Corporate Strategy and Marketing Metrics
DRIVERS OF THE STRATEGIC ROLE OF MARKETING
Globalisation & variation in market and characteristics & industry situation
Increased importance of services and the service component & quality in
product delivery
Growth in use of IT and data scanning devices & other data mining
software that enables identification of data
Development of relationships across functional areas and organisations
ire SCM, networks and integrated logistics
Marketing becoming more important than other functional areas
CHARACTERISTICS OF A MARKET DRIVEN STRATEGY
Being Market Oriented
Achieving superior performance
Determining a firms distinctive capabilities
Matching customer value to Distinctive capabilities
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Market driven vis--vis market driving organisations
Market-driven strategy Reactive to the business environment and competition Market-driving strategy Proactive, innovative and initiate change and drive markets Customers cannot drive markets because most customers
do not know their future needs Most firms use a blend of proactive and reactive strategies entrepreneurial & innovative whilst customer and competitor focused.
THE COMPONENTS OF STRATEGY
Scope The breath of the strategic domain i.e. # of industries, products lines,
market segments a product /services competes in Determined by the mission statement & business purpose
Goals and objectives Should detail specific performance dimensions i.e. sales volume, ROI,
profit contribution
Resource deployments Resources are scarce & strategy formulation should specify how and
where they will de obtained and deployed
THE COMPONENTS OF STRATEGY
Identification of a sustainable competitive advantage What core competencies & capabilities do we have to compete &
sustain CA
Synergy
- Existence of reinforcement between a firms businesses, resources and competencies These components of strategy vary at different levels of the strategic formulation and implementation process
THE THREE CORNERS OF STRATEGIC MARKETING
Strategic Implementation
Strategic analysis
Strategic Choice
Hierarchy of strategies
Corporate Level Defining the Organisational Mission Defining Organisational Objectives and Goals Designing the Business Portfolio (SBUs)
(range of business within the organisation
SBU Level
Product Mix & SBU Growth Strategies
Functional & tactical Level
Planning Marketing & Other Functional Strategies (Production, R & D, HR, Finance, etc.)
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STRATEGIES & THEIR IMPLICATIONS
Businesses have a hierarchy of strategies Corporate level- addresses overriding strategy -goals, objectives Which business should we be in? Business/SBU level Which product markets should we compete in?
Functional level strategy Marketing strategy-focuses on competencies of the business Who are our customers? Which are our target markets?
CHARACTERISTICS OF MARKETING PLANNING LEVELS
Level
Management level Top Corporate Management Type of Mix Business Mix Strategies Corporate Growth To SBUs 3-5yrs Allocations Time Horizon
Plan
Strategic Business Business Management
Strategies
Product Mix Growth SBU Products To 1-3 yrs
Unit(SBU)
Functional Plan (Marketing) Marketing Management Marketing Mix
Strategy
Market Segmentation Targeting & Positioning To marketing mix components 1 yr
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CORPORATE STRATEGY
Six Components of a Corporate Strategy
1. Overall scope and mission of the organization 2. Company goals and objectives 3. Source of competitive advantage
4. Development strategy for future growth (BCG, Porter, etc..)
5. Implementation - Allocation of corporate resources across the firms
various businesses
6. Control
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1. Corporate ScopeDefining the Firms Mission
A clearly stated mission can help instill:
A shared sense of direction Relevance
Achievement among employees
Positive image of the firm
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EXAMPLE OF A MISSION STATEMENT
LVMHs mission is to work together, respecting each other, our heritage,
diversity, skills and knowledge to:
- Build premium brands - Deliver service excellence to customers and consumers - Generate superior returns for stakeholders - Create an inspiring workplace - Be welcomed in the communities in which we operate
If we took the mission statements of 100 large industrial companies, mixed them up while everyone was asleep, and reassigned them at random, would anyone wake up tomorrow and cry My gosh, where has our mission statement gone? (Gary Hamel & C.K. Prahalad, cited in Aaker & Mills, 2005)
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2. COMPANY GOALS AND OBJECTIVES
Each objective contains four components:
A performance dimension A measure or index for evaluating progress A target or hurdle level to be achieved A time frame within which the target is to be accomