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CRAVENS

PIERCY
8/e
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
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Chapter One

Market-Driven Strategy
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
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 Market-Driven Strategy
 Becoming Market
Oriented
 Distinctive Capabilities
 Creating Value for
Customers
 Becoming Market Driven
 Challenges of a New Era
for Strategic Marketing
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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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Achieving
Superior
Performance
Determining
Distinctive
Capabilities
Customer
Value/
Capabilities
Match
Becoming
Market-
Orientation
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 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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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
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 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

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Information
Acquisition
Cross-Functional
Analysis of Information
Shared Diagnosis
and Coordinated
Action
Delivery of
Superior Customer
Value
Becoming a Market-
Oriented Organization
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 Information Acquisition
 Gather relevant information on
customers, 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
 Deliver superior customer
value
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“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.
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Southwest Airline’s Distinctive
Capabilities
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 carrier’s 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
Southwest’s key assets are very low operating costs, loyal
customer base, and high employee esprit de corps


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Compelling
Logic of Distinctive
Capabilities
Disproportionate (higher)
contribution to superior
customer value
Provides value to
customers on a more
cost-effective basis
Capabilities
Source: George S. Day, Journal of Marketing, October 1994, p. 38.
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Capabilities
Desirable
Capabilities
Applicable to
Multiple
Competition
Situations
Difficult to
Duplicate
Superior to
the
Competition
Source: George S. Day, Journal of Marketing, October 1994, 49.
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Outside-In
Processes
Inside-Out
Processes
Spanning
Processes
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Source: George S. Day, Journal of Marketing, October 1994, 41.
Spanning
Processes
Outside-In
Processes
Inside-Out
Processes
EXTERNAL
EMPHASIS
INTERNAL
EMPHASIS
 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
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Value
Requirements
Distinctive
Capabilities
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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.
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Benefits Costs
Customer
Value
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Monetary
costs
Time
Psychic
and physic
costs
Product
Services
Employees
Image
Benefits
Costs
(sacrifices)
Value
(gain/loss)
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MARKET –
DRIVEN
STRATEGIES
Market Sensing
Capabilities
Customer Linking
Capabilities
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Market Sensing
Capabilities
Customer Linking
Capabilities
MARKET-DRIVEN
STRATEGIES
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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

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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
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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 world’s poor
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Radical New Product
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).
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Increasingly
demanding ethical
challenges
Corporate
responsibility
Responsibilities to
stakeholders