5. Module Overview
1. Structural Alternatives
2. Centralization versus Decentralization
3. Choosing the Most Effective Structure
4. Reacting to Turbulent Markets
5. When to Restructure
6. Managing Change
7. The Future of Business Marketing (Globalization, Rapidly Changing
Technology, Social Networking, Increased Visibility)
8. Product Development, Postmodern Marketing, Value-based
Marketing, and The Twenty-first Century Marketplace
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6. Introduction
• Once the hard work of segmentation has been completed and a
strategy has been chosen, the basics of marketing must be put in
place.
• Nothing is more basic than the organization structure.
• The design and implementation of this structure can empower
employees to make the strategy work or place insurmountable
obstacles in the way of this success.
6
7. Structural Alternatives
• Marketing can be organized
around functions, product
lines, target markets, or
some combination of these.
• The five broad ways to
organize marketing tasks
are shown in Table 60.1.
7
Table 60.1: Organizational alternatives
Source: Zimmerman, A. & Blythe, J. (2013) Business to Business Marketing
Management A global perspective
8. Structural Alternatives
• Businesses which provide single product lines to a limited number
of markets normally follow a simple functional organization.
• A major advantage of this approach is simplicity. Decision-making is
centralized. However, where a firm has multiple products or markets
to be addressed, this approach becomes unwisely.
• In the functional design, it is difficult for a particular product or
market to get the attention it needs from the various functions in
marketing. This has led to the establishment of product or market-
based organizations.
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9. Structural Alternatives
• The product/market-based organizations puts a great amount of
strain on the top marketing executive who needs to be an expert in
several different lines of business or differentiated market
segments.
• A combination approach is where marketing is organized on a
functional basis but the sales organization is organized by product.
• The difficulty with this organization is the obstacles it presents for
functions such as manufacturing and engineering to interact with
product line experts.
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10. Structural Alternatives
• The geographic or area organization is employed by companies
with short or similar product lines with vastly different conditions in
its geographic markets.
• The structure allows local managers to adapt their marketing
programs very well to specific markets. However, it limits the
exchange of information and adds a level of complication to
rationalizing the product line.
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11. Structural Alternatives
• Yet another permutation is where the sales organization is organized in
the traditional geographic way, but product managers are established
to focus attention on the needs of the particular product line.
• This organization is best used where a single sales organization serves
one set of customers with a varied line of products. Again, this
structure may be organized around markets rather than products.
• While this organization approach is quite common in B2B firms, the
difficulty here is that product managers do not report to a level high
enough in the organization so that they can affect the basic decisions
of other functions.
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12. Structural Alternatives
• The overlay of serving international markets adds more complexity
to the organization design.
• The simplest approach for handling international business is the
export department as an extension of a functional organization
which is effective only for firms with very limited sales outside its
home market.
• Once a firm begins to have significant international sales, the export
sales department is overwhelmed and the firm may move to various
other types of organization.
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13. Structural Alternatives
• There are six basic types of international organization structures:
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Global product – product divisions are
responsible for all manufacturing and
marketing worldwide.
Global area – geographic divisions are
responsible for all manufacturing and
marketing in their area.
Global functional – each functional area
is responsible for worldwide operations.
Global market – similar to the global
product structure but based on
customer segments.
Mixed or hybrid – combining features of
all the alternatives listed above.
Matrix – for large multinational
corporations attempting to give equal
emphasis to functional and geographic
aspects of the organization.
14. Structural Alternatives
• The most common structure used by multinational organizations is
the product structure. The benefit of this approach is centralization
and ease of decision-making.
• A global product structure assigns the international responsibility to
each product division, therefore, there is no central pool of
international expertise.
• In many cases, several product-oriented organizations in the firm
are marketing simultaneously to the same customer with little or no
coordination between them.
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15. Structural Alternatives
• In addition, some activities such as market research are often not
given adequate attention, especially on an international basis since
the critical mass of projects does not develop within each product
organization.
• Centralizing functions like research is sometimes the solution to that
problem.
• The market structure allows the firm to focus on specific market
segments and has the same advantages and disadvantages as the
product structure.
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16. Structural Alternatives
• The product-oriented organization is called as an impediment to
“market-driven thinking.”
• These organizations tend to be competitor-centered and to over-
emphasize cost. Hence, market-oriented organization with its ability
to clearly align sales and marketing toward customer segments is
preferred.
• Also, functionally-organized firms who have semi-related products
suffer because no individual takes the responsibility for a customer
group or a prospective new segment.
