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McGraw-Hill/Irwin 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
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Chapter One
Market-Driven Strategy
McGraw-Hill/Irwin
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MARKET-DRIVEN STRATEGY
Market-Driven Strategy
Becoming Market Oriented Distinctive Capabilities Creating Value for Customers Becoming Market Driven Challenges of a New Era for Strategic Marketing
MARKET-DRIVEN STRATEGY
All
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business strategy decisions should start with a clear understanding of markets, customers, and competitors. market and the customers that form the market should be the starting pint in shaping business strategy.
The
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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
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Determine
the impact of changes on customer satisfaction Increase the rate of product innovation Pursue strategies to create competitive advantage
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Market Orientation
Information Acquisition
Gather relevant information on customers, competition, and markets Involve all business functions
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Intuits Quicken
Inter-functional Assessment
Share information and develop
action
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.
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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 carriers 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-topoint services offered on a frequent basis. Assets Southwests key assets are very low operating costs, loyal customer base, and high employee esprit de corps
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Capabilities
Disproportionate (higher) contribution to superior customer value
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Capabilities
Desirable Capabilities
Difficult to Duplicate
Source: George S. Day, Journal of Marketing, October 1994, 49.
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Types of Capabilities
Outside-In Processes
Spanning Processes
Inside-Out Processes
Organizations Process
EXTERNAL EMPHASIS Outside-In Processes Spanning Processes
Market sensing Customer linking Channel bonding Technology monitoring Customer order fulfillment Pricing Purchasing Customer service delivery New product/service development Strategy development
Source: George S. Day, Journal of Marketing, October 1994, 41.
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Financial management Cost control Technology development Integrated logistics Manufacturing/ transformation processes Human resources management Environment health and safety
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Distinctive Capabilities
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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.
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Benefits
Costs
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Value Composition
Product
Services
Employees
Benefits
Image
Value (gain/loss)
Monetary costs
Time
Psychic and physic costs
Costs (sacrifices)
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MARKET-DRIVEN STRATEGIES
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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
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Ethical Challenges
Escalating Globalization
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It is important to understand the differences (and similarities) between the developed economies and the new world beyond. Market opportunities Competitive threats Partnering opportunities Outsourcing initiatives The worlds poor
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Finland was ranked #1 in global competitiveness in 2004 by the World Economic Forum because of strong skills in adapting to new technology, proactive business practices, and nurturing a culture of innovation (www.weforum.org).
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