CHAPTER 1

Imperatives for
Market-Driven
Strategy
OBJECTIVES
 Pivotal role of market-driven strategy in designing and
implementing business/marketing strategies
 Links between business/marketing strategy and corporate
strategy
 Challenges in the modern environment
CHARACTERISTICS OF A MARKET-DRIVEN
STRATEGY
Becoming Market-
Orientation

Achieving Superior Determining

Performance Distinctive
Capabilities

Customer
Value/
Capabilities
Match
MARKET-DRIVEN STRATEGY (1)
 Becoming market-oriented
 Customer focus
 Competitor intelligence
 Cross-functional coordination
 Performance implications
BECOMING MARKET ORIENTED

 Customer is the focal point of the organization

 Commitment to continuous creation of superior
customer value
 Superior skills in understanding and satisfying
customers
 Requires involvement and support of the entire
workforce
 Monitor rapidly changing customer needs and wants
 Determine the impact of changes on customer satisfaction
 Increase the rate of product innovation

 Pursue strategies to create competitive advantage

 CHARACTERISTICS OF MARKET
ORIENTATION
 Customer Focus
What are the customer’s value requirements?
 Competitive Intelligence
Importance of understanding the
competition as well as the customer
 Cross-Functional Coordination
Remove the walls between business functions
 Performance Consequences
Market orientation leads to
superior organizational performances
Becoming a Market-Oriented
Organization
Information
Acquisition

Cross-Functional
Analysis of Information

Shared Diagnosis
and Coordinated
Action
Delivery of
Superior Customer
Value
 MARKET ORIENTATION

 Information Acquisition
 Gather relevant information on customers, competition, and markets
 Involve all business function

 Inter-functional Assessment
 Share information and develop
innovative products with
people from different function
 Shared diagnosis and action
 Deliver superior customer value
MARKET-DRIVEN STRATEGY (2)
 Becoming market-oriented
 Customer focus
 Competitor intelligence
 Cross-functional coordination
 Performance implications

 Determining distinctive capabilities

 DISTINCTIVE CAPABILITIES

“Capabilities are complex bundles of

skills and accumulated knowledge,
exercised through organizational
processes, that enable firms to
coordinate activities and make use of
their assets.”

George S. Day, Journal of Marketing, October 1994, p.38.

SOUTHWEST AIRLINE’S DISTINCTIVE CAPABILITIES

Organizational Processes
Southwest uses a point-to-point route system rather than the hub-and-spoke design used by many
airlines. The airline offers services to 57 cities in 29 states, with an average trip about 500 miles. The
carrier’s value proposition consists of low fares and limited services (no meals). Nonetheless, major
emphasis throughout the organization is placed on building a loyal customer base. Operating costs are
kept low by using only Boeing 737 aircraft, minimizing the time span from landing to departure, and
developing strong customer loyalty. The company continues to grow by expanding its point-to-point
route network.
Skills and Accumulated Knowledge
The airline has developed impressive skills in operating its business model at very low cost levels.
Accumulated knowledge has guided management in improving the business design over time.
Coordination of Activities
Coordination of activities across business functions is facilitated by the point-to-point business model.
The high aircraft utilization, simplification of functions, and limited passenger services enable the
airline to manage the activities very efficiently and to provide on-time point-to-point services offered
on a frequent basis.
Assets
Southwest’s key assets are very low operating costs, loyal customer base, and high employee esprit de
corps
 Capabilities
Disproportionate
(higher)
contribution to
superior
customer value Compelling
Logic of Distinctive
Capabilities

Provides value to
customers on a more
cost-effective basis
Source: George S. Day, Journal of Marketing, October 1994, p. 38.
 CAPABILITIES

Desirable
Desirable
Capabilities
Capabilities

Applicable to Superior to the

Multiple Competition
Competition
Situations

Difficult to
Duplicate
Source: George S. Day, Journal of Marketing, October 1994, 49.
MARKET-DRIVEN STRATEGY (3)
 Becoming market-oriented
 Customer focus
 Competitor intelligence
 Cross-functional coordination
 Performance implications

