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Market-Oriented Perspectives Underlie Successful Corporate ...

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  • 11
  • Advantages Promotes listening to the customer Happier customers more likely to be more loyal – good for long term profitability More customer and competitive information is likely to be obtained and used – good for profitability More likely to identify changes in market and competitive conditions – avoid being blindsided If the first two steps are done well, the third should take care of itself Helps employees focus on profit, not sales volume Possible drawbacks May lead the firm to seek to satisfy all customer groups – a possible prescription for disaster Customers may not be able to articulate what they really want and need – and will pay for! Current customers may not be the most attractive target – must avoid tyranny of current customers, if others are more attractive Implies tailoring products to different needs of different segments – may be costly Implies need for research – costs money, may slow reaction to market changes
  • Have a unique business mission, independent of other SBUs Have a clearly definable set of competitors Be able to carry out integrative planning relatively independent of other SBUs Be able to manage resources in all areas Be large enough to justify senior management attention, but small enough to serve as a useful focus for resource allocation
  • A-Mei, the Taiwanese pop diva sang the Taiwanese anthem at President Chen Shui-bian’s May inauguaration (2000) and raise a political storm. China withdrew her Sprite soft drink ads from TV, newspapers and billboards across the country, almost jeopardising her contract with Coca-cola. Spokesman for Coca-cola was quoted as saying that the company was informed of the withdrawal a day before A-Mei even performed at the inauguration. Puyuma pop star, A-Mei, in a recent Sprite commercial, dances and sings in the old colonial powers quarter of Shanghai. She sings a chorus of "give me true feeling" in Mandarin to promote the product of an American multinational corporation. This ad and her music videos are screened on Hong Kong's TVB, MTV, and on channels of Rupert Murdoch's Star TV Group. Bit 2 In an August 1999 article "China's crazy about A-Mei" by New York Times News Service reporter Seth Faison, A-Mei is described as being "Taiwanese" and No. 1 in China. Feth describes A-Mei's sell out concerts in Beijing as "overpowering any consideration of the current battle over" Taiwan's sovereignty. This is in reference to the latest spat between Taiwan and the PRC due to President Lee's "state to state" relations comments. Bit 3 The shifting images of A-Mei (Chinese name Chuang Hui-mei) are quite market responsive. She has been called a "pop diva", Taiwan's Mariah Carey and other related labels. She is a superstar by regional commercial criteria, her 5 CDs released thus far having sold millions of copies along with concert videos and VCDs. Her brand of cultural products has become well known throughout East Asia. She has large advertising contracts with Fuji Film and Sprite. In general, she's done well commercially.
  • 11
  • Mission statements may be developed at the SBU level in order to make sense, especially for large organization with diverse business interests e.g. NTUC INCOME and NTUC Fairprice
  • 3
  • 4
  • The macro level assessment should be accompanied by a micro level assessment.
  • A market is a group of individuals or organizations (i.e., buyers ) having the willingness and ability to buy goods or services to satisfy a particular class of wants or needs
  • It makes sense to play in a game with more winners! Average firm profitability varies from industry to industry: In some industries (e.g., pharmaceuticals) most firms are highly profitable. In others (e.g., restaurants) the failure rate is high and average returns on equity are low. It’s easier to raise capital and acquire other resources in attractive industries .
  • Have students consider industry attractiveness for the cellular phone service industry. Five Forces Analysis of the Worldwide Cell Phone Service Industry In Early 2004 Rivalry is high leading to high customer churn: unfavorable Products are differentiated through new features and services, customer switching costs are low. Threat of new entrants is low: moderately favorable While rapid pace of technological change may bring new entrants based on new technologies (i.e.packet switching, satellites) new service providers must purchase a bandwidth licence by spending billions. Supplier power is high: moderately unfavorable Governments have raised the price of additional bandwidth through auctions. Buyer power is low: very favorable Even large customers have little power to set terms and conditions in this oligopolistic industry. Threat of substitutes is high: moderately unfavorable PDAs or new multimedia devices could replace cell phones. Overall conclusion: only 2 out of 5 forces are favorable. Thus the cellular phone industry is not particularly attractive at this time.