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17. Structural Alternatives
• In The area or regional structure firm is divided geographically and
all activities related to the particular area are planned and executed
within the area organization.
• For firms whose customers exhibit great variations by geography,
this approach can work well. Here again, duplication is a possible
negative effect with a possible lack of information transfer from one
country organization to another.
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18. Structural Alternatives
• Cost-effective product standardization is often downplayed in favor
of regional differences.
• Some firms group countries together into regions to capture some
of that synergy.
• The mixed structure combines aspects of all the organizational types
mentioned above.
• Figure 60.1 (next slide) shows the essentials of the matrix
organization. It is predicted that many corporations would be
heading in this organizational direction.
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19. Structural Alternatives
19
Figure 60.1: Matrix Organization
Source: Zimmerman, A. & Blythe, J.
(2013) Business to Business
Marketing Management A global
perspective
20. Structural Alternatives
• In this figure, a French product manager and a sales manager
located in France report to their respective managers located in a
regional location and to a country manager for France.
• This dual reporting relationship violates the basic principle of
management, that an individual should have only a single
supervisor.
• But provides cure the ills of functional, product-only or area-only
focus in the other organizational alternatives.
• Many large firms such as GE, Eriksson, Boeing, and Philips have used
this approach successfully over many years.
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21. Structural Alternatives
• Following are six strategies to make the matrix organization more
effective:
– clarity of authority and ownership to be given to a specific function;
– developing optimal balance of vertical and horizontal power across units;
– consideration of units which generally act as catalysts for innovation vs
those responsible for constraining opportunities in assigning power;
– understanding whether practices should be introduced which are culture-
challenging or culture-friendly;
– balancing the cost of management time versus allowing more input;
– allowing management to be open to new ideas
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22. Structural Alternatives
• An extension of the matrix organization structure is the organismic
structure. Unlike the traditional mechanistic or bureaucratic
pyramid, there is no clear “boss.”Each individual contributes
expertise (and effort) toward achieving the organization’s objectives.
• The leader for each task is determined by the project being tackled
at the time.
• This type of structure is typical of small consultancy firms but can be
found in larger organizations or departments of larger organizations.
• The main advantage is flexibility, which makes it a appropriate
structure for dealing with changing environments.
• 22
23. Structural Alternatives
• Organismic structures have the following characteristics:
– Communications flow evenly between all the members of the
organization.
– There is no fixed leadership: leadership devolves to the person best
fitted to deal with the situation facing the organization at the time.
– Status in the organization comes from knowledge and skill rather than
from qualifications and experience.
– The organization makes use of a broader range of skills from each
individual than would be the case in a hierarchical organization.
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24. Structural Alternatives
• Of course, organismic structures also have drawbacks, as follows:
– A great deal of time is spent in discussions, and in resolving leadership
issues.
– Career paths can be difficult to identify.
– The bigger the organization, the more complex the communications
become.
– In periods of stability, managers tend to become confirmed in their
leadership roles. In other words, the organization tends to become
hierarchical if conditions remain stable.
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25. Centralization versus Decentralization
• A key decision in international marketing is the degree of
independence to be given to local organizations.
• Decentralized organizations allow a high degree of independence
for local subsidiaries while highly centralized organizations
concentrate decision-making at the head office.
• In reality, firms are a mix of centralization and decentralization,
often by function.
• Some functions, such as R&D or human resources may lend
themselves to centralization while local marketing functions are
often decentralized.
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26. Centralization versus Decentralization
• Wise management allows a high level of local marketing decision-
making so that products and approaches can be adapted to the
needs of the local customers.
• If a firm faces severe challenges by competitors on a global basis, it
may wish to set strategy on a global basis while allowing local
decision-making within that strategy.
• This is called coordinated decentralization.
26
27. Choosing the Most Effective Structure
• In deciding how to design the organization, several factors come
into play. These are seen in Figure 60.2.
27
Figure 60.2: Factors affecting
organizational structure
Source: Zimmerman, A. & Blythe, J.
(2013) Business to Business
Marketing Management A global
perspective
28. Choosing the Most Effective Structure
• The first and most important driver of organization structure is
strategy. It is said that “suitable structure and processes need to be
instituted to realize the fruits of global strategy.”
• Obviously the products and services offered have a significant effect
upon the organization.
- Should the products require installation and maintenance with highly skilled
technical people, a more centralized organization would be required. Firms with
multiple product lines selling to multiple segments will more than likely have the
product or market-based organizational structures.
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29. Choosing the Most Effective Structure
• The degree of internationalization is another important factor in
making the structure decision.