 Determining distinctive capabilities

 Types of capabilities
TYPES OF CAPABILITIES

Outside-In
Processes

Spanning
Processes

Inside-Out
Processes
 ORGANIZATION’S PROCESS
EXTERNAL INTERNAL
EMPHASIS EMPHASIS
Outside-In Inside-Out
Processes Processes
Spanning Processes
 Market sensing  Financial management
 Customer order
 Customer linking fulfillment  Cost control
 Channel bonding  Pricing  Technology
development
 Technology  Purchasing
monitoring  Integrated logistics
 Customer service
delivery  Manufacturing/
transformation
 New product/service processes
development
 Human resources
 Strategy development management
 Environment health and
Source: George S. Day, Journal of Marketing, October 1994, 41.
safety
MARKET-DRIVEN STRATEGY (4)
 Becoming market-oriented
 Customer focus
 Competitor intelligence
 Cross-functional coordination
 Performance implications

 Determining distinctive capabilities

 Types of capabilities

 Creating value for customers

MATCHING CUSTOMER VALUE AND
DISTINCTIVE CAPABILITIES

Value Requirements

Distinctive
Capabilities
 CREATING VALUE FOR CUSTOMERS

Customer Value:
 Value for buyers consists of the benefits less the costs resulting from
the purchase of products.
 Superior value: positive net benefits

Creating Value:
“Customer value is the outcome of a process
that begins with a business strategy anchored in
a deep understanding of customer needs.”
Source: C. K. Troy, The Conference Board Inc., 1996, 5.
CREATING VALUE FOR CUSTOMERS

Customer
Value

Benefits Costs
 VALUE COMPOSITION

Product

Services
Benefits
Employees

Image Value
(gain/loss)
Monetary costs
Costs
Time (sacrifices)
Psychic and
physic costs
MARKET-DRIVEN STRATEGY (5)
 Becoming market-driven
 Marketing sensing capabilities
 Customer linking capabilities
 Aligning structure and processes
 BECOMING MARKET DRIVEN
Market Sensing
Capabilities

MARKET –
DRIVEN
STRATEGIES

Customer Linking
Capabilities
 MARKET DRIVEN INITIATIVES
Market Sensing Capabilities
Effective processes for learning about markets
Sensing:
Collected information needs to be shared across

functions and interpreted to determine proper

actions.
Customer Linking Capabilities
Create and maintain close customer relationships
Aligning Structure and Processes
 Potential change of organizational design
Improve existing processes
Process redesign
 Cross-functional coordination and involvement
 Primary targets for reengineering:

 Sales and marketing, customer relations, order

fulfillment, and distribution
CORPORATE, BUSINESS AND MARKETING
STRATEGY (1)
 What is corporate strategy?
 CORPORATE STRATEGY
Deciding the Scope
and Purpose of
the Business

Business
Objectives

Actions and
Resources for
Achieving
Objectives
CHARACTERISTICS OF SUCCESSFUL
STRATEGY

 Unique competitive position for the company.

 Activities tailored to strategy.
 Clear trade-offs and choices vis-à-vis
competitors.
 Competitive advantage arises from fit across
activities.
 Sustainability comes from the activity system
not the parts.
 Operational effectiveness a given.

Source: Michael E. Porter, “What Is Strategy,” Harvard Business Review, November-December 1996, 74.
CORPORATE, BUSINESS AND MARKETING
STRATEGY (2)
 What is corporate strategy?
 Corporate strategy framework
 Deciding corporate vision
 Objectives
 Resources
 Business composition
 Structure, systems and processes
 CORPORATE STRATEGY
COMPONENTS

 Management’s long-term vision for the corporation

 Objectives
 Assets, skills, and capabilities
 Businesses in which the corporation competes
 Structure, systems, and processes
 Creation of value

Source: David J. Collis and Cynthia A. Montgomery, Corporate Strategy, Chicago: Irwin, 1997, 7-12.
CORPORATE, BUSINESS AND
MARKETING STRATEGY (3)
 Business and marketing strategy
 Business and marketing strategy relationships
 Strategic marketing
CORPORATE, BUSINESS AND MARKETING
STRATEGY
 CORPORATE, BUSINESS AND MARKETING
STRATEGY (4)
 The marketing strategy process
 Markets, segments and customer value
 Markets and competitive space
 Strategic market segmentation

