Marketing Management Ch2....

ESLSCA COLLEGE

09

Chapter Two Marketing Management

Mohamed Kadri

Mo

M

D

ohamed

arketi

The ta

Thevaluecontinues

Nirmalya(1)Define(2)define(3)DefineDartmout(1)Valueanalysis),(2)Valuesourcings(3)Valuedistributio

TheValueDeliveryProce

(Chapt

Kadri/T

ingan

ask of any

edeliveryswhileiti

aKumarhaethevalueethevalueethevalueth'sFrededefiningpdevelopinstrategy,adeliveringon).

ess TheV

ter 2) M

Trainer

ndCus

business i

THE V

processbsbeingde

asputforesegmenepropositenetworkerickWebprocesses

ngprocessandvendogprocesse

alueChain

Marketin

2

tomer

is to deliv

VALUE DEL

eginsbefoevelopeda

tha"3Vstorcustotion;kthatwillsterviewss(e.g.,ma

ses(e.g.,norselectioes(e.g.,ad

CoreCompeten

ng Man

rValue

er custom

LIVERY PRO

orethereandafter

s"approacomers(and

deliverthsmarketinrketresea

newprodon),dvertising

ncies OrCu

ageme

e

mer value a

OCESS

isaproduitbecome

chtomardhis/hern

hepromisengintermarchandc

uctdevelo

gandman

AHolisticMarketingientationandstomerValue

ent

4May

at a profit.

uctandesavailabl

rketing:needs);

edservicemsof:companys

opment,

aging

de

ThecenofStrPlan

2009

le.

e

self

ntralRolerategicnning

(Chapter 2) Marketing Management

MohamedKadri/Trainer4May2009

3

THE VALUE CHAIN

MichaelPorterofHarvardhasproposed thevaluechainasa tool foridentifyingwaystocreatemorecustomervalue.

Thevaluechainidentifiesninestrategicallyrelevantactivitiesthatcreatevalueandcostinaspecificbusiness.Theseninevaluecreatingactivitiesconsistoffiveprimaryactivitiesandfoursupportactivities.

Theprimaryactivitiescoverthesequenceofbringingmaterialsintothebusiness( inbound logistics), converting them into final products



4

(operations),shippingoutfinalproducts(outboundlogistics),marketingthem(marketingandsales),andservicingthem(service).

Thesupportactivitiesprocurement,technologydevelopment,humanresourcemanagement,andfirminfrastructurearehandledincertainspecializeddepartments.The firm's infrastructure covers the costs of general management,planning,finance,accounting,legal,andgovernmentaffairs.

Thefirm'staskistoexamineitscostsandperformanceineachvaluecreatingactivityandtolookforwaystoimproveit.

Managers should estimate its competitors' costs andperformances asbenchmarksagainstwhichtocompareitsowncostsandperformance.

The firm's success depends not only on how well each department performs its work, but also on how well the various departmental activities are coordinated to conduct core business processes.

8 These core

business processes include:

1. The market sensing process. All the activities involved in gathering market intelligence, disseminating it within the organization, and acting on the information.

2. The new offering realization process. All the activities involved in researching, developing, and launching new high-quality offerings quickly and within budget.

3. The customer acquisition process. All the activities involved in defining target markets and prospecting for new customers.

4. The customer relationship management process. All the activities involved in building deeper understanding, relationships, and offerings to individual customers.

5. The fulfillment management process. All the activities involved in receiving and approving orders, shipping the goods on time, and collecting payment.

Strong companies are also reengineering the work flows and building cross-functional teams responsible for each process. At Xerox, a Customer Operations Group links sales, shipping, installation, service, and billing so that these activities flow smoothly into



5

one another. Winning companies are those that excel at managing core business processes through cross-functional teams.

To be successful, a firm also needs to look for competitive advantages beyond its own operations, into the value chains of suppliers, distributors, and customers. Many companies today have partnered with specific suppliers and distributors to create a superior value delivery network also called a supply chain.

CORE COMPETENCIES

Many companies today outsource less critical resources if they can be obtained at better quality or lower cost.

The key, then, is to own and nurture the resources and competencies that make up the essence of the business.

A core competency has three characteristics: 1. It is a source of competitive advantage in that it makes a significant

contribution to perceived customer benefits, 2. It has applications in a wide variety of markets, 3. It is difficult for competitors to imitate.

Competitive advantage also accrues to companies that possess distinctive capabilities. Whereas core competencies tend to refer to areas of special technical and production expertise, distinctive capabilities tend to describe excellence in broader business processes.

George Day sees market-driven organizations as excelling in three distinctive capabilities: market sensing, customer linking, and channel bonding.

Heoffersa systematicprocess fordevelopingperipheralvision,andpractical tools and strategies for building vigilant organizationattunedtochanges intheenvironment,byaskingquestions inthree

Mo

ohamed

categor

Tab

Lea

Wbepasp

winanotinof

winskpiwanth

(Chapt

Kadri/T

ries.

le 2.1 B

arningfthepas

Whathaveenourastblindpots?hatstructivnalogiestherdustriesffer?hointhdustryikilledatckingupeaksignndactinhem?

ter 2) M

Trainer

Becom

romst

ve

d

vesdo

s

heis

pnalgon

Marketin

6

ing a V

Evalup

Whimpsignweratiawa

Whmavoutcomandtell

whapercusandthin

ng Man

Vigilan

uatingtpresent

hatportantnalsare

onalizinay?hatareovericks,tliers,mplainerddefectingus?atareoripheraltomersdreallynking?

ageme

nt Orga

he

ng

our

rs,ors

ur

ent

4May

anizatio

Envisthe

Whatsurprcouldhurtus?

Whatemertechncouldtheg

Istheunthscenamigh

2009

on

sioningfuture

tfuturerisesdreallyorhelp

trgingnologiesdchangegame?ereaninkableariothatdis

se

t



7

Competitive advantage ultimately derives from how well thecompany has fitted its core competencies and distinctivecapabilitiesintotightlyinterlocking"activitysystems."

Business realignment may be necessary to maximize corecompetencies.Ithasthreesteps:

1. (Re)definingthebusinessconceptorbigidea.2. (Re)shapingthebusinessscope.3. (Re)positioningthecompanysbrandidentity.

A HOLISTIC MARKETING ORIENTATION AND CUSTOMER VALUE

FIG. 2.1 A Holistic Marketing Framework



8

THE CENTRAL ROLE OF STRATEGIC PLANNING

Marketingorientedcompaniesfocusonthecustomerandareorganizedtorespondeffectivelytochangingcustomerneeds.

To ensure that they select and execute the right activities.Marketersshouldgiveprioritytostrategicplanningisinthreekeyareas:

1. Managing a company's businesses as an investmentportfolio.

2. Assessing each businesses strength by considering themarket'sgrowthrateandthecompany'spositionandfitinthatmarket.

3. Establishingastrategy.

The marketing plan is the central instrument for directing andcoordinatingthemarketingeffort.Themarketingplanoperatesattwo levels: strategic and tactical. The strategic marketing planlaysoutthetargetmarketsandthevaluepropositionthatwillbeoffered,basedonananalysisofthebestmarketopportunities.Thetacticalmarketingplan specifies themarketing tactics, includingproduct features, promotion, merchandising, pricing, saleschannels,andservice.

Mo

Co

1.D2.E3.A4.A

C

ohamed

FIG 2.

orpora

AllcDefiningtEstablishinAssigningAssessing

DefiningThe

CorporateMission

(Chapt

Kadri/T

.2 The

atean

corporatehecorporngstrategresourcesgrowtho

EstablisSBU

ter 2) M

Trainer

Strateand C

dDivi

headquarratemissiogicbusinesstoeachSpportunit

shingU

Marketin

9

gic PlaContro

isionS

rtersundeonssunitsSBUies

AssigningResourcestoeachSBU

ng Man

anning,ol Proc

Strateg

ertakefou

AssessGrowOpport

ities

ageme

, Implecess

gicPla

rplanning

singwthtuns

Organ

Organal

ent

4May

ementa

anning

gactivities

anizationandanizatioCulture

MIn

2009

ation

g

s:

Marketingnnovation



10

DEFINING THE CORPORATE MISSION

Anorganizationexiststoaccomplishsomething:tomakecars,lendmoney,provideanight'slodging,andsoon.

Over time the mission may change, to take advantage of newopportunitiesorrespondtonewmarketconditions.

Todefine itsmission,acompanyshouldaddressPeterDrucker'sclassic questions: What is our business? Who is the customer?Whatisofvaluetothecustomer?Whatwillourbusinessbe?Whatshouldourbusinessbe?

Organizations develop mission statements to share withmanagers, employees, and (in many cases) customers. A clear,thoughtfulmission statement provides employeeswith a sharedsenseofpurpose,direction,andopportunity.

Missionstatementsareat theirbestwhen they reflectavision,an almost "impossible dream" that provides a direction for thecompanyforthenext10to20years.

o Sony's formerpresident,AkioMorita,wantedeveryone tohaveaccess to"personalportablesound,"sohiscompanycreatedtheWalkmanandportableCDplayer.

o FredSmithwanted todelivermailanywhere intheUnitedStatesbefore10:30A.M.thenextday,sohecreatedFedEx.Table2.1givesexamplesofthreemissionstatements.

o GoogleMission is toorganize theworlds informationandmakeituniversallyaccessibleanduseful.

Goodmissionstatementhavefivemajorcharacteristics:1. Theyfocusonalimitednumberofgoals.2. Theystressthemajorcompanysmajorpoliciesandvalues.

Mo

ohamed

3. Thecom

4. The5. The

CompaTheya

(Chapt

Kadri/T

ey definempany

eytakealeyhaveto

E

aniesareoareinthe

Industry

ter 2) M

Trainer

e the maj

longtermobeshort

ESTABLISHI

oftendefiautoBus

ProductsApplicati

Marketin

11

jor comp

mview.t,memora

NG STRATE

ningtheirsinessor

andion Com

ng Man

petitive spwill

ableandm

EGIC BUSI

rbusinessthecloth

Spher

mpetence M

ageme

phere wit

meaningfu

INESS UNIT

intermohingbusin

res

MarketSegment

ent

4May

thin whicop

ulasposs

TS

ofproductess.

t Vertical(ChLevel)

2009

ch theperate

ible.

s.

annel) Geog

graphical



12

ButHarvardsfamedmarketingprofessorTedLevittarguedthatmarketingdefinitionofabusinessaresuperiortoproductdefinitions.Inotherwords,companiesmustseetheirbusinessasaconsumersatisfyingprocess,notagoodsproducingprocess.Productsaretransient;basicneedsandcustomergroupsendureforever.

IBM redefined itself from a hardware and software manufacturer to a "builder of networks." Table 2.3 gives several examples of companies that have moved from a product to a market definition of their business.

It highlights the difference between a target market definition and a strategic market definition.

TABLE 2.3 Product-Oriented Versus Market-

Oriented Definitions of a Business



13

A target market definition tends to focus on selling a product or service. Pepsi could define its target market as everyone who drinks a cola beverage and competitors would therefore be other cola companies. A strategic market definition could be everyone who might drink something to quench his or her thirst. Suddenly, Pepsi's competition would then include non-cola soft drinks, bottled water, fruit juices, tea, and coffee. To better compete, Pepsi might decide to sell additional beverages whose growth rate appears to be promising.

A business can be defined in terms of three dimensions: customer groups, customer needs, and technology. Consider a small company that defines its business as designing incandescent lighting systems for television studios. Its customer group is television studios; the customer need is lighting; and the technology is incandescent lighting. The company might want to expand. It could make lighting for other customer groups, such as homes, factories, and offices; or it could supply other services needed by television studios, such as heating, ventilation, or air conditioning. It could design other lighting technologies for television studios, such as infrared or ultraviolet lighting.

Large companies normally manage quite different businesses, each requiring its own strategy. General Electric classified its businesses into 49 strategic business units (SBUs). An SBU has three characteristics:

1. It is a single business or collection of related businesses that can be planned separately from the rest of the company. 2. It has its own set of competitors. 3. It has a manager who is responsible for strategic planning and profit performance and who controls most of the factors affecting profit.

The purpose of identifying the company's strategic business units is to develop separate strategies and assign appropriate funding.

ASSIGNING RESOURCES TO EACH SBU

Once it has defined SBU, Management must decide how to allocate corporate resources to each.

ASSESSING GROWTH OPPORTUNITIES



14

Assessing growth opportunities involves planning new businesses, downsizing, or terminating older businesses.

If there is a gap between future desired sales and projected sales, corporate management will have to develop or acquire new businesses to fill it.

Figure 2.3 illustrates this strategic-planning gap for a major manufacturer of blank compact disks called Musicale (name disguised). The lowest curve projects the expected sales over the next five years from the current business portfolio. The highest curve describes desired sales over the same period. Evidently, the company wants to grow much faster than its current businesses will permit. How can it fill the strategic-planning gap?

The first option is to identify opportunities to achieve further growth within current businesses (intensive opportunities). The second is to identify opportunities to build or acquire businesses that are related to current businesses integrative opportunities). The third is to identify opportunities to add attractive businesses that are unrelated to current businesses (diversification opportunities).

FIG 2.3 The Strategic Planning Gap

(1) INTENSIVE GROWTH Corporate management's first course of action should be a review of opportunities for improving existing businesses.



15

Ansoff proposed a useful framework for detecting new intensive growth opportunities called a "product-market expansion grid" (Figure 2.4)

FIG 2.4 Three Intensive Growth Strategies Ansoffs Product- Market Expansion Grid

The company first considers whether it could gain more market share with its current products in their current markets (market-penetration strategy). Next it considers whether it can find or develop new markets for its current products (market-development strategy). Then it considers whether it can develop new products of potential interest to its current markets (product-development strategy). Later it will also review opportunities to develop new products for new markets (diversification strategy).

(2) INTEGRATIVE GROWTH

A business's sales and profits may be increased through backward, forward, or horizontal integration within its industry.

How might Musicale achieve integrative growth? The company

might acquire one or more of its suppliers (such as plastic material producers) to gain more control or generate more profit (backward integration). It might acquire some wholesalers or retailers, especially if they are highly profitable (forward integration). Finally, Musicale might acquire one or more competitors, provided that the government does not bar this move (horizontal integration). However, these new



16

sources may still not deliver the desired sales volume. In that case, the company must consider diversification.

(3) DIVERSIFICATION GROWTH Diversification growth makes sense when good opportunities can be found outside the present businesses- the industry is highly attractive and the company has the right mix of business strengths to be successful.

Several types of diversification are possible. First, the company could seek new products that have technological or marketing synergies with existing product lines, even though the new products themselves may appeal to a different group of customers (concentric strategy). It might start a laser disk manufacturing operation because it knows how to manufacture compact disks. Second, the company might search for new products that could appeal to current customers even though the new products are technologically unrelated to its current product line (horizontal strategy). Musicale might produce compact disk cases, even though producing them requires a different manufacturing process. Finally, the company might seek new businesses that have no relationship to its current technology, products, or markets (conglomerate strategy). Musicale might want to consider such new businesses as making application software or personal organizers.

(4) DOWNSIZING AND DIVESTING OLDER BUSINESSES

Weak businesses require a disproportionate amount of managerial attention. Companies must carefully prune, harvest, or divest tired old businesses in order to release needed resources and reduce costs.

ORGANIZATION AND ORGANIZATIONAL CULTURE

Strategic planning is done within the context of the organization. A company's organization consists of its structures, policies, and



17

corporate culture, all of which can become dysfunctional in a rapidly changing business environment. Whereas structures and policies can be changed (with difficulty), the company's culture is very hard to change. Yet changing a corporate culture is often the key to successfully implementing a new strategy.

What exactly is a corporate culture? Most businesspeople would be hard-pressed to find words to describe this elusive concept, which some define as "the shared experiences, stories, beliefs, and norms that characterize an organization." Yet, walk into any company and the first thing that strikes you is the corporate culturethe way people are dressed, how they talk to one another, the way they greet customers.

MATRKETING INNOVATION

Innovation in marketing is critical. Gary Hamel offers the contrasting view that imaginative ideas exist in many places within the company.

Senior management should identify and encourage fresh ideas from three groups that tend to be underrepresented in strategy making (i) Employees with youthful perspectives. (ii) Employees who are far removed from the company

headquarters. (iii) Employees who are new to the industry.

Each group is capable of challenging company orthodoxy and stimulating new ideas.

Jump Associates, an innovative strategy firm, offers five key strategies for managing change in an organization:

A. Avoid the innovative title. B. Use the buddy system. C. Set the metrics in advance. D. Aim for quick hits first. E. Get data to back up your gut.

The Royal Dutch/Shell Group has pioneered scenario analysis, which consists of developing plausible representations of the firms possible future that make different assumptions about forces driving the market and that include different uncertainties.



18

TABLE 2.4 The 12 Dimensions of Business Innovation (P90) IMP

Marketing Management Ch2....

Documents

Transcript of Marketing Management Ch2....