7/21/2015 8:31:00 AM. Look at learning goals for test

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1 7/21/2015 8:31:00 AM Look at learning goals for test Market-orientated perspectives underlie successful corporate, business and marketing strategies -case study in chapter re Samsung s re-branding into a sophisticated and innovative brand -most businesses, particularly larger corporations with multiple divisions or business units pursue a hierarchy of interdependent strategies Corporate strategy provides direction on the businesses mission, the kinds of it businesses it should be in, and its growth policies Business level strategy addresses how a business will compete in its industry Marketing strategy fundamental decisions about how to divide the market into segments, which segments to target, what goods and services to offer each market, what promo tools and appeals to employ, and what prices to charge -need to consider external factors such as C needs and desires, challenges from competitors, and opportunities and threats -need to know companies own strengths and weaknesses Market orientated businesses those that systematically incorporate such market and competitive analyses into their planning process. Coordinate activities around the primary goal of satisfying C needs Shown to be more profitable and have maintain strong competitive positions over time Strategic issue The marketing obj and strat for a product-market entry must be achieveable with resources and capabilities, and consistent with direction and allocation of resources within business s corporate and business-level strategies What is a strategy? Strategy fundamental pattern of present and planned obj, resource deployments and interactions of an org with markets, competitors, and other environmental factors 1. What objectives 2. Where industries/products 3. How resources and activities Components of strategy Scope breadth of the strategic campaign

2 Number and type of industries, product lines and market segments it competes in/plans to enter Needs to reflect management s view of the businesses purpose/mission Goals and objectives should detail desired levels of accomplishment on 1+ dimensions of performance (such as volume growth, profit contribution or ROI), for a time period C/C+ objective o To increase market share of the Windows Phone by 20%. A/A+ objective o To increase market share of the Windows Phone among NZ business users (measured as a percentage of all smartphone sales among all users on a business contract) from 10% to 30%, by 30 September NB: SMART objectives should tie into KPIs (Key Performance Indicators) Resource deployments every org has limited financial and human resources. Making a strategy must decide how resources are obtained and allocated Identification of sustainable competitive advantage specify how the business will compete in each business and product market within its domain, and where it s advantage will be compared to competition Synergy when organisation s businesses, product markets, resource deployments and competencies complement and reinforce one another The hierarchy of strategies 1. Corporate strategy; 2. Business-level strategy; and 3. Functional strategies Unilever Example Corporate level (e.g. Unilever) o Business portfolio o Investment decisions o Creating superior stakeholder value SBU level (e.g. Home & personal care) o Business unit o Competitive/ organisational decisions o Creating superior customer value Product level e.g. (Dove, Rexona etc) o Departments o Product & brand decisions

3 Corporate strategy -managers must coordinate the activities of multiple business units, and/or separate legal business entities -consider what business(es) are we in what should we be in what portion of our total resources should we devote to each of these businesses -attempts to develop and maintain competencies at this level focus on generating superior human, financial and technologies resources; designing effective org structures; and seeking synergy among the company s various businesses Component Scope Goals and obj Resources Comp adv Synergy Corp strat -what businesses to be in -corp development strat -conglomerate diversification (move into unrelated businesses) -vertical integration -acquisition and divestiture -overall corp obj across businesses -revenue growth -profitability -ROI -earnings per share -contr to other stakeholders -allocation among businesses -allocation across functions shared by multiple businesses -normally through superior financial or human rsources; R+D; org processes or synergies relative to competitors -shared resources, tech or functional competencies Business-level -major concern is sustainable competitive advantage -what competencies can give a competitive adv -which competencies best match the businesses target segments -also consider scope how many and which segments to compete in

4 -finally, requires synergy across product markets and functional departments Component Scope Goals and obj Resources Comp adv Synergy Business strat -what product markets to be in -business dev strat -concentric diversification (new products for existing C or new C for existing products) -constrained by corp goals -objectives aggregated across product-market entries -sales growth -new product/market growth -profitability -ROI -cash flow -strengthen base of comp adv -allocation among product-market entries -across functional dept -primarily through competitive strategy -shared resources or functional competencies across product markets within an industry Marketing strategy -primary focus is to effectively allocate and coordinate marketing resources and activities to accomplish the businesses obj within a specific market -seek competitive adv and synergy via the 4Ps tailored to wants and needs of potential customers Component Scope Goals and obj Corp strat -TM definition -product line depth and breadth -branding policies -product-market development plan -line extn and product elimination plans -constrained by corp and business goals -obj for a specific product-market entry -sales -market share

5 Resources Comp adv Synergy -contr margin -customer satisfactio -allocation across components of the marketing plan (elements of the MM) -through effective positioming -shared resources, competencies of activities Market orientated management Marketing concept planning and coord of all business activities around the goal of satisfying C needs is the most effective means to attain and sustain competitive advantage and achieve objectives -focus on C needs and competitive circumstance -willingness and ability to quickly adapt to changes in the env -needed detailed and up to date info-sys -frequent feedback from and coordinating plans with key customers and major suppliers -decentralised strat decisions Guidelines for market-orientated management 1. Customer focus through whole business 2. Listen to C 3. Define and nurture competence 4. Define marketing and marketing intelligence 5. Target C precisely 6. Manage for profitability, not sales vol 7. Make c value the guiding star 8. Let the c define quality 9. Measure and manage C expectations 10. Build C r/s and loyalty 11. Define the business as a service business 12. Commit to continuous improvement and innov 13. Manage culture along with strat and structure 14. Grow with partners and alliances 15. Destroy marketing bureaucracy -sometimes customers cannot articulate what they want -organisations can lead consumers to what they want; they are not always aware of what s possible -paying too much attention to C could stifle creativity

6 -with regards to R+D, there are two components Basic research involving science and tech that C would not understand Development where the consumer s uses of the product must be considered -profitability is also another part of the marketing concept (along with customer focus and cross-functional coord) Factors that mediate marketing s strategic role -competitive conditions may enable a business to be successful in the short run w/o being sensitive to C desires As industries grow they become more competitive As industries mature, and sales levels off, tech differences between products disappear, as manu copy the best features of their competitors -different levels of econ development across countries or industries may favour diff philosophies -businesses can sffer from strategic inertia the automatic continuation of strats successful in the past, even though current market conditions are changing A business that achieved success in the past by being in tune with its env loses touch with its market because managers become reluctant to tamper with strats and marketing programs that worked in the past Business activity/function Product orientation Marketing orientation Product offering Sells what it can make; focus on functional performance Makes what it can sell; focus on needs and market ops and cost Product line narrow broad Pricing Based on product and distr Based on perceived bene costs research Tech research; focus on product improvement and cost cutting Market research; finding new ops and applying new tech packaging Protection and minimise cost Designed for C convenience; promo Credit Necessary evil; minimise bad For C service debt losses promo Emphasis on product features, quality and price Emphasis on bene and ability to satisfy needs

7 Recent developments affecting the strat role of marketing -inertia will be even more dangerous in many industries because they are facing increasing magnitudes and rates of change in their env Globalisation international markets account for a large and growing proportion of sales of many organisations Differences in market and competitive conditions across boundaries may require adaptions Even for similar countries, there may be differences with infrastructure, legal systems and culture Increase importance of service including financing, delivery, installation, user training and assistance, and maintenance Ancillary services have become more critical to continued success These benefits can justify higher prices and margins (in the ST) and help improve retention, satisfaction and loyalty (LT) Information technology Make it possible for businesses to collect and analyse more detailed info re potential customers and their needs, preferences and buying habits; can help ID more specific and small TM new channels for communication and transactions Relationships across functions and businesses Do not want discrete series of arm s length, adversarial exchanges with C/channel mems etc; want LT r/s Gains benefits from lower costs and increases in LTV of C -in light of these changes, many businesses will have to become market-orientated to succeed and prosper -however marketing activities should not just be carried out by mktg managers in dif functional departments; marketing will become part of everybody s business Formulating and implementing marketing strategy an overview Analysis comes first the 4 Cs -need to focus on the company s internal resources/capabilities/strats the environmental context (social/econ/tech trends) the strengths and weaknesses of competitors the needs/wants/characteristics of current and potential customers

