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The Wharton School University of Pennsylvania Marketing 777 MARKETING STRATEGY Professor: George S.

Day, Suite 700 JMHH, Telephone: 215 898 8245 Email: dayg@wharton.upenn.edu Mary Donegan Suite 700 JMHH Telephone: 215 898 2104 Email: mdonegan@wharton.upenn.edu By appointment
http://webcafe.wharton.upenn.edu/eRoom/mktg/777c

Administrative Assistant:

Office Hours: Web Caf Address: Class Schedule:

Monday and Wednesday 9:00am 10:20am 10:30am 12:00 noon

Introduction This course views marketing as both a general management responsibility and an orientation of an organization. Relatively less attention will be given to the specific activities of the marketing department, sales group, or advertising function in implementing strategic decisions. We will take the viewpoint of the general manager and the senior marketing executive to address the issues of: Formulating segmentation and focus strategies Understanding, attracting and keeping valuable customers Positioning the business to achieve an advantage over competitors Identifying and exploiting growth opportunities Allocating resources across businesses and segments Managing the channels for gaining access to the served markets, and Aligning the organization to changing market requirements.

The course will use a mix of cases, lecture/discussion, outside speakers, and group projects. This material will be integrated throughout the course with four over-riding themes. First, that successful market strategies deliver superior customer value; second, that successful implementation of these strategies requires a high level of market orientation a market-driven firm has superior skills in understanding, attracting, and keeping customers; third, that the internet will transform most markets by introducing new business models and enabling personalization of offerings; and fourth, that the market arena in which the strategies are implemented is increasingly global. Objectives Your basic objective is to develop your own understanding and management skills. My primary objective is to stimulate this process. Specifically, the course will attempt to help you develop your knowledge and skills in the application of advanced frameworks, concepts, and methods for making strategic choices at the business unit level. At the end of the course, you should have a working knowledge of the approaches that organizations use to resolve market strategy issues. Teaching Method and Performance Evaluation This course will be taught as a seminar so participation during the lectures and meaningful contributions to the case discussions are essential. There are four components to the course grade: 1. Class Participation (25%). This part of the grade depends on the quality of your contributions. Highly valued contributions include asking insightful questions about the assigned readings, redirecting a case discussion when the current point has been adequately covered, providing an appropriate qualitative analysis, summarizing and/or reconciling previous comments, and drawing generic learning points from a particular case. 2. Individual Written Case Analysis (20%). This should be handed in at the beginning of the session for which the case has been assigned. The choice of the specific case is made by each person. The write-ups should be in essay form and as comprehensive as possible. Also, they should be double-spaced and typed and not exceed eight (8) pages, including exhibits and tables. Do not use questions for discussion in the syllabus as the structure for your report. These questions are meant to signal the main issues to be addressed during the class discussion. Note that the California Vision Tools case cannot be used to satisfy this requirement. This is a short, descriptive case that will be used to stimulate a class discussion. 3. The Wireless Wars (25%). Twelve self-selected teams will be assigned to formulate a strategy for one of four existing network operators in the U.K. market, the

3 new operator TIW/Hutchinson or an MVNO. Teams should be prepared to make a 10 minute presentation on October 16 that covers a market assessment and a medium term competitive marketing strategy for their assigned operator. These presentations should be supported with a team report of up to six (typed, double-spaced pages) including tables and exhibits. Although two teams will be assigned to each network operator, only one team will be randomly chosen to present. The other team will be given three minutes to explain what they did differently. In line with the theme of the course, your strategy should position the network distinctively. Ensure you detail of how you have arrived at this positioning, how you will communicate it in a way that exploits its particular strengths, why you think it will be successful and what you consider success to be. Your market analysis should include a review of network performance to-date, an assessment of your competitions current and likely future positioning. Note that the case contains a great deal of market data some of it disguised. You are encouraged to supplement case data with any other data you feel is helpful (for example, you may wish to research the network providers websites). You should present your case in such a way as to sell it to the networks board of directors. To do this you will need to estimate the investment required to achieve the positioning and the expected results (in terms of market share over the next five years). 4. Marketing Strategy Project (30%). This report is to be prepared and presented by self-selected groups of three or four people. The topic should relate to the content of the course and provide a significant learning experience for all members of the group. A list of candidate topics is provided in Exhibit 1 (attached). However, every effort will be made to accommodate other topics. Feasible topics include an evaluation of the strategy of a firm or business, or the applicability of a concept or method useful in strategic marketing. The report will ordinarily be based on secondary sources and information in the public domain, but can also be based on field research or interviews and data collection within a company. The reports will be evaluated according to the following criteria: 1. The quality of the analysis were the right questions asked? 2. The feasibility of the conclusions or recommendations did they follow from the analysis? 3. Evidence of mastery of the frameworks, concepts, and methods developed during the course; and 4. The effectiveness of the written and verbal presentation of the report. Unless I am informed otherwise, I will assume the workload was shared equally by the members of the group. Please prepare a brief (one-paragraph to one-page) typed proposal to be submitted with the names of the team members by September 25. A one-page progress report is due on November 6. The final paper should be between 12 and 15 pages, excluding any