 Strategic customer relationship management

 Capabilities for continuous learning about markets

CORPORATE, BUSINESS AND
MARKETING STRATEGY (5)
 Designing market-driven strategies
 Market targeting and strategic positioning
 Strategic relationships

 Innovation and new product strategy

 Market-driven program development

 Strategic brand management
 Value chain strategy

 Pricing strategy

 Promotion strategy
CORPORATE, BUSINESS AND
MARKETING STRATEGY (6)
 Implementing and managing market-driven strategy
 Designing market-driven organizations
 Marketing strategy implementation and control
 MARKETING STRATEGY PROCESS
Markets,
Segments
And Value
Implementing
and Managing Designing
Market-Driven Market-Driven
Strategy Strategies

Market-Driven
Program
Development
CHALLENGES IN THE MODERN
ENVIRONMENT

 Escalating globalization
 Technology diversity and uncertainty

 The Web 2.0

 Ethical behavior and corporate social responsiveness

STRATEGIC MARKETING PLANNING
 Developing the strategic plan for each business
 Preparing the marketing plan
 Planning relationships and frequency
 Planning considerations

 Responsibility for preparing plans

 Planning unit

 Preparing the marketing plan

 MARKETING PLAN
OUTLINE

I. Strategic Situation Summary

Summarize the key points from your situation analysis (market analysis, segments, industry/competition) in
order to recount the major events and provide information to better understand thestrategies outlined in the
marketing plan.

II. Market-Targets and Objectives

The market target may be defined demographically (key characteristics only), geographically, or
in social/economic terms. Each market target should have needs and wants that differ to some degree from
other targets. These differences may be with
respect to types of products purchased, use situation, frequency of purchase, and other variations that
indicate a need to alter the positioning strategy to fit the needs and wants of each target. An objective is a
quantified goal identifying what is expected when. It specifies the end results expected. The objectives
should be written for each target market. Objectives should also be included for the following program
components: (1) product,
(2) price, (3) distribution, (4) promotion (salesforce, advertising, sales promotion, and public relations),
and (5) technical services.
 MARKETING PLAN
OUTLINE

III. Positioning Statements

Write statements that describe how you want each market

target to perceive each product relative to competition. State the
core concept used to position the product (brand) in the eyes and
mind of the targeted buyer. The positioning statement should
describe: (1) What criteria or benefits the customer considers when
buying a product along with the level of importance, (2) What we
offer that differentiates our product from competition, and (3) The
limitations of competitive products.
 IV. Market Mix Strategy for
Each Market Target
A. Product Strategy
Identify how each product fits the market target. Other issues that may be addressed would
be new product suggestions, adjustments in the mix of existing products, and product
deletion candidates.
B. Price Strategy
The overall pricing strategy (I.e., competitive, premium-priced, etc.) should be identified
along with a cost/benefit analysis if applicable. Identify what role you want price to play, i.e.,
increase share, maintenance, etc.
C. Distribution Strategy
Describe specific distribution strategies for each market target. Issues to be addressed are
intensity of distribution (market coverage), how distribution will be accomplished, and
assistance provided to distributors. The role of the sales force in distribution strategy should
also be considered.
D. Promotion Strategy
Promotion strategy is used to initiate and maintain a flow of communication between the
company and the market target. To assist in developing the communications program, the
attributes or benefits of our product should be identified for each market target. How our
product differs from competition (competitive advantage) should be listed. The sales force’s
responsibilities in fulfilling the market plan must be integrated into the promotion strategy.
Strategies should be listed for (1) personal selling, (2) advertising, (3) sales promotion, and
(4) public relations.
 E. Marketing Research
Describe the market research problem and the kind of
information needed. Include a statement which addresses
why this information is needed. The specific market
research strategies can be written once the above two
steps have been followed.
V. Coordination with Other Business Functions
Indicate other departments/functions that have
responsibilities for implementing the marketing plan.
VI. Sales Forecasts and Budgets

VII. Contingency Plans

Indicate how your plans should be modified if events
should occur that are different from those assumed
in the plan.