- A firm that sells a few products outside its home market can have an export
department within a functional organization. But a firm with a global strategy
will eventually move to a complex matrix or other hybrid type of organization.
• Both market and technological environments can also have major
effect upon the structure decisions.
-With rapid and unpredictable changes in environment whether regulatory or
competitive the organizations need a structure that can respond rapidly .
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30. Choosing the Most Effective Structure
• A key question affecting firm organization is its human capabilities.
- the matrix organization works best where management and employees
understand how to make it work. The experience, knowledge, and capabilities
of individuals must be understood when an organization type is chosen.
• Firm size was found to be a key determinant.
- Smaller firms tended to have marketing and sales together in one unit
which was functionally organized.
- Medium-sized firms organized marketing and sales in a strategic business
unit along with a corporate marketing group.
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31. Choosing the Most Effective Structure
– The largest firms placed marketing in a business unit but employed
shared salesforces which sold more than one business unit’s product.
– Alternatively they placed sales and marketing in a “distribution
business unit,” an entity essentially devoid of R&D and production
capabilities.
• We have already discussed the need for centralization or
decentralization in a previous section.
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To conclude, the keys to find the ideal structure for the firms are simplicity,
cooperation, and exchange of information across the company, putting the
best people “closest to the action” and establishing systems for easy
knowledge sharing.
32. Reacting to Turbulent Markets
• The e-businesses doing well are able to re-direct their marketing
very quickly. For example Staples.com changes its marketing
campaigns several times a day based on feedback from its websites.
• Since selling through the web yields instant feedback, highly flexible
organizations and individuals are required for success.
• Therefore “patching” is recommended for e-businesses.
• Patching is the strategic process by which corporate executives
remap businesses in response to changing market opportunities.
• This is done by adding, dividing, transferring, exiting or combining
parts of businesses.
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33. Reacting to Turbulent Markets
• Managers in highly turbulent markets do not see organization
structure as stable but as temporary. They are ready to make many
small changes to keep their businesses flexible enough to respond
to changing market conditions.
• These managers keep business units small and make changes
quickly. They attempt to get the change approximately correct but
the emphasis is on moving quickly rather than having all the details
of an organization change worked out.
• Changing market conditions requires organizations to create
“specialized subunits with differing structural features.”
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34. Reacting to Turbulent Markets
• Patching does not work well in organizations with many shared
services or cross-divisional committees and success depends upon
clear business-level measurements and consistent companywide
compensation.
• Patching is a result of a detailed understanding of market
segmentation and then the ability to create new products or services
to address the needs of these market segments.
• Also important to success of this approach is picking the correct
general manager and developing a detailed plan for the first 30 to 60
days after the patch is made. Often it is necessary to reward and
recognize managers whose businesses have been cut or restructured.
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35. When to Restructure
• Managers need to ask the following questions in order to know when
to restructure the marketing department:
– Is the marketing structure capable of implementing the plans?
– Does the marketing focus the organization on priority markets or
products?
– Are managers suitably empowered?
– Does the firm meet its sales and profit objectives?
– Is the organization responding to customer needs or competitive
actions?
– Does the marketing department produce creative business strategies
and plans?
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36. When to Restructure
• If the answer to any of these questions is a negative, then either the
structure of the organization is wrong or the strategy is wrong.
• Either one can be changed, in order to ensure the organization’s
survival in the long run.
• Before restructuring, a manager must determine whether the
structure is the problem or whether the people filling the positions.
• Reorganizations are by necessity very disturbing and often cause
productivity to plummet.
• So all other alternatives should be reviewed before an extensive
reorganization is undertaken
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37. Managing Change
• Continual tinkering with the structure is not an optimum solution in
most cases, because employees will become unsettled by the
changes: it is probably better to build in the required degree of
flexibility when first designing the corporate structure.
• If staff do not support required changes, they are likely to sabotage
the changes, through industrial action or union representation.
• The managers shall adopt tactical alternatives to iprove the
acceptance of structural changes.
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38. The Future of Business Marketing
• Business-to-business marketing will
be strongly affected by three major
trends – globalization, rapidly
changing technology, and increased
visibility.
• These trends can be seen in Figure
60.3
38
Figure 60.3: Major trends affecting B2B marketing
Source: Zimmerman, A. & Blythe, J. (2013) Business to
Business Marketing Management A global perspective
39. The Future of Business Marketing
• Globalization is made possible in part by rapidly changing
technology and these changes in technology measurably increase
the visibility of marketing actions; and because globalization exists,
companies are more visible as well.
• One can make the case that each of these three trends would be
weaker without the other.