4 charts, graphs, and figures. This paper is due on December 2. A class presentation of the project will be scheduled for December 2, 4 or 9. Materials A bulkpack of printed case studies and readings will provided. The required text for the course is George S. Day, The Market-Driven Organization: Understanding, Attracting and Keeping Valuable Customers, New York: Free Press, 1999 Along with the assigned readings, you are encouraged to regularly read strategy-related items in the Wall Street Journal and articles in Business Week, Fortune, Forbes, and other publications. This syllabus and any updates available on the World Wide Web at:
http://webcafe.wharton.upenn.edu/eRoom/mktg/777c

Course Philosophy The starting point is the belief that you cannot develop a sound competitive market strategy unless you first understand the problem or situation. This requires not only an understanding of what the important features are in the situation you face, but also of how these features will impact your strategy. In other words, you need to have a good theory. Cook-book solutions rarely work in practice because every situation is somewhat unique, and there are no universal marketing solutions. Alfred Whitehead expressed this very well in a famous essay from 1929: Whatever be the detail with which you cram your student, the chance of this meeting in after-life exactly that detail is almost infinitesimal; and if he does meet it, he will probably have forgotten what you taught him about it. The really useful training yields a comprehension of a few general principles with a thorough grounding in the way they apply to a variety of concrete details. In subsequent practice the (students) will have forgotten your particular details; but they will remember by an unconscious common sense how to apply principles to immediate circumstances. - Alfred Whitehead, The Aims of Education and Other Essays

Exhibit One Illustrative List of Topics for Marketing Strategy Project 1. Analyze how changes in the strategies and relative power of buyers and/or customers could cause a distribution system to compress and eliminate intermediaries. 2. Determine the feasibility of a strategy of close customer relationships, in terms of the mutual benefits, organizational requirements, and prospects for competitive advantage. 3. Assess the present orientation of a firm to its market, by comparing the judgements of senior managers with the perceptions of major customers, and identify barriers to becoming more market-driven. 4. Evaluate the effectiveness of an application of CRM processes and technologies in retaining a companys most valuable customers. 5. Assess the present and prospective extent of globalization of the market for a business, and identify the appropriate strategies for participation. 6. Value the equity in a brand name, and propose strategies for maximizing the value through line extensions, or other strategies. 7. Use scenario analysis to understand the impact of an environmental discontinuity on the viability of a market strategy. 8. Assess the impact of a sense-and-respond or mass customization strategy in a market where competition is on a make-and-sell basis. 9. Forecast the pattern of value migration in a market as the requirements or technology change and identify feasible strategies for the incumbent to use in response. 10. Undertake an analysis of the capabilities, strategies, and intentions of a major competitor, and propose a defensive strategy to blunt these initiatives. 11. Assess the ability of the organization to learn about its markets and act on the information. 12. Identify and evaluate strategic opportunities for a follower when the leader has preempted most of the positions of advantage. 13. Evaluate the benefits and costs of a marketing alliance and forecast the durability of the relationship of the partners. 14. Identify feasible strategies for surviving an industry consolidation or shakeout.

Overview of Course A. INTRODUCTION 1. September 9 2. September 11 3. September 16 B. Introduction to the Course The Fundamentals of Market Strategies Case: Snapple Becoming Market Driven Case: California Vision Tools (not suitable for case write-up)

POSITIONING FOR ADVANTAGE 4. September 18 5. September 23 6. September 25 7. September 30 8. October 2 9. October 7 10. October 9 Strategies for Achieving Advantage Strategies for Achieving Advantage Case: First Direct Branchless Banking Alternative Value Strategies Alternative Value Strategies (continued) Case: easyJet 2000 Innovative Growth Strategies Case: TiVo Value Migration and Channels Creating Value through Innovation Case: Weve Got Rhythm: Medtronic Corporation Cardiac Pacemakers Division Guest Speaker: Steve Mahle, President, Brady Pacing Business, Medtronic Corp. The Future of Distribution: Strategies and Technologies for Reaching Markets Guest Speaker: Adam Fein, President, Pembroke Consulting Wireless Wars Group presentations

11. October 14

12. October 16 C.

RELATING TO CUSTOMERS 13. October 21 14. October 23 15. October 28 16. October 30 17. November 4 Competing for Customer Relationships Competing for Customer Relationships (continued) Case: Hilton HHonors Worldwide: Loyalty Wars Managing Customers for Profit Case: Hunter Business Group: Team TBA Collaborative Partnering Case: Procter & Gamble: The WalMart Partnership (A) Customer Relationship Management at Fidelity Investments

7 Guest Speaker: Sanjiv Mirchandani, Executive Vice President, Fidelity Investments D. BRAND STRATEGIES 18. November 6 19. November 11 20. November 13 21. November 18 E. Managing Brand Equity Growing the Brand Case: Howard Schultz and Starbucks Coffee Company Managing Brand Equity Guest Speaker: Elizabeth Browning, President, Lluminari Managing Brand Equity (continued) Case: Black & Decker Corporation (A)

ALIGNING THE ORGANIZATION TO THE MARKET 22. November 20 23. November 25 24. November 27 Reshaping the Organization Building a Market-Driven Organization Case: Sony Europa (A) Putting It All Together: How Merck Protected Their Share of the Cholesterol Statin Market Guest Speaker: Jerry Wisler, Vice President, Artheoscleorosis, Merck Group Presentations Group Presentations (continued) Summary: Challenges for Marketing

25. December 2 26. December 4 27. December 9

DETAILED CLASS SCHEDULE (A) INTRODUCTION 1. September 9 Introduction to the Course Reading: 2. September 11 Chapter One of the text for the course

The Fundamentals of Market Strategies Case: Snapple

Questions for Discussion: 1. Why do you think Snapple flourished in the period 1972 to 1993 when so many other startup premium fruit drinks failed? 2. Did Quaker make an error in buying Snapple or did they manage it badly? 3 .What can Triarcs managers learn from the Quaker experience? 4. What should Mike Weinsteins highest priority initiatives be in his effort to reinvigorate Snapple? 3. September 16 Becoming Market Driven Reading: Case: Questions: 1. Why is it so difficult to change an engineering oriented company? 2. Why do firms focus on their currently served market and miss the emergence of new segments with different requirements? (B) POSITIONING FOR ADVANTAGE 4. September 18 Strategies for Achieving Advantage Readings: (1) (2) Chapter 4 of text Treacey and Wiersema, Customer Intimacy and Other Value Disciplines Chapters 2 and 3 of text California Vision Tools (this vignette is not suitable for case write-up)

(3) 5. September 23

Constantinos Markides Six Principles of Breakthrough Strategy

Strategies for Achieving Advantage Case: Questions: 1. How has First Direct been able to sustain its advantages in the home banking market in the U.K.? Why do they have the highest customer satisfaction ratings in the industry? 2. What challenges do they face in the future? How big a threat or opportunity is online banking? 3. What should they do to maintain their growth in the face of intensifying competition? First Direct Branchless Banking

6. September 25

Alternative Value Strategies Readings: (1) Chapter 5 of text (2) Robert Dolan Sustaining Value (3) W. Chan Kim and Rene Mauborgne Creating New Market Space

7. September 30

Alternative Value Strategies (continued) Case: Questions: 1. What customer value does easyJet offer? How do they make money? Where is their business model vulnerable? 2. How far can the concept behind easyJet be extended? What would you recommend? Why? easyJet 2000

8. October 2 Case: Questions:

Innovative Growth Strategies TiVo

1. What factors are inhibiting or facilitating the adoption of TiVo?

10 What is the most attractive market segment? 2. What are Microsofts potential strengths and weaknesses in this market? 3. What is your assessment of the proposed action plan? What alternatives should be considered? 9. October 7 Value Migration and Channels Readings: (1) Anderson, Day and Rangan, Strategic Channel Designs (2) Adam J. Fein and Sandy Jap, Manage Consolidation in the Distribution Channel 10. October 9 Creating Value through Innovation Reading: Case: Speaker: Robert G. Cooper, The Invisible Success Factors in New Product Development Weve Got Rhythm: Medtronic Corporation Cardiac Pacemakers Division Steve Mahle, President, Brady Pacing Business, Medtronic Corporation

Questions for Discussion: 1. Why did Medtronics market share erode between 1970 and 1986? 2. What are the crucial elements of the NPD system that turned the company around? What are the key interdependencies? 3. What challenges does Medtronic face in the future? 11. October 14 The Future of Distribution: Strategies and Technologies for Reaching Markets Speaker: 12. October 16 Adam Fein, President, Pembroke Consulting

Wireless Wars Selected groups will make 10-minute presentations on the recommended strategy for one of the four existing network operators, or a new operator, or an MVNO.

