Ch05 bus mktg planning

New Strategies
 New strategies come from new ideas
 New ideas often come from new voices
 To meet both domestic and foreign
competition, B2B firms are recognizing the vital
role of marketing in developing and
implementing successful strategies

Effective Strategies
Effective strategies share a:
A. Responsiveness to market needs
B. Ability to exploit the organizations special
competencies
C. Ability to make valid assumptions about
environmental trends
D. Ability to take advantage of competitive behavior
E. Realistic basis for securing and sustaining a
competitive advantage

Market-driven organizations are:
 Centered on customers
 Take an outside-in view of strategy
 Demonstrate an ability to sense
market trends ahead of their
competitors
Market-Driven Organizations

Hierarchy of Strategies – 3 parts
Corporate Strategy
Business-Level Strategy
Functional Strategy

Hierarchy of Strategies – Part 1
 Corporate Strategy
– What businesses are we in?
– What are our core competencies?
– How should we allocate resources?
– What businesses should we be in?

Corporate Strategy
At this level, the role of Marketing is to:
a) Assess market attractiveness and
competitive effectiveness of the firm
b) Promote customer orientation to
management
c) Formulate the company’s overall value
proposition that is marketed to the
customer, management and employees

Marketing Strategy to Corporate
An important role for marketing
management is to make the firm
understand the “Customer is King”
and advocate a set of values and
beliefs that put the customer first in
the firm’s decision-making process.

 Business-Level Strategy
– How do we compete in a given industry?
– How should we position ourselves against
competitors?

Business-Level Strategy
The focus is on how firms compete in a
given industry.
Competition is not between large corporations. It
is between individual business units (SBUs) that
compete in specific markets. Each SBU needs to
develops its own business and marketing plans
to answer:
 How can we compete?
 How and what is the most efficient way to get
to the market?
 What are our distinctive skills?

Functional Strategy
– How can we allocate resources to
most efficiently and effectively
support business-level strategies?
– How can we use resources to meet
the firm’s objectives within a
specific product market?

The interplay between the three levels of
strategic formulation:
1. Cuts across functional areas
2. Involves issues related to long term
objectives
3. Involves allocating resources across SBUs
and/or product markets
4. Includes decisions about the direction of
corporate strategy, application of
technology and choice of alliance partners

Strategic Decision
1. Process involves active participation of several
functional groups with differing opinions about:
a. Appropriateness of certain strategies
b. Corporate goals
2. Altering strategic goals can cause friction
between them.
3. However, strategic decision-making represents
a bargaining process between competing
functional factions.

The Game
• There are a number of players within an organization
that want to change strategy to further their interests.
• Certain managers feel their functional areas belong to
them (“turf”) and if anyone intrudes by changing the
strategy, they are stepping over their bounds.
• Further, various groups possess different philosophies,
beliefs and incentives resulting in different thought-
worlds.
• Thus, each subculture has a different agenda.
• The bargaining process for arriving at a mutually
agreeable strategic decision between these competing
forces represent “the game.”

14
Collective Action Perspective of Strategy Formulation Process

Corporate Progress Requires a
Meeting of the Minds
 Successful cross-functional connections
occur when turf wars, thought-worlds, and
other various interest groups come together
and develop a workable strategy to deal
with the competitive world.
 In order for this to occur, the marketing
group needs to be sensitive to—and
connect with—these “stakeholders.”

Cross-Functional Connections Explore Interrelationships
between Marketing and Four Business Functions

B2B TOP PERFORMERS
Marketing managers who know how to get the job
done (i.e., facilitate negotiations across functional
areas) possess certain characteristics:
1. Responsive & timely
2. Perspective-taking ability to understand and
anticipate other functional managers’ priorities
3. Open, frequent and high quality communication
style
4. Their word is their bond and follow through
5. Able to develop a strong network
17

 Successful marketing managers know
how to integrate functional areas.
They:
1. Understand their capabilities
2. Capitalize on their strengths
3. Facilitate strategies that are responsive
to customer needs
 Successful marketing managers assume
a central role in strategy
implementation.

Inter-Functional Involvement in Marketing Decision Making:
An Illustrative Responsibility Chart
Decision areas Marketing Manufacturing R&D Logistics Tech.
Services
SBU
Manager
Corp. Level
Manager
Product
Design specifications
Performance character.
Reliability
Price
List/Discount
Tech. Services
Customer training
Logistics
Inventory
Customer service level
Sales Force
Training
Advertising
Message development
Channel
Selection
19
Organizational Function
Decision role: R=Responsibility; A=Approval; C=Consult; M=Implement; I=Inform,
X=No Role
Vocabulary

Roles in Strategic Decision Making
Participants in strategic decision making may
assume the following roles:
Responsible (R) - Manager takes initiative,
analyzes situation, develops alternatives, consults
with others, make initial recommendation, &
facilitates approval of decision
Approve (A) - Manager accepts or rejects
decisions
Consult (C) - Manager offers input
Implement (M) - Manager is accountable for
implementing decision
Inform (I) - Manager is informed of the decision

Marketing Strategy Center (MSC)
 Representatives may assume more than
one role
 Roles evolve during the marketing
strategy development process
 Composition of the MSC is not strictly
prescribed by the organization chart
 MSC share certain parallels with the
buying center

 One challenge for the business marketer is to
minimize interdepartmental conflict.
 Conflicts are motivated by personal and
organizational goals.
 Organizational objectives may be different for
different functional areas. (Example:Various
functional areas are rewarded differently.)
 Managing conflict, promoting cooperation,
developing and coordinating strategy is a
fundamental responsibility for marketing managers.

Strategy Success
For a strategy to succeed:
 Each firm needs to have a business
concept that separates them apart
from their competition.
 There are 4 components:
1. Customer Interface
2. Core Strategy
3. Strategic Resources
4. Value Network
 Refer to Figure 5.2

Major business concept components are tied together by
three important “bridge” elements: customer benefits,
configuration, and company boundaries.
CUSTOMER INTERFACE
Fulfillment & Support
Information & Insight
Relationship Dynamics
Pricing Structure
CORE STRATEGY
Business Mission
Product/Market Scope
Basis for Differentiation
STRATEGIC RESOURCES
Core Competencies
Strategic Assets
Core Processes
VALUE NETWORK
Suppliers
Partners
Coalitions
EFFICIENT / UNIQUE / FIT / PROFIT BOOSTERS
Fig. 5.2 – Components of a
Business Model: Bridges to Profits

Fulfillment
& Support
Information
& Insight
Relationship
Dynamics
Pricing
Structure
1. Customer Interface

1. CUSTOMER INTERFACE
1. Fulfillment & Support – They are the channels a firm
uses to reach and support customers.
2. Information & Insight – Involves the capture of
knowledge from customers and uses it to provide
enhanced value to customers.
3. Relationship Dynamics – Involves the dyadic nature
of the buy/sell relationship in order to understand
customer expectations so it can exceed them,
increase the affiliation and lower competitive
influences.
4. Pricing Structure – Employs a pricing policy and
structure that enhances profits but not at the
expense of curtailing business.

The business mission describes overall strategic
objective, sets course direction, and defines
performance criteria to measure progress.
Product/market scope defines where firm
competes.
Basis for differentiation captures essence of how
firm competes differently than its rivals do.
Core Strategy – Three Elements

Differentiation of Products and Services
 A business is differentiated when its value-
adding activities are perceived as superior and
profitable.
 Value-added features need to motivate
customers to pay a higher premium than the
cost of superior performance.

 Provide superior performance through:
 Speed
 Responsiveness to complex orders
 Customized to solve customer problems
 Provide superior quality by:
 Reducing customer costs
 Improving performance
 Offer innovative product features that employ
new technologies

Competitive Advantage
 Employing superior strategic resources
and skills can gain a competitive
advantage.
 Core competencies are set of skills,
systems, and technologies that create
uniquely high value for customers.
 Strategic assets are more tangible
requirements for advantage; includes
brands, customer data, distribution
coverage, patents.
 Core processes are methodologies and
routines that companies use to transform
competencies, assets, and other inputs into
value for customers.

Value Network
A value network includes those who complement and
enrich the organization.
 Do we have good relations with suppliers,
partners, vendors and other supporters?
 Can we partner with others in such a way that we
can use their assets as if they were our own?
 Example: Using Bluedart as shipping service

 Competitive positioning is about being
different and competing in a distinct way
by using a unique mix of customer values.
 Michael Porter states there are six
fundamentals principles that a company
should employ for establishing and
maintaining a distinct strategic position.

Michael Porter Asks: What is Strategic Positioning?

Michael Porter & Strategic Positioning
 Right goal: Superior long term ROI instead of
performance goals (i.e., % share market)
 Create and deliver a good customer value proposition
 Create a distinctive value chain by offering or
performing similar features but in a different way
 Accept trade-offs: You can’t be everything to everyone,
therefore give up some things and reinforce others that
enhance the distinctions
 Emphasize those element that facilitate the strategic “fit”
and reinforce them
 Continuity of direction means to define a distinctive
value proposition and build strong customer relations by
staying consistent to that plan

Building the Strategic Plan
 Companies need to do many things well.
 However, underperformance is caused by a breakdown
between strategy and operations.
 Kaplan & Norton contend that successful strategic
execution involves two rules:
a. Understand the Management cycle that links
strategy and operations, and
b. Know what tools to apply at each stage of the cycle.

This system allows
management to plan,
coordinate and monitor
the links between
strategy and operations.
The Management System

The Management System
Involves 5 stages:
1. Strategy development
2. Translate strategy into objectives
3. Design key processes
4. Monitor performance
5. Adapt the strategy
2 Key tools for successful strategy implementation are:
1. Balanced Scorecard
2. Strategy Map

Balanced Scorecard
 Developed by Kaplan and Norton.
 We know measures are central to any
strategy.
 The Balanced Scorecard is a comprehensive
system for converting a company’s vision
and strategy into a tightly connected set of
performance measures.

Balanced Scorecard
Examines the performance of a business
unit from four perspectives:
1. Financial
2. Customer
3. Internal Business
4. Learning and growth

The Balanced Scorecard - Translating Strategy Into
Operational Terms
4. Learning and Growth Perspective
3. Internal Process Perspective
1. Financial Perspective
Productivity
Long-Term
Shareholder
Value Revenue
Growth
2. Customer Perspective
Product/Service Attributes Relationship Image
Price Quality Time Function Partnership Brand
Manage
Operations
Manage
Customers
Manage
Innovation
Manage
Regulatory
and Social
Processes
Human
Capital
Information
Capital
Organization
Capital+ +
Cause-and-Effect Relationships
Defines the chain of logic by which
intangible assets will be
transformed to tangible value.
Customer Value Proposition
Clarifies conditions that create
value for the customer.
Value-Creating Processes
Defines processes that transform
intangible assets into customer
and financial outcomes.
Clustering Assets and Activities
Defines intangible assets to be
aligned and integrated to create
value.

 Cause & Effect Relationship defines the logic
that transforms intangible assets into
tangible assets.
 Consideration is give to:
1. Productivity
2. Long-term shareholder value
3. Revenue growth

 Balanced Scorecard seeks to match financial
objectives with business units’ growth and
other life cycle stages.
 Growth stage:
◦ Operation: This stage is where the company needs
to commit resources for new product or service.
◦ Financial objectives:
 Know sales growth rate by segment
 Know % of revenue from new product, services and
customers

 Sustain Stage:
◦ Operation: This stage represents majority of
business where the strategy is to maintain and
grow slowly.
◦ Financial objectives:
 Focus on share of target customers and account
 Know customer and product line profitability

 Harvest Stage:
◦ Mature SBUs or products
 Operations: Provide only enough investment to
maintain product equipment and capabilities.
 Financial Objectives:
 Goal is payback
 Know customer and product-line profitability

2. CUSTOMER PERSPECTIVE
 Clarifies conditions that create
customer value
 Take into consideration:
1. Product/Service attributes (price, quality, time
& function)
2. Relationships (partnerships)
3. Image (brand)

2. CUSTOMER PERSPECTIVE: CORE MEASURES
Market Share Proportion of business in a particular market by:
a. % share of market
b. Total number of customers
c. Rupees spent or unit volume sold
Customer Acquisition Tracks in absolute or relative terms rate at which SBU
attracts and/or wins new customers
Customer Retention Tracks in absolute or relative terms rate at which SBU
retains new customers
Customer Satisfaction Matches the satisfaction level of customers on specific
performance criteria such as quality, service, delivery,
reliability, etc.
Customer Profitability Assesses the net profit on each customer, or a segment,
after deducting unique expenses allocated to support that
customer or segment 50

3. Internal Process Perspective
 This highlights the value-creating processes
that define the other processes that will
transform intangible assets into tangible
assets.
 It considers:
1. Operations management
2. Customer management
3. Innovation management
4. Regulatory & social processes management

Key Value Propositions & Customer Strategy The Focus of Internal Business Processes
Operations Management Customer Relationship Management Innovation Management
Low Total Cost Strategy Highly Efficient Operating Ease of Customer Access Seek Process Innovations
Processes Superb Post-Sales Service Gain Scale Economies
Efficient, Timely Distribution
Product Leadership Flexible Manufacturing Capture Customer Ideas for Disciplined, High-Performance
Strategy Processes New Offering Product Development
Rapid Introduction of Educate Customers about Complex First-to-Market
New Products New Products/Services
Complete Customer Deliver Broad Product/ Create Customized Solutions Identify New Opportunities
Solutions Strategy Service Line for Customers to Serve Customers
Create Network of Suppliers Build Strong Customer Anticipate Future Customer
for Extended Product/ Relationships Needs
Service Capabilities Develop Customer Knowledge
Lock-in Provide Capacity for Create Awareness Develop and Enhance
Strategies Proprietary Product/ Influence Switching Costs of Proprietary Product
Service Existing and Potential Increase Breadth/
Reliable Access and Customers Applications of
Standard
Ease of Use
Source: Adapted from Robert S. Kaplan and David P. Norton, Strategy Maps: Converting Intangible Assets into Tangible Outcomes (Boston: Harvard
Business School Publishing Corporation, 2004), pp. 322-344.
3. Aligning Internal Business Processes

