CRAVENS

PIERCY

8/e
McGraw-Hill/Irwin

2006 The McGraw-Hill Companies, Inc., All Rights

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Chapter One
Market-Driven Strategy

McGraw-Hill/Irwin

2006 The McGraw-Hill Companies, Inc., All Rights

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MARKET-DRIVEN
STRATEGY
Market-Driven
Strategy
Becoming Market
Oriented
Distinctive Capabilities
Creating Value for
Customers
Becoming Market
Driven
Challenges of a New
Era for Strategic

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.

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Characteristics of a
Market-Driven
Strategy
Becoming
MarketOrientation

Achieving
Superior
Performance

Determining
Distinctive
Capabilities

Customer
Value/
Capabilities
Match

Why Pursue a
Market-Driven
Strategy?

Strong supporting logic

Achievements of companies
displaying market-driven
characteristics are
impressive
Examples include:
Dell Inc.
Louis Vuitton
Southwest Airlines
Tesco
Tiffany & Co.
Wal-Mart
Zara

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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

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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 customers
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

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Becoming a MarketOriented
Organization

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Information
Acquisition

Cross-Functional
Analysis of Information

Shared Diagnosis
and Coordinated
Action

Delivery of
Superior Customer
Value

Market Orientation

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Information Acquisition
Gather relevant information on
customers, competition, and
markets
Involve all business functions

Intuits Quicken

Inter-functional
Assessment
Share information and develop

innovative products with

people from different functions
Zara
Shared
diagnosis and

action
Deliver superior
customer value

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DISTINCTIVE
CAPABILITIES
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.

George S. Day, Journal of Marketing, October 1994, p.38.

Southwest Airlines
Distinctive Capabilities

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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 carriers 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
Southwests key assets are very low operating costs, loyal
customer base, and high employee esprit de corps

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Capabilities
Disproportionate (higher)
contribution to superior
customer value

Compelling
Logic of Distinctive
Capabilities

Provides value to
customers on a more
cost-effective basis
Source: George S. Day, Journal of Marketing, October 1994, p.
38.

Capabilities

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Desirable
Desirable
Capabilities
Capabilities

Applicable to
Multiple
Competition
Situations

Superior to
the
Competition

Difficult to
Duplicate
Source: George S. Day, Journal of Marketing, October 1994, 49.

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Types of
Capabilities
Outside-In
Processes

Spanning
Processes

Inside-Out
Processes

Organizations
Process
EXTERNAL
EMPHASIS

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INTERNAL
EMPHASIS

Outside-In
Processes

Inside-Out
Processes
Spanning
Processes

Market
sensing
Customer
linking
Channel
bonding
Technology
monitoring

Customer order
fulfillment
Pricing

Financial
management

Cost control

Purchasing
Customer service
delivery
New
product/service
development
Strategy
development

Technology
development

Integrated
logistics

Manufacturing/
transformation
processes

Human
resources
management

Environment
health and safety

Source: George S. Day, Journal of Marketing, October 1994, 41.

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Matching Customer
Value and Distinctive
Capabilities
Value
Requirements

Distinctive
Capabilities

CREATING VALUE
FOR CUSTOMERS

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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, 5.

Creating Value for

Customers
Customer
Value

Benefits

Costs

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Value Composition
Product
Services
Employe
es

Benefit
s

Image

Monetar
y costs
Time
Psychic
and
physic
costs

Value
(gain/loss)

Costs
(sacrifices)

Becoming
Market Driven

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Market Sensing
Capabilities

MARKET
DRIVEN
STRATEGIES

Customer Linking
Capabilities

BECOMING
MARKET DRIVEN
Market
Sensing
Capabilities

MARKETDRIVEN
STRATEGIES

Customer
Linking
Capabilities

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Market Driven
Initiatives

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Market Sensing Capabilities

Effective processes for
learning about markets
Sensing:
Collected information
needs to be shared across
functions and interpreted
to determine proper
actions.
Customer Linking Capabilities
Create and maintain close
customer relationships

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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

CHALLENGES OF A
NEW ERA FOR
STRATEGIC
MARKETING

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Strategic marketing faces

unprecedented challenges and
opportunities:
Turbulent markets
Intense competition
Disruptive innovations
Escalating customer demands

Ethical Challenges

Societal and Global Change

Social Responsiveness of
Organizations

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 worlds poor

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Technology
Diversity and
RadicalUncertainty
New Product

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Opportunities
Nanotechnology
Private space travel
The digital home
Self-cleaning windows
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 (www.weforum.org).

Ethical Behavior
and Social
Responsiveness
Increasingly
demanding ethical
challenges
Corporate
responsibility
Responsibilities to
stakeholders

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