8 Integrating marketing strat with the company s other strategies and resources -MM s job requires monitoring and analysing C s needs and wants and emerging ops and threats posed by C and trends in the ext environment -all levels of strat must consider such factors, and thus marketing plays a major role in providing inputs, and development of corp and business strats Market opportunity analysis -major factor in success at all 3 levels is whether the strat elements are consistent with the realities of the businesses ext env and its own capabilities and resources Understanding market opportunities -may requires an examination of the external environment including markets served and industry the business is in -must then look at broad macro issues, such as env trends that are driving or constraining market demand Measuring market opportunities -understanding overall attractiveness, versus evidence based forecasting are very different Market segmentation, targeting and positioning decisions -not all C with similar needs seek the same products or services to satisfy those needs -purchase decisions may be driven by indiv preferences, personal characteristic, social circumstances etc -must divide C into market segments; select a marketing segment; and then position the product to that segment Implementation -the final critical determinant of a strategy s success -depends whether the strat is consistent with the resources, org structure, coordination and control systems and the skills and experience of business personnel -must consider if objectives are met, and the program must be changed if results are disappointing the marketing plan a blueprint for action Marketing plan written doc detailing the current sitch with respect to C, competitors and the ext environment, and providing guidelines for obj, marketing actions, and resource allocations over the planning period for either an existing or proposed product/service

9 -having written plans are important for concrete histories, aiding org memory and helping new managers Contents of a marketing plan Section content Exec summ Short overview of issues, obj, strat, and actions Current sitch and Summarises relevant bckg info on the market, competition and trends macroenvironment and trends therein, including size an growth rates Performance Examines past performance review Key issues Main ops and threats to the product that the plan must deal with, and relative str and weaknesses of the product and business unit that must be taken into account Obj Goals to be accomplished (in terms of sales vol, market share and profit) Marketing strat Summarises the overall strat approach that will be used to meet the plan s objectives Action plans The most critical section of the annual plan for helping to ensure effective implementation and coordination of activities across functional dept. It specifies: -TM/ -actions re the 4Ps -who is responsible for each action -when the action will be engaged in -how much is budgeted for each action Projected profit Expected financial pay-off from the plan and loss statement Controls Discusses how the plan s progress will be monitored; may present contingency plans to be used if performance falls below or rises above expectations/sitch changes Contingency -actions to be taken if specific threats/ops materialise during planing plans

10 7/21/2015 8:31:00 AM Corporate Strategy Decisions and their marketing implications Scope//Obj//Comp Adv//Corp Dev Strategy//Resource Allocation//Synergy Corporate Scope: defining the business s mission -a well thought out mission statement guides an org s managers as to which market ops to pursue and which fall outside the business s strat domain -must fit both internal characteristics, as well as external ops and threats should be compatible with established values, resources and distinctive competencies; as well as markets where resources and competencies will generate greater value for Cs -defining an org s strat mission is v important consider Theodore Levitt and the railroad business idea being a failure best to consider customer needs and how they will be satisfied -characteristics of effective corp mission statements Broad Specific Functional (C needs) Transportation business Long-distance transportation for largevolume producers of lowvalue, low-density products Physical (existing products/tech) Railroad business Long-haul, coal-carrying railway upper right is most useful as it focuses on customer need to be satisfied, functions that must be performed to satisfy, which are specific to the C groups and products/technologies -increasing important of social and ethical boundaries of the strategic domain sustainability ad ethical codes are very important Why are ethics important? -unethical practices can damage the trust between a business and its suppliers and/or customers, thereby disrupting the development of LT exchange r/s and resulting in the likely loss of sales and profits over time -not all suppliers and customers comply to the same ethical standards -some feel that not paying bribes will reduce competitive advantage Corporate Objs -formal obj provide decision criteria that guide an org s business units and employees toward specific dimensions and performance levels -must contain

11 a performance dimension or attribute sought measure or index for eval progress target or hurdle level to be achieved time frame Enhancing shareholder value: the ultimate objective -many believe that the ultimate goal is to increase shareholders economic returns (dividends + appreciation in share price) -this is done by balancing interests of various corporate constituencies, including E, C, S, debt holders, and shareholders -if a business cannot satisfy its constituent s financial claims, it ceases to be viable -ability to attain debt financing is dependent on cash flow projections; and ability to attain equity financing is dependent on investor s expectations of the firm s future cashgenerating abilities thus management s primary objective should be to pursue capital investments, acquisitions and strategies that will produce sufficient CF to return positive value to s/h -recently, execs have started measuring obj in market value added (MVA) debt and market value of its shares, less invested capital -do not have narrow focus on ST-financial, shareholder value objectives; may ignore C and sustaining a comp adv Common performance criteria Performance Criteria Measures/indexes Growth $ sales, unit sales, % change in sales Competitive strength Market share, brand aw, brand pref Innovativeness $ sales from new g/s, % sales from product-market entries from within last 5 years, percentage cost savings from new processes Profitability $ profits; profit as a % of sales; contribution margins; ROI; RO Net Assets; RO Equity Use of resources % capacity use; fixed assets as a % of sales Contribution to owners Earnings per share, price/earnings ratio Contribution to C Price compared to C; product quality; customer satisfaction; customer retention; customer loyalty; C LTV Contribution to E Wage rates, bene, personnel development, promotions, stability/turnover Contribution to society $ to charity/community orgs; growth in employment

12 Marketing implications of corp obj -in the LT, C value and S/h value converge; a business can continue to provide attractive returns to s/h only as long as it satisfies and retains its C -most orgs have more than one objective; which leads to conflicts and trade-offs can priorities objectives, or state one of them as a constraint/hurdle in companies with multiple business units or product lines, the most common way is to break them down into subobjectives, and the assign these to different units or products -as businesses emphasise the development and maintenance of LT C r/s, customer-focused obj are being given greater emphasis; and are likely to be consistently pursued across business units and offerings. This is b/c b/c C LTV has large profit implications, maximising satisfaction and loyalty seems to make good sense loyal customers can be leveraged to provide synergies for other business g/s C satisfaction and loyalty are influenced by factors other than the product itself or the activities of the marketing department Gaining a competitive advantage -may be based on the fact that a co. has resources its competition does not however, this is not sufficient to guarantee superior performance -need to develop a competitive strat for each division or business unit within the business, and a strategic marketing program for each of its product-market entries, that convert 1+ unique resources into something of value to C -need superior benefits at a similar cost; or similar benefits at a lower cost this needs to be actively communicated to the C Corporate Growth Strategies Current Markets New markets Current Product Market penetration -increase market share -increase usage/frequence of use/quantity used -new applications Market development -expand markets for existing products -geo expansion New Products Product dev -prod improvements -product line extn -new products for same market Diversification -vertical/forward/backward integration -diversification into related

13 -target new segs business (concentric) -diversification into unrelated business (conglomerate) -a business can go in two major directions when seeking future growth: expansion of its current businesses and activities or diversification into new businesses Expansion by increasing penetration of current product markets -even if a commanding share of the product market is held, additional growth is possible Expansion by developing new products for current customers -likely to be successful if the new products use the same distr channels and can be promoted using the same media Expansion by selling existing products into new segments/countries -potentially the strat with the greatest potential -may be aimed at non-users or occasional-users Expansion by diversifying -this is typically riskier -vertical integration (forward and backward) Related (concentric) diversification internally develops or acquires another business that does not have products or C in common Unrelated (conglomerate) usually financial, rather than operational. No common products, C, production facilities, or functional ares of expertise. Usually if a disproportionate # of the company s businesses are facing decline Expansion by diversifying through org r/s or networks -recently, businesses have attempted to gain some benefits of market expansion or diversification while simultaneously focusing more intensely on a few core competencies try to accomplish this by forming r/s or org networks with other businesses instead of acquiring ownership -coopetition simultaneous comp and coop b/w firms may jointly invest in R+D, and then compete heavily marketing wise coop allows EoS and customer value; while competition pushes for efficiency and innovation