CRAVENS

PIERCY

McGraw-Hill/Irwin

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

8/e

1-2

Chapter One
Market-Driven Strategy

McGraw-Hill/Irwin

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

1-3 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 Marketing .

and competitors.MARKET-DRIVEN STRATEGY  All 1-4 business strategy decisions should start with a clear understanding of markets. customers.  The market and the customers that form the market should be the starting pint in shaping business strategy. .

Characteristics of a MarketDriven Strategy Becoming MarketOrientation 1-5 Achieving Superior Performance Determining Distinctive Capabilities Customer Value/ Capabilities Match .

Louis Vuitton Southwest Airlines Tesco Tiffany & Co.Why Pursue a Market-Driven Strategy?  Strong supporting logic  Achievements of companies displaying market-driven characteristics are impressive  Examples include: Dell Inc. Wal-Mart Zara 1-6 .

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  1-7 .

1-8 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 1-9 .

Becoming a Market-Oriented Organization Information Acquisition 1-10 Cross-Functional Analysis of Information Shared Diagnosis and Coordinated Action Delivery of Superior Customer Value .

competition. and markets  Involve all business functions  Intuit’s Quicken  Inter-functional Assessment  Share information and develop innovative products with people from different functions  Zara  Shared diagnosis and action value  Deliver superior customer .Market Orientation  Information Acquisition 1-11  Gather relevant information on customers.

that enable firms to coordinate activities and make use of their assets.” George S. Day.38. 1-12 . Journal of Marketing.DISTINCTIVE CAPABILITIES “Capabilities are complex bundles of skills and accumulated knowledge. p. October 1994. exercised through organizational processes.

Skills and Accumulated Knowledge The airline has developed impressive skills in operating its business model at very low cost levels. and high employee esprit de corps Southwest Airline’s Distinctive Capabilities 1-13 . The carrier’s value proposition consists of low fares and limited services (no meals).Organizational Processes Southwest uses a point-to-point route system rather than the hub-and-spoke design used by many airlines. and developing strong customer loyalty. with an average trip about 500 miles. loyal customer base. minimizing the time span from landing to departure. The high aircraft utilization. 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. The company continues to grow by expanding its point-to-point route network. Coordination of Activities Coordination of activities across business functions is facilitated by the point-topoint business model. simplification of functions. The airline offers services to 57 cities in 29 states. Operating costs are kept low by using only Boeing 737 aircraft. major emphasis throughout the organization is placed on building a loyal customer base. Nonetheless. Assets Southwest’s key assets are very low operating costs. Accumulated knowledge has guided management in improving the business design over time.

p.Capabilities Disproportionate (higher) contribution to superior customer value 1-14 Compelling Logic of Distinctive Capabilities Source: George S. Journal of Marketing. Provides value to customers on a more cost-effective basis . Day. October 1994. 38.

49. October 1994. Journal of Marketing.1-15 Capabilities Desirable Capabilities Applicable to Multiple Competition Situations Difficult to Duplicate Source: George S. Day. Superior to the Competition .

Types of Capabilities Outside-In Processes Spanning Processes 1-16 Inside-Out Processes .

October 1994. Day.Organization’s Process EXTERNAL EMPHASIS Outside-In Processes 1-17 INTERNAL EMPHASIS Inside-Out Processes Spanning 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. Journal of Marketing. 41. .

Matching Customer Value and Distinctive Capabilities Value Requirements 1-18 Distinctive Capabilities .

Troy.. K.” Source: C. 5. The Conference Board Inc. 1996.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 1-19 Creating Value: “Customer value is the outcome of a process that begins with a business strategy anchored in a deep understanding of customer needs.

Creating Value for Customers Customer Value 1-20 Benefits Costs .

1-21 Value Composition Product Services Employees Benefits Value (gain/loss) Image Monetary costs Time Psychic and physic costs Costs (sacrifices) .

Becoming Market Driven Market Sensing Capabilities 1-22 MARKET – DRIVEN STRATEGIES Customer Linking Capabilities .

BECOMING MARKET DRIVEN Market Sensing Capabilities 1-23 MARKET-DRIVEN STRATEGIES Customer Linking Capabilities .

Customer Linking Capabilities – Create and maintain close customer relationships .Market Driven Initiatives 1-24 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 relations. and distribution .1-25 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. order fulfillment.

CHALLENGES OF A NEW ERA FOR STRATEGIC MARKETING 1-26  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 .

Market opportunities 1-27 Competitive threats Partnering opportunities Outsourcing initiatives The world’s poor .Escalating Globalization It is important to understand the differences (and similarities) between the developed economies and the new world beyond.

weforum. and nurturing a culture of innovation (www. .Technology Diversity and Uncertainty Radical New Product Opportunities Nanotechnology Private space travel The digital home Self-cleaning windows 1-28 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.org).

Ethical Behavior and Social Responsiveness Increasingly demanding ethical challenges Corporate responsibility Responsibilities to stakeholders 1-29 .

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