MARKET-DRIVEN STRATEGY

Transcription

1 CHAPTER MARKET-DRIVEN STRATEGY Market-Driven Strategy Becoming Market Oriented Distinctive Creating Value for Customers Becoming Market Driven Challenges of a New Era for Strategic Marketing MARKET-DRIVEN STRATEGY All business strategy decisions should start with a clear understanding of markets, customers, and competitors. The market and the customers that form the market should be the starting pint in shaping business strategy. 2 1

2 1-3 Characteristics of a Market- Driven Strategy Becoming Market- Oriented Achieving Superior Performance Determining Distinctive Matching Customer Value/ Requirements to 3 Why Pursue a Market-Driven Strategy? Strong supporting logic 1-4 Achievements of companies displaying market-driven characteristics are impressive Examples include: Dell Inc. Louis Vuitton Southwest Airlines Tesco Tiffany & Co. Wal-Mart Zara 4 2

3 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? Competition 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

4 1-7 Becoming a Market-Oriented Organization Information Acquisition Gather relevant information on customers, competition, and markets Involve all business functions Intuit s Quicken Cross-functional Assessment-analysis of information Share information and develop innovative products with people from different functions Zara Shared diagnosis and coordinated action Delivery of superior customer value 7 DETERMINING DISTINCTIVE 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. 1-8 George S. Day, Journal of Marketing, October 1994, p

5 1-9 Southwest Airline s Distinctive 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 Desirable Applicable to Multiple Competition Situations Superior to the Competition Difficult to Duplicate Source: George S. Day, Journal of Marketing, October 1994,

6 EXTERNAL EMPHASIS Classifying process capabilities INTERNAL EMPHASIS 1-11 Outside-In Processes Spanning Processes Inside-Out Processes Market sensing Customer linking Channel bonding Technology monitoring Customer order fulfillment Pricing Purchasing Customer service delivery New product/service development Strategy development Financial management Cost control Technology development Integrated logistics Manufacturing/ transformation processes Human resources management Environment health and safety Source: George S. Day, Journal of Marketing, October 1994, Classifying process capabilities The outside-in processes connect the organization to the external environment, providing market feedback and forging external relationships. The inside-out processes are the activities necessary to satisfy customer value requirements (e.g., manufacturing/operations). The outside-in processes play a key role in offering direction for the spanning and inside-out capabilities, which respond to the customer needs and requirements identified by the outside-in processes. The organizational process view of distinctive capabilities requires shifting away from the traditional organization of business functions toward a cross-functional process perspective. Source: C. K. Troy, The Conference Board Inc., 1996,

7 Matching Customer Value and Distinctive 1-13 Value Requirements Distinctive 13 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,

8 Value Composition 1-15 Product Services Employees Image Monetary costs Time Psychic and physic costs Benefits Costs (sacrifices) Value (gain/loss) 15 BECOMING MARKET DRIVEN 1-16 Market Sensing MARKET-DRIVEN STRATEGIES Customer Linking 16 8

9 Becoming Market Driven 1-17 A. Market Sensing Effective processes for learning about markets Sensing: Collected information needs to be shared across functions and interpreted to determine proper actions. B. Customer Linking Create and maintain close customer relationships 17 Becoming Market Driven 1-18 C. 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 18 9

10 CHALLENGES OF A NEW ERA FOR STRATEGIC MARKETING Strategic marketing faces unprecedented challenges and opportunities: Turbulent markets Intense competition Escalating customer demands Ethical Challenges Societal and Global Change Social Responsiveness of Organizations i. Escalating Globalization ii. Technology Diversity and Uncertainty iii. Ethical Behavior and Social Responsiveness i. Escalating Globalization 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 world s poor 20 10

11 ii. Technology Diversity and Uncertainty Radical New Product Opportunities Nanotechnology Private space travel The digital home Self-cleaning windows 1-21 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 ( iii. Ethical Behavior and Social Responsiveness Increasingly demanding ethical challenges Corporate responsibility Responsibilities to stakeholders Review Questions Define the market-driven strategy. List the characteristics of the market-driven strategy and list and discuss the steps to become a market-oriented organization