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40. Globalization
• The four drivers of globalization are:
– Market factors – Products can be designed to meet needs of customers
throughout the world. In addition, customers are expecting both higher
quality of service as well as customization.
– Cost factors – Cost efficiencies and the avoidance of duplication of effort are
two important drivers of globalization.
– Environmental factors – The removal of barriers to trade and improved
communications is also driving firms toward seeing markets globally.
– Competitive factors – When a competitor is marketing its products in many
nations throughout the world a firm must seek global competitive
advantage rather than just national advantage.
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41. Globalization
• Recent developments call into question the continued pace of
globalization. The trend toward global outsourcing has limitations –
there are drawbacks to outsourcing, and therefore there is a point at
which outsourcing leads to poorer performance.
• It is thus concluded that any company has an optimal level of
outsourcing: more, or less, will reduce performance.
• Protectionist pressure is also seen in the developed countries
(especially in the wake of the 2008 financial crisis).
• The new, more aggressive approaches from Asian and Latin American
countries may slow the pace of globalization considerably.
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42. Globalization
• Should this pace slow, the business marketing manager will have to
recognize the opportunities some trade barriers may provide for
securing protected markets through intelligent selection of the
market entry strategy.
• While in the long run increasing globalization might make marketing
business products around the world more effective, a wise manager
will watch these trends carefully and take advantage of opportunities
which present themselves.
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43. Rapidly Changing Technology
• A second important trend is rapidly changing technology, especially in
electronics and telecommunications.
• The Internet, of course, is the most important technological event. But
the advent of the smartphone, faster and lower cost computers, and
the continuing reduction in the size of components of every kind, are
all critical technological advances.
• These technologies improve communications and management within
the firm and with suppliers and distributors. They also allow for higher
quality products and customization to meet customer needs.
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44. Rapidly Changing Technology
• Improved technology not only makes products better and adds to
visibility, but it also provides many more vehicles for contacting the
customer.
• One intriguing new trend is that of webcasting, sometimes called
push technology.
• Webcasting has been defined as a way of updating news or other
selected information on a computer user’s desktop through periodic
transmission over the Internet.
• This is a new and more powerful way to send information is used by
B2B marketers.
44
45. Rapidly Changing Technology
• Online auctions and exchanges have received some attention lately,
as providing a model for future B2B dealings.
• These exchanges allow buyers to source products at the lowest
prices, and to have access to a very wide range of potential suppliers.
• However, the exchange model for B2B transactions on the Internet is
flawed.
- First, the emphasis on obtaining best price runs counter to the relationship
marketing paradigm.
- Second, exchanges offer little to suppliers since lowest bidder gets the sale.
- Third, firms have very little understanding of needs of the buyers or sellers.
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46. Social Networking
• The huge growth in social networking sites (Facebook, Twitter,
LinkedIn, etc.) during the last decade has opened up many
opportunities for promoting consumer goods.
• B2B marketers have been a little slower in accessing these new
media, but are now realizing the possibilities for communicating
through social networks.
• The slow take-up rate of the new media in B2B markets probably
stems from the difficulty of measuring return on investment or
tracking success.
46
47. Social Networking
• Currently there appear to be four basic strategies adopted by firms
seeking to exploit social networks explained in Table 60.3.
47
Table 60.3: Social media
strategies
Source: Zimmerman, A. &
Blythe, J. (2013) Business to
Business Marketing
Management A global
perspective
48. Increased Visibility
• There is no question that firms are now being subjected to far greater
visibility.
• The growth in the number of media outlets corresponding to the
growing number of investors have made business a popular subject
for far more individuals than in the past.
• Institutions are responding, providing firms with the ability to show
their good intentions.
• The web allows facts or rumors to spread very quickly across the
world. Firms concerned about reputation management monitor the
web and are proactive in providing corrective information.
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49. Product Development
• The acceleration of the international product lifecycle means firms
must speed up product development.
• In addition, management must design for a global market when
moving new products through the development process. This does
not necessarily mean complete standardization, because technology
allows for customization even for narrow market segments.
• Responding to the challenge of faster development requirements, the
most advanced firms have dramatically reduced the time they need
to bring a product from the idea stage to commercialization.
49
50. Product Development
• The basis of this new approach is the way product and process
information is used throughout the development cycle.
• Instead of a sequential process, these firms have adopted a flexible
approach.
• By using a standard product development approach as much as one-
third of the time is spent doing unnecessary work or waiting for
information.
• To optimize the process, the team decides on the most important
information it will need and attempts to get those answers as quickly
as possible.
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51. Product Development
• Another key to the success of this process is the leader.
• Leaders of the process are vital since they must decide which are the
most important activities the team should undertake and also which
activities are unnecessary.
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52. Postmodern Marketing
• In the B2B arena, postmodernism can explain the blurring of
boundaries between companies.
• Traditional thinking has been that one company is a buyer, while the
other is a seller.
• The current trend toward establishing long-term relationships
between firms means that some companies are in buyer–seller
relationships whereas others have progressed to the point of being
joint-venture partners in establishing a value chain.
• This is much more in accord with postmodern views.
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53. Postmodern Marketing
• Boundaries are further blurred by the fact that the same firms may
collaborate in one market while they compete in another.
– For example, the Ford Galaxy (Ford’s European multi-purpose vehicle) is
the same vehicle as the Seat Alhambra and the Volkswagen Sharan.
Volkswagen make engines for all three models, and the companies
collaborate on the design of this car while competing in (for example)
the compact car market.
• No one firm has the ability to fully compete in all markets – as a
result, smart managers are choosing their opportunities for both
cooperation (through strategic alliances or other arrangements) and
competition.
53
54. Value-based Marketing
• Starting from the premise that the central task of management is to
maximize shareholder value, the theory of Value-based Marketing
goes on to look at how this affects marketing thinking and action.
• As discussed maximizing shareholder value is not the same as
maximizing profits. Shareholder value is about creating a long-term,
secure, and growing investment.
• For marketers, the idea that the company exists to increase
shareholder value may seem to fly in the face of the customer-
oriented, high-service approach.
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55. Value-based Marketing
• In fact, customer orientation does not necessarily mean that the
company gives the customers everything they want: it does mean
that the company ensures that customers are satisfied and loyal in
order to maximize the long-term survival potential of the firm.
• Traditionally, marketers have focused almost exclusively on the
customers, while other (often more senior) managers have focused
on the shareholders.
• Marketing can and will fulfill the objective of maximizing shareholder
value once marketers accept that the customers and consumers are
the means to an end rather than the end in themselves.
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56. Value-based Marketing
• Much of the value that will be
added to the shareholders’
assets will be through growth
in the brand value.
• This is the key area which
marketers are able to influence.
• Increases in brand value reveal
themselves in four ways, as
shown in Table 60.4.
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Table 60.4: Aspects of brand value
Source: Zimmerman, A. & Blythe, J. (2013) Business to
Business Marketing Management A global perspective
57. The Twenty-first Century Marketplace
• In the B2B area, four formative trends have been identified. These
are:
–The move from simple to complex transactions. Currently, transactions may
involve several companies on the supply side and even several cooperating
companies on the purchasing side, each wanting something different from
the deal.
–The move from middleman to speculator. As profit margins are driven down
by intensifying competition, the online exchanges will need to consider
speculating in the products on offer online.
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58. The Twenty-first Century Marketplace
– The move from transactions to solutions. Creative companies can use the
Internet, and their relationships with the rest of the value chain, to offer
more than just a product. Integrated firms can (and will) offer tailored
solutions to their customers’ problems.
– The move toward sell-side swaps. Rather than go through the procedures
for setting up a buy–sell transaction, some firms are now using the Internet
to exchange products or services.
For example, the trucking business is which trucks often travel empty or with
part-loads is clearly inefficient. Internet sites now exist where companies, are
able to exchange loads to ensure that the trucks run full. These online swaps
are especially important for small operators enabling them to compete better.
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59. Conclusion
• In this module, we described organization structure alternatives,
and discussed the strengths and weaknesses of centralization versus
decentralization.
• We explained the advantages and disadvantages of the product or
market manager form of organization and discussed the benefits
and drawbacks to the matrix form of organization.
• Then we understood the considerations in choosing the most
effective structure, explained how to react to turbulent markets and
explored when to restructure the marketing department.
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60. Conclusion
• Next, we understood how to manage organizational change.
• We also explained the three major trends affecting business-to-
business marketing and described some of the new marketing
approaches now developing as a result of those trends
• Finally, we explained some newer thinking which may change a
manager’s perspective on the future of marketing. These included
product development, postmodernism in marketing, value-based
marketing and the 21st century marketplace.
60
61. References
1. Kotabe, M. & Helsen, K. (2012) Global Marketing Management,
Wiley India(P.) Ltd., Fifth Edition.
2. Keegan, W.J. (2004) Global Marketing Management, Pearson
Education, Inc., Seventh Edition.
3. Zimmerman, A. & Blythe, J. (2013) Business to Business Marketing
Management A global perspective, Routledge, Second Edition.
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