11

(C) RELATING TO CUSTOMERS 13. October 21 Competing for Customer Relationships Readings: (1) Chapters 7 and 8 of text (2) Frederick F. Reichheld, Lead for Loyalty (3) Russell S. Winer, A Framework for Customer Relationship Management Questions: 1. What are the differences between loyal buyers, defectors, switchers and prospects? 2. What benefits do customers get from a close relationship with a supplier? 14. October 23 Competing for Customer Relationships (continued) Case: Hilton HHonors Worldwide: Loyalty Wars Questions: 1. What are the strengths and weaknesses of the Hilton HHonors Program from the perspectives of the Hilton brand, the member properties and the guests? 2. What should Hilton do in response to Starwood? 15. October 28 Managing Customers for Profit Case: Hunter Business Group: Team TBA Questions for Discussion: 1. What do you think of HBGs approach? How valid is the customer contact matrix? 2. What is your analysis of the three options Kowalski has at the end of 1993 (given the assumptions that revenues declined 20 percent and there are 1500 active accounts)? 3. How important is the Gold Account program as an incentive to dealers? 4. What is the trade-off, if any between eliminating salesforce, and a

12 drop-off in contacts? Who would you eliminate? 5. What will happen to Team TBA in the next 3 to 5 years? 16. October 30 Collaborative Partnering Reading: Chapter 9 of course text

Case: Procter & Gamble: The WalMart Partnership (A) Questions: 1. Why has Wal-Mart been so successful? Has power in the channel shifted to Wal-Mart? 2. How would you evaluate the Wal-Mart/P&G partnership? 3. What problems are P&G facing? How has P&G typically fought the threat of private labels? 4. Why did Kimberly-Clark agree to supply private label diapers to WalMart? How should P&G respond? 17. November 4 Customer Relationship Management at Fidelity Investments Speaker: Sanjiv Mirchandani, Executive Vice President, Fidelity Investments

(D) BRAND STRATEGIES 18. November 6 Managing Brand Equity Readings: (1) Peter Farquhar, Brand Waves: Building Momentum Throughout the Ownership Cycle (2) David A. Aaker, Measuring Brand Equity Across Products and Markets (3) Kevin Lane Keller and Sanjay Sood, The Ten Commandments of Global Branding 19. November 11 Growing the Brand Case: Howard Schultz and Starbucks Coffee Company Questions for Discussion: 1. What is the Starbucks brand promise?

13 2. Are there limits to the growth of the Starbucks franchise? Which growth alternatives would you recommend? 20. November 13 Managing Brand Equity Speaker: 21. November 18 Elizabeth Browning, President, Lluminari

Managing Brand Equity (continued) Case: Questions: 1. What is the cause of Black & Deckers 9% share versus Makitas 50% share? 2. How does the buying behavior of the tradesman influence the situation? 3 .What is Makitas competitive strategy, and what role does Milwaukee play? 4. What action alternatives should B&D pursue? Black & Decker Corporation (A)

(E) ALIGNING THE ORGANIZATION TO THE MARKET 22. November 20 Reshaping the Organization Reading: 23. November 25 Chapters 10 and 11 of course text

Building a Market-Driven Organization Reading: Case: Questions: 1. How appropriate are the changes initiated by Sony senior management in Europe in response to the evolving market and distribution realities? 2. Assess the reorganization seven months into the implementation: What has been gained or lost? 3. What step should Ron Summer take? Should he appoint Shin Takagi as vice president of consumer marketing Europe? Chapter 12 of the course text Sony Europa (A)

14 24. November 27 Putting It All Together: How Merck Protected Their Share of the Cholesterol Statin Market Speaker: 25. December 2 Jerry Wisler, Vice President, Artheoscleorosis, Merck

Group Presentations Each group will make a presentation of the highlights of their project and the main insights that were gained. Presentations must be no more than 10 minutes.

26. December 4 27. December 9

Group Presentations (continued) Summary: Challenges for Marketing

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