4. Learning & Growth
 Intangible assets must be aligned to long term
strategy to achieve long term growth.
 Intangible assets represent “the capabilities of
the company’s employees to satisfy customer
needs.”
 They include:
 Human capital
 Information capital
 Organization capital

4. Learning & Growth (continued)
To implement strategy, the organization needs:
1. Human Capital: Availability of employees
with skills & talent
2. Information Capital: Availability of
information systems and infrastructure
3. Organization Capital: The culture,
leadership, incentives and teamwork

Benefit of the Balanced Scorecard
 The Balanced Scorecard helps align the
firms tangible and intangible assets with
the organization’s strategic goals.
 See next frame:
– 3. Aligning Internal Business Processes

Key Value Propositions & Customer Strategy The Focus of Internal Business Processes
Operations Management Customer Relationship Management Innovation Management
Low Total Cost Strategy Highly Efficient Operating Ease of Customer Access Seek Process Innovations
Processes Superb Post-Sales Service Gain Scale Economies
Efficient, Timely Distribution
Product Leadership Flexible Manufacturing Capture Customer Ideas for Disciplined, High-Performance
Strategy Processes New Offering Product Development
Rapid Introduction of Educate Customers about Complex First-to-Market
New Products New Products/Services
Complete Customer Deliver Broad Product/ Create Customized Solutions Identify New Opportunities
Solutions Strategy Service Line for Customers to Serve Customers
Create Network of Suppliers Build Strong Customer Anticipate Future Customer
for Extended Product/ Relationships Needs
Service Capabilities Develop Customer Knowledge
Lock-in Provide Capacity for Create Awareness Develop and Enhance
Strategies Proprietary Product/ Influence Switching Costs of Proprietary Product
Service Existing and Potential Increase Breadth/
Reliable Access and Customers Applications of Standard
Ease of Use
Source: Adapted from Robert S. Kaplan and David P. Norton, Strategy Maps: Converting Intangible Assets into Tangible Outcomes (Boston: Harvard
Business School Publishing Corporation, 2004), pp. 322-344.
3. Aligning Internal Business Processes

Strategy Map
 The cause & effect components of the Balanced
Scorecard template is transformed into visual
model called the “strategy map.”
 The strategy map allows the company to describe
and illustrate its:
 Objectives, initiatives & targets
 Measurements used to assess performance
 Linkages which are the foundation of the strategic
direction

Strategy Map
The next frame illustrates a firm’s strategic map for
pursuing a product leadership strategy.
 To start the company emphasize:
 Productivity strategy &
 Revenue Growth strategy
 Refer to Strategy Map Template

Balanced Scorecard
Strategy Map Template: Product Leadership
Financial
Perspective
Customer
Perspective
Internal
Perspective
Learning and
Growth
Perspective
“Products and Services That Expand Existing Performance Boundaries into the Highly Desirable”
A Capable, Motivated and Technologically Enabled Workforce
Long-Term Shareholder Value
Manage Total Life-Cycle
Product Costs
Revenues from
New Products
Gross Margins:
New Products
Productivity Strategy Revenue Growth Strategy
High-Performance Products: Smaller,
Faster, Lighter, Cooler, More
Accurate, More Storage, Brighter…
First to market
New Customer
Segments
Operations Management Customer Management Innovation Regulatory and Social
Flexible
Robust
Processes
Rapid
Introduction
of New
Products
Supply
Capacity
for Rapid
Growth
In-line
Experimentation
and
Improvement
Educate
Customers about
Complex New
Products/Services
Capture Customer
Ideas for New
Products/Services
Disciplined,
High-Performance
Product
Development
Product
Development
Time: From Idea
to Market
Minimize
Product Liability
And
Environmental
Impact
Contribute to
Communities
“Find, Motivate, Grow, and Retain the Best Talent”
Human Capital Information Capital Organization Capital
Deep
Functional
Expertise
Creative, Versatile
Employees: Cross-
functional Teamwork
Virtual Product
Prototyping and
Simulation
Computer-Aided
Design and
Manufacturing
(CAD/CAM)
Creativity,
Innovation

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