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Chapter One

Imperatives for
Market Driven
Strategy

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

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Characteristics of a
Market-Driven
Strategy
Becoming
Market-
Orientation

Achieving Determining
Superior Distinctive
Performance Capabilities

Customer
Value/
Capabilities
Match
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BECOMING MARKET
ORIENTED
 Customer is the focal point of
the organization
 Superior skills in

understanding and satisfying

customers
 Commitment to continuous

creation of superior customer

value
 Requires involvement and

support of the entire workforce

and development of culture
and processes
 Monitor rapidly changing

customer needs and wants

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Characteristics of
Market Orientation
 Customer Focus
What are the customer’s value
requirements to satisfy their
purchase objectives
 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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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.

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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
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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Matching Customer
Value and Distinctive
Capabilities

Value
Requirements

Distinctive
Capabilities
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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

Providing Value to Customers:

The organizational distinctive
capabilities are used to deliver
value by differentiating the
product, offering lower prices
relative to the competitors of a
combination of both,
Source: C. K. Troy, The Conference Board Inc., 1996, 5.
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Creating Value for

Customers

Customer
Value

Benefits Costs
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Value Composition

Product

Services

Benefits
Employees

Image
Value
(gain/loss)
Monetary
costs
Costs
Time (sacrifices)

Psychic
and physic
costs
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Becoming Market
Driven
Market Sensing Capabilities
– Effective processes for
learning about markets
– Sensing involves collecting
information and sharing it
across functions to
determine what actions
needs to be taken
Customer Linking Capabilities
– Create and maintain close
customer relationships
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Aligning Structure and

Processes
– Changing the organizational
design
– Emphasis on cross-functional
coordination and involvement
 CORPORATE,
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BUSINESS AND
MARKETING
STRATEGY
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CORPORATE STRATEGY

Deciding the Scope

and Purpose of
the Business

Objectives

Actions and
Resources for
Achieving
Objectives
 BUSINESS AND
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MARKETING
STRATEGY
 Business Strategy is developing the strategic plan for
each business unit
 Business and marketing strategy relationships: An
understanding of business purpose, scope, objectives,
resources and strategy is essential in designing and
implementing marketing strategies that are consistent
with corporate and business strategy
 Strategic marketing:
– Developing a vision about the markets of interest to the organization,
selecting market target strategies, setting objectives, and developing,
implementing and managing the marketing program positioning strategies
designed to meet the value requirements of customers in each market target
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MARKETING STRATEGY
PROCESS
Markets,
segments and
customer
value

Implementing Designing
and Managing Market
Marketing Driven
Strategy Strategy

Marketing
Program
Development
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MARKET-DRIVEN
STRATEGIES
Designing Market-
Driven Strategies

Market Targeting Relationship Planning

and Strategic Strategies for New
Positioning Products