develops a competitor response profile the psychology of competition may be just as significant – e.g., how ugly are the competitors around here?

Competitor analysis Competitor’s goals What are they trying to achieve in this market? Competitor’s strategy What is this company’s current strategic position? Competitor’s response profile Is this competitor satisfied with its current position? What are the likely moves they may make? Where is this competitor most vulnerable? What is this competitor sensitive about, what is most likely to provoke a competitive reaction? Competitor’s strategic assumptions - How does management look at the market? Competitor’s capabilities - What are their strengths and weaknesses Adapted from: Michael E. Porter, Competitive Strategy, New York: Free Press, 1980.

How ugly are the competitors around here? Competitive reaction to our move? Yes No Fight to the death Show disdain High Competitive aggression Weak counter- attack Ignore us Low

Competitor and contingent relationships Where is the competition coming from in this market? can we predict the strategic moves of our competitors and maintain our competitive advantage? do we recognise new potential competitors and new technologies? does our value proposition give us a specific positioning thatb plays to our strengths and avoids head-on competition?

Competitor and contingent relationships Critical contingents: shapers of opinion regulators recommenders gatekeepers suppliers supply chain partners

Collaborator relationships From outsourcing to alliances and networks outsourcing partnership alliance vertical integration

Types of collaborative relationship Closeness of relationship Nature of the relationship Outsourcing Arm’s length Low Purchase of goods and services from outside the company, possibly over the long term Short-term focus, but coordinated activities between partner companies Short-term Long-term Longer-term focus with integration of activities between partner companies Partnership Permanent “Permanent” arrangement with partner companies highly integrated Joint venture Shared ownership in an operation with a collaborator company Alliance Vertical integration Full ownership of the activities or operations Ownership High

Collaborator relationships Advantages in collaboration: cost efficiency customer service marketing advantage strategic advantage profit stability and growth

Collaborator relationships Network organizations a new organization form: the hollow or networked organization

The Calyx & Corolla hollow, networked organization Customers 1. Customer orders from catalogue: phone, fax, mail, e-mail 4. Federal Express delivers flowers Federal Express Calyx & Corolla 3. Federal Express collects flowers 2. C&C notifies order to Federal Express and the chosen flower grower by computer Flower growers

Collaborator relationships Collaborations that crash synergy or “ygrenys” Managing partnerships and collaborations corporate compatibility management style and techniques mutuality symmetry

Collaborator relationships Partnership-based strategy should consider time and cost in: establishing the partnership monitoring the partnership strengthening the partnership getting out of the partnership

Co-worker relationships Can and will employees/managers in the company/alliance deliver the promise of the value proposition to the customer? do not assume everyone will think our strategy is great and buy-in be realistic about capabilities Link to internal marketing strategy

The network of key relationships Relationships with customers, competitors, contingents, collaborators and co-workers are connected Challenge is to test market choices and value propositions against the network’s capabilities

British Airway’s relationship network Customers Customer satisfaction levels falling; premium passengers switching brands; higher service image weakened Competitors and contingents Virgin antagonism continues; low cost operators attacking through courts; European regulator investigates; no help from government Collaborators USAir alliance crashed; American Air alliance stalled; travel agents are hostile; BA Strategy Co-workers Climate surveys go down; new branding is resisted; industrial action takes place and more is threatened

The network of key relationships The danger is developing and pursuing attractive strategies that rely on relationship network capabilities which do not exist