  • Key questions: - Is there a clearly identified source of customer pain? - Does the provide offering provide customer benefits that other solutions do not? - Is the target segment likely to grow? Is it a springboard to other segments?
  • Key question: - What is the basis of competitive advantage? Proprietary technology, brand, etc Superior organizational processes, capabilities or resources Economically viable business model
  • Key questions: - what are the Missions, Aspirations and Risk Propensity of the team? - does the team have the Ability to Execute on the Industry’s Success Factors - is the team well Connected up and down the Value Chain

Market-Oriented Perspectives Underlie Successful Corporate ... Market-Oriented Perspectives Underlie Successful Corporate ... Presentation Transcript

  • Market-Oriented Perspectives Underlie Successful Corporate, Business, and Marketing Strategies This is the latest version 12/25/07 1
  • Discussion Question
      • What does strategy mean?
      • A fundamental pattern of present and planned objectives, resource deployments, and interactions of an organization with markets, competitors, and other environmental factors.
    • Scope
    • Goals and objectives
    • Resource deployments
    • Identification of sustainable competitive advantage
    • Synergy
    Exhibit 1.3 Components of Strategy
  • Need to be Market Oriented.
    • Persuade customers to buy
    • What company has
    • Generic product, production
    • process, and delivery system
    • Lowest delivered cost
    • Volume, cost, profit margins
    • Short term, reactive
    • Persuade company to have
    • what customers want
    • Augmented product, customer
    • benefits, and market segments
    • Superior customer value
    • Profitable use of resources, market position, customer satisfaction, and loyalty
    • Medium and long-run view of threats and opportunities
    Internal Orientation Market Orientation Focus Competitive Advantage Objectives Time Horizon
  • How to be a Market-Driven Organization.
    • Keep close to customers and ahead of competition
    • Love the customer more than the product
    • Our legitimacy is based on customer satisfaction
    • Do business the way the customer wants to do it
    • Our mission is to find needs and fill them, not to make products and sell them
    • If we’re not customer-driven, our products won’t be either
  • Strategic Planning.
    • …is the managerial process of developing and maintaining a strategic fit between the organization's objectives and resources and its changing market opportunities.
    Org Objectives Resources Changing Environment Strategic Fit
  • The Role of Strategy. Corporate Mission & Objectives
    • Strategy:
    • Corporate
    • Business
    • Functional
    Operating Plans
  • An Overview of Marketing Strategies.
    • Strategies based on market dominance : Leader, Challenger, Follower
    • Porter generic strategies (strategy on the dimensions of strategic scope and strategic strength): Cost leadership, Product differentiation, Market segmentation
    • Innovation strategies: Pioneers, Close followers, Late followers
    • Growth strategies: Intensification, Vertical integration, Horizontal integration, Diversification
    • Management style strategies: Prospector, Analyzer, Defender, Reactor
    • Marketing warfare strategies - draws on parallels between marketing strategies and military strategies.
  • Sun Tzu on Strategy.
    • “ Know your enemy, know yourself, and your victory will not be threatened. Know the terrain, know the weather, and your victory will be complete.”
    • (from The Art of War , 6 th century BCE)
  • Strategic Marketing.
    • “ Marketing Strategy is a series of integrated
    • actions leading to a sustainable competitive
    • advantage.”
    • John Scully
    • President, PepsiCo (1977-1983) CEO , Apple (1983-1993) Partner, Scully Bros. LLC (1995-Present)
  • Discussion Questions
    • Does having a market orientation make sense? What are the advantages and drawbacks?
    • Why do some firms lack orientation towards the market?
  • Organizational Marketing Levels.
    • Organizations develop strategies at three structural levels:
    • Corporate level—(corporate marketing)
    • SBU level—(Strategic Marketing)
    • Product/Market level—(Functional Marketing)
  • What is a Strategic Business Unit? (SBU).
    • A set of products or product lines
      • With clear independence from other products or product lines
      • for which a business or marketing strategy should be designed
    • Characteristics of a viable SBU?
  • Characteristics of a viable SBU.
    • Unique business mission
    • Definable set of competitors
    • Integrative planning done independently
    • Responsible for resource management in all areas
    • Large enough but not so large as to become bureaucratic
    ( Source: Subhash Jain, Marketing Planning & Strategy, 6 th Ed.)
  • Marketing at the SBU Level - Strategic Marketing.
    • Strategic Marketing requires
      • Detailed understanding of market needs, and
      • Proactive use of competitive intelligence at the corporate as well as SBU’s levels
    • Strategic Marketing
      • Focuses on what the firm do best at the SBU level
      • To secure and maintain a sustainable competitive advantage
  • Other Characteristics of Competitive Advantage.
    • Substantiality
    • Sustainability
    • Ability to be leveraged
    (Source: Strategic Marketing Management, Aakers)
  • Seeking Competitive Advantages.
    • Position advantages
      • Superior customer value
      • Lower relative total cost
    • Performance advantages
      • Customer satisfaction, Loyalty, Market Share, Profit
    • Sources of advantages
      • Superior skills & knowledge, Superior resources, Superior business process
  • Key Elements of Marketing Strategy Formulation.
    • The strategic 3 Cs
      • - Customers, Competitors & the Corporation
    • Environment analysis
    •   Strategic Marketing Decisions
      • - Where to compete
      • - How to compete
      • - When to compete
    • Must have:
    • a clearly defined market
    • a good match between corporate strengths and market needs
    • significant positive differentiation in the key success factors of the business
    A Viable Marketing Strategy.
    • Executive summary
    • Current situation and trends
    • Performance review
    • Key issues
    • Objectives
    • Marketing strategy
    • Action plans
    • Projected profit-and-loss statement
    • Controls
    • Contingency plans
    Exhibit 1.10 Contents of a Marketing Plan
  • Corporate Strategy Decisions and Their Marketing Implications 2
  • Corporate Mission.
    • Broad purposes of the organization
    • General criteria for assessing the long-term organizational effectiveness
    • Driven by heritage & environment
    • Mission statements are increasingly being developed at the SBU level as well
  • Exhibit 2.2 Characteristics of Effective Corporate Mission Statements Long-haul, coal carrying railroad Railroad business Physical Based on existing products or technology Long-distance transportation for large-volume producers of low-value, low-density products Transportation business Functional Based on customer needs Specific Broad
  • Corporate Objectives & Goals.
    • Objective: a long-range purpose
      • Not quantified and not limited to a time period
      • - e.g. increasing the return on shareholders’ equity
    • Goal: a measurable objective of the business
      • Attainable at some specific future date through planned actions
      • - e.g. 10% growth in the next two years
  • Corporate Culture.
    • The most abstract level of managerial thinking
    • How do you define culture?
    • What is the significance of culture to an organization?
    • How does marketing affect culture in the organization?
  • How do Firms Compete.
    • Value proposition
    • Assets & competencies
    • Function area strategies and programs
    • Implementation
  • Discussion Question
    • 5. Ansoff says there are four strategies for growing a business. What are their merits and drawbacks?.
  • Sources of Synergy
    • 1. Knowledge-based synergies
    • 2. Corporate identity-based synergies
    • 3. Corporate branding-based synergies
      • GE, IBM, Amazon etc.
      • Virgin Records, Virgin Airlines, etc.
      • Individual brands such as P & G’s Ivory, Pampers, cheer, Clairol, Olay, etc.
    • 4. Shared resources-based synergy
  • Business Strategies and Their Marketing Implications 3
  • How SBUs are Defined
    • Product-markets should be clustered into an SBU on the bases of
      • Technical compatibility
      • Similarity in customer needs
      • Similarity in customer characteristics or behavior
    • In practice SBUs are defined by product-
    • markets requiring similar technologies,
    • production facilities, and employee skills
  • How Business Strategies Differ in Scope, Objectives, Resource Deployments, and Synergy Exhibit 3.4.
    • Dimensions
    • Scope
    • Goals and obj. Adaptability (new product success) Effectiveness
    • ( ↑ mrkt share) Efficiency (ROI)
    • Resource deployment
    • Synergy
    Low-cost defender Mature/stable/well-defined domain; mature tech.and cust. segments Very little Low High Generate excess cash (cash cows) Need to seek operating synergies to achieve efficiencies Differentiated defender Mature/stable/well-defined domain; mature tech.and cstmr segment Little Low High Generate excess cash (cash cows) Need to seek operating synergies to achieve efficiencies
  • How Business Strategies Differ in Scope, Objectives, Resource Deployments, and Synergy Exhibit 3.4.
    • Dimensions
    • Scope
    • Goals and obj. Adaptability
    • (new product success) Effectiveness
    • ( ↑ mrkt.
    • share) Efficiency
    • (ROI)
    • Resource deployment
    • Synergy
    Prospector Broad/dynamic domains; tech. and cust. segments not well-established Extensive High Low Need cash for product dev. (? or *) Danger in sharing operating fac. and programs - better to share tech./mktg skills Analyzer Mixture of defender and prospector strategies Mix. of defender & prospector strats. Mix. of defender & prospector strats. Mix. of def. & prosp. strats Need cash for prod. dev. but < prospectors Danger in sharing operating fac. and programs - better to share tech./mktg. skills
  • Understanding Market Opportunities 4
  • The Seven Domains of Attractive Opportunities Macro Level Micro Level Market Domains Industry Domains Mission, Ability to Aspirations, Execute Propensity on CSFs for Risk Connectedness up and down Value Chain Team Domains Market Attractiveness Target Segment Benefits and Attractiveness Industry Attractiveness Sustainable Advantage
  • Discussion Question
      • 1. What’s a market?
      • 2. What’s an industry?
    • Is the market vs. industry distinction important?
    • Why or why not?
  • Macro Trend Analysis
    • Demographic environment
    • Sociocultural environment
    • Economic environment
    • Regulatory environment
    • Technological environment
    • Natural environment
    • Think of an example of each and its impact
  • Discussion Questions
    • 6. Does industry attractiveness matter? Why or why not?
  • A Tool for Assessing Industry Attractiveness: Porter’s Five Forces Rivalry among existing industry firms Threat of substitute products Bargaining power of buyers Bargaining power of suppliers Source : Adapted from Michael E. Porter, “Industry Structure and Competitive Strategy: Keys to Profitability,” Financial Analysts Journal , July-August 1980, p. 33. Threat of new entrants
  • Identifying an Industry
    • A firm is a pert of an industry where suppliers of key inputs, processes which create added value, and buyers are similar to other firms in the industry of which the company considers itself a part.
    • Sources of information for macro-level industry analysis: Exhibit 4.12, p. 99
  • Understanding Markets at the Micro Level
    • Involves looking individually at customers to understand
    • the attractiveness of the target segment.
    • Attractive opportunities exist when: 1. there is a clearly
    • defined source of customer pain, for some in the target
    • segment, which the offering resolves, 2. the offering
    • provides customer benefits that others do not 3. the
    • target segment is likely to grow and 4. the current
    • segment may provide a springboard for future entry into
    • other segments.
  • Understanding Industries at the Micro Level
    • Involves looking at the company
    • and whether it has a sustainable
    • competitive advantage
  • The Team Domains
    • Opportunities are only as good
    • as the people who will pursue them
  • Measuring Market Opportunities: Forecasting and Market Knowledge 5