Basics of Marketing Strategy

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CHAPTER 4

The basics of marketingstrategy

ROBIN WENSLEY

Marketing strategy sometimes claims to pro-vide an answer to one of the most difficultquestions in our understanding of competitivemarkets: how to recognize and achieve aneconomic advantage which endures. Inattempting to do so, marketing strategy, as withthe field of strategy itself, has had to addressthe continual dialectic between analysis andaction, or in more common managerial terms

between strategy formulation and strategicimplementation. At the same time, it has alsohad to address a perhaps more fundamentalquestion: how far, at least from a demand or

market perspective, can we ever develop gen-eral rules for achieving enduring economicadvantage.

Strategy: from formulation toimplementation

From the late 1960s to the mid-1980s at least,management strategy seemed to be inevitablylinked to issues of product-market selectionand hence to marketing strategy. Perhaps iron-ically this was not primarily or mainly as aresult of the contribution of marketing scholarsor indeed practitioners. The most significantinitial contributors, such as Bruce Henderson

and Michael Porter, were both to be found at orclosely linked to the Harvard Business School,

but were really informed more by particularaspects of economic analysis: neo-marginaleconomics and Industrial Organizational Eco-nomics respectively. Labelling the intellectualpedigree for Bruce Henderson and the BostonConsulting Group is rather more difficult thanfor Michael Porter. This is partly because muchof the approach developed out of consultingpractice (cf. Morrison and Wensley, 1991) in thecontext of a broad rather than focus notion ofeconomic analysis. Some of the intellectual

pedigree for the approach can be found inHenderson, who was at Harvard also, andQuant (1958), but some basic ideas such asdynamic economies of scale have a muchlonger pedigree (see, for instance, Jones, 1926).However, in various institutions the marketingacademics were not slow to recognize what wasgoing on and also to see that the centrality ofproduct-market choice linked well with theimportance attached to marketing. This expan-sion of the teaching domain had a much lesssignificant impact on the research agenda andactivity within marketing itself, where the focuscontinued to underplay the emerging impor-tance of the competitive dimension (Day andWensley, 1983). Hence the relatively atheor-etical development continued into the process

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54 The Marketing Book

of codification of this new area, most obviouslyin the first key text by Abell and Hammond(1979), which was based on a, by then, well-established second year MBA option at Har-vard. The book itself is clearly influenced by the

work related to the Profit Impact of MarketStrategy (PIMS) project, as well as work inmanagement consultancies such as McKinsey,ADL and, perhaps most importantly, BostonConsulting Group, whose founder, Bruce Hen-derson, had close links with Derek Abell. TheMBA course itself started in 1975 with a broadnotion of filling the gap between what wasseen then as the marketing domain and themuch broader area of Business Policy, soencompassing issues relating to Research andDevelopment, Distribution and CompetitiveCosts. The course itself was a second yearelective and rapidly expanded to four sectionswith a major commitment on development andcase writing in 1976 and 1977. For a morehistorical analysis of the ways in which the casemethod has been used to incorporate newissues in management whilst avoiding somecentral concerns about the nature of power andinfluence, see Contardo and Wensley (2002).

In retrospect, this period was the highpoint for the uncontested impact of competitivemarket-related analysis on strategic manage-ment practice. With the advantage of hindsight,

it is clear that a serious alternative perspectivewas also developing, most obviously signalled

by Peters and Waterman (1982), which was tohave a very substantial impact on what wastaught in strategic management courses andwhat was marketed by consultancies. It wasalso a significant book in the sense that,although not widely recognized as so doing, italso attempted to integrate, at least to somedegree, earlier work by other relevant aca-demics such as Mintzberg (1973), Pettigrew(1973), and Weick (1976).

As the decade progressed, it was inevitablethat, at least to some degree, each side recog-nized the other as a key protagonist. Perhapsone of the most noteworthy comments is that inwhich Robert Waterman challenged the value

of a Michael Porter-based analysis of competi-tion. Waterman (1988) argued that the Porterapproach does not work because people getstuck in trying to carry out his ideas1 for threereasons: the lack of a single competitor, the

actual nature of interfirm co-operation as wellas competition and, finally, the fact that com-petitors were neither dumb nor superhuman.This is a particular, and rather colourful, way ofrepresenting the notion of rational expecta-tions (Muth, 1961; Simon, 1979) in economics,to which we will return later in this chapter.

Equally, the economists have not takensuch attacks lying down: somewhat morerecently, Kay (1993) attempted to wrest back theintellectual dominance in matters of corporatestrategy and Porter (1990) extended his domainto the nation state itself.

The story, of course, has also becomecomplicated in other ways, many of which areoutside the scope of this chapter. In terms ofkey perspectives, Tom Peters has become moreand more polemical about the nature of success(indeed, to the extent of arguing in one inter-view that innovative behaviour now dependson ignoring rather than exploiting marketevidence), C. K. Prahalad has refined hisoriginal notion of dominant logic to reflect ingeneral terms the importance of transferablecapabilities and technological interdependen-

cies in the development of strategic advantage(for instance, see Bettis and Prahalad, 1995;Prahalad and Hamel, 1990; Prahalad and Bettis,1989), whist Gary Hamel, who started his workwith C. K. Prahalad on Strategic Intent (1989),has moved on to espousing radical and revolu-tionary change (2000) and, of course, PeterSenge (1992) reiterated the importance of infor-mation structures, and Hammer and Champy(1993) introduced a new approach labelled

business process analysis.In terms of the disciplinary debate, what

was originally broadly a debate between econ-omists and sociologists now also involves

1 It is noteworthy that the very representation of the five-forces diagram, for instance, is one which emphasizes thatthe firm is under pressure from all sides.



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Production

Development

Finance

Marketing

Sales

Advertising

Distribution

Market

research

Customers

The basics of marketing strategy 55

psychologists, social anthropologists and, ifthey are a distinct discipline, systems theorists.

However, the key change in emphasis has been the one from analysis to process, fromformulation to implementation. Perhaps thesingle most important contributor to thischange has been Henry Mintzberg, who hasdeveloped over the period an extensive critiqueof what he calls the Design School in StrategicManagement, culminating in his 1994 book. Inthis he even challenges the notion of planningin strategy:

Thus we arrive at the planning schools grandfallacy: because analysis is not synthesis, strate-gic planning is not strategy formation. Analysismay precede and support synthesis, by definingthe parts that can be combined into wholes.Analysis may follow and elaborate synthesis, by decomposing and formalising its conse-quences. But analysis cannot substitute forsynthesis. No amount of elaboration will everenable formal procedures to forecast disconti-

nuities, to inform managers who are detachedfrom their operations, to create novel strategies.Ultimately the term strategic planning hasproved to be an oxymoron.

(p. 321)

Whilst his approach and indeed critique ofstrategy analysis is itself rather polemical andoverstated,2 there is little doubt that the generalemphasis in strategic management has shiftedsignificantly towards implementation andaway from formulation and planning.

The nature of the competitive

market environment

As our analysis of marketing strategy hasdeveloped over the last 30 years, so ourrepresentation of the marketing context hasalso changed.

As an example, Figure 4.1 is an overheadwhich the author used 30 years ago in describ-ing the nature of the marketing context. Anumber of major omissions are clear. In partic-ular, there is no recognition of competitors and

Figure 4.1 The early 1970s perspective on the marketing context

2

In fact, Mintzberg himself goes on to argue three rolesfor corporate planning: (1) a more refined approach intraditional contexts; (2) a focus on techniques whichemphasize the uncertain and emergent nature of strategicphenomena; and/or (3) a more creative and intuitive formof strategic planning (see Wensley, 1996a).



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