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The Marketing Implications of Corporate and Business Strategies

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What Is Marketing’s Role in Formulating and Implementing Strategies?The primary strategic responsibility of any

manager is to look outward continuously to keep the firm or business in step with changes in the environment

Marketing managers are primary participants and contributors to the planning process at the business and corporate level

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Market-Oriented ManagementMarketing concept: Holds that the planning

and coordination of all company activities around the primary goal of satisfying customer needs is the most effective means to attain and sustain a competitive advantage and achieve company objectives over time

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Exhibit 2.2 - Guidelines for Market-Oriented Management

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Does Being Market-Oriented Pay?An organization’s success over time hinges on its

ability to provide benefits of value to its customers and to do that better than its competitors

Organizations should be able to enhance, accelerate, and reduce the volatility and vulnerability of their cash flows:By paying careful attention to customer needs and

competitive threats By focusing activities across all functional

departments on meeting those needs and threats effectively

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Factors That Mediate Marketing’s Strategic RoleCompetitive conditions may enable a

company to be successful in the short run without being particularly sensitive to customer desires

Different levels of economic development across industries or countries may favor different business philosophies

Firms can suffer from strategic inertia

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Exhibit 2.3 - Differences between Production-Oriented and Market-Oriented Organizations

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Three Levels of Strategy: Similar Components, but Different IssuesStrategy: A fundamental pattern of present

and planned objectives, resource deployments, and interactions of an organization with markets, competitors, and other environmental factors

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Three Levels of Strategy: Similar Components, but Different IssuesThe components of strategy

ScopeGoals and objectivesResource deploymentsIdentification of a sustainable competitive

advantageSynergy

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The hierarchy of strategiesCorporate strategyBusiness-level strategyFunctional strategies

Three Levels of Strategy: Similar Components, but Different Issues

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Exhibit 2.5 - Key Components of Corporate, Business, and Marketing Strategies

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Exhibit 2.5 - Key Components of Corporate, Business, and Marketing Strategies

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Corporate Scope—Defining the Firm’s MissionA good mission statement guides an

organization’s managers as to which market opportunities to pursue and which fall outside the firm’s strategic domainMarket influences on the corporate missionCriteria for defining the corporate missionSocial values and ethical principles

Ethics: Concerned with the development of moral standards by which actions and situations can be judged

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Exhibit 2.6 - Characteristics of Effective Corporate Mission Statements

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Corporate ObjectivesA performance dimension or attribute soughtA measure or index for evaluating progressA target or hurdle level to be achievedA time frame within which the target is to be

accomplished

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Exhibit 2.8 - Common Performance Criteria and Measures That Specify Corporate, Business-Unit, and Marketing Objectives

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Exhibit 2.8 - Common Performance Criteria and Measures That Specify Corporate, Business-Unit, and Marketing Objectives

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Corporate ObjectivesThe marketing implications of corporate

objectives: Most organizations pursue multiple objectives

Trying to achieve many objectives at once leads to conflicts and trade-offsManagers can reconcile conflicting goals by

prioritizing themAnother approach is to state one of the

conflicting goals as a constraint or hurdle

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Corporate Sources of Competitive AdvantageA sustainable competitive advantage at the

corporate level is based on company resources - resources that other firms do not have, that take a long time to develop, and that are hard to acquire

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Corporate Growth StrategiesA firm can go in two major directions in

seeking future growthExpansion of its current businesses and

activitiesDiversification into new businesses, either

through internal business development or acquisition

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Exhibit 2.9 - Alternative Corporate Growth Strategies

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Corporate Growth StrategiesExpansion by increasing penetration of

current product-marketsExpansion by developing new products for

current customersExpansion by selling existing products to new

segments or countries

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Corporate Growth StrategiesExpansion by diversifying:

Vertical integration Forward vertical integration occurs when a firm

moves downstream in terms of the product flow Backward integration occurs when a firm moves

upstream by acquiring a supplierRelated (or concentric) diversification Unrelated (or conglomerate) diversification

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Allocating Corporate ResourcesTo exploit the advantages of diversification

Corporate managers must make intelligent decisions about how to allocate financial and human resources across the firm’s various businesses and product-markets

Two sets of analytical tools have proven useful in making such decisionsPortfolio models Value-based planning

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Portfolio ModelsEnable managers to classify and review their

current and prospective businesses by viewing them as portfolios of investment opportunities and then evaluating each business’s competitive strength and the attractiveness of the markets it servesThe Boston Consulting Group’s (BCG) growth-

share matrix

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Exhibit 2.10 - BCG’s Market Growth Relative Share Matrix

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Exhibit 2.11 - Cash Flows across Businesses in The BCG Portfolio Model

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Limitations of the Growth-Share MatrixMarket growth rate is an inadequate descriptor of

overall industry attractivenessRelative market share is inadequate as a

description of overall competitive strengthThe outcomes are highly sensitive to variations in

how growth and share are measuredIt provides little guidance on how best to

implement investment strategies for each businessIt assumes that all business units are independent

of one another except for the flow of cash

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Value-Based PlanningA resource allocation tool that attempts to

address such questions by assessing the shareholder value a given strategy is likely to createEconomic value added: The amount of

return a strategy or operating program generates in excess of the cost of capital

Discounted cash flow model

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Exhibit 2.12 - Factors Affecting the Creation of Shareholder Value

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Value-Based PlanningSome limitations of value-based planning

It is not a substitute for strategic planning Good forecasts that are critical to the validity

of value-based planning are difficult to make There are natural human tendencies to overvalue

the financial projections associated with some strategy alternatives and to undervalue others

Value-based planning can only evaluate alternatives, but it cannot create them

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Sources of SynergyKnowledge-based synergies

Performance enhancement through transfer of competencies, knowledge, or customer-related intangibles from other units within the firm

Corporate identity and the corporate brandCorporate identity flows from the

communications, impressions, and personality projected by an organization

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The Marketing Implications of Business-unit Strategy DecisionsStrategic business units: Components of a

firm engaged in multiple industries or businesses

Steps in developing business-level strategiesDeciding how to divide into SBUsManagers must recommend:

The unit’s objectives The scope of its target customers and offerings Which broad competitive strategy to pursue How resources should be allocated

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How Should Strategic Business UnitsBe Designed?Characteristics of strategic business units

A homogeneous set of markets to serve with a limited number of related technologies

A unique set of product-marketsControl over those factors necessary for

successful performanceResponsibility for their own profitability

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How Should Strategic Business UnitsBe Designed?Dimensions that define the scope and mission

of the entire corporation also define individual SBUsTechnical compatibilitySimilarity in the customer needsSimilarity in the personal characteristics

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The Business Unit’s ObjectivesCorporate objectives typically broken

down into subobjectives for each SBUBreaking down an SBU’s objectives into

subobjectives for each of its productmarket entries is often a major part of developing business-level strategy

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The Business Unit’s Competitive StrategyDecisions about an SBU’s scope Allocating resources within the business unitGaining a competitive advantageMarketing resources and competitive

advantage

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Exhibit 2.13 - Three Competitive Strategies and the Traits and Competencies of Businesses That Implement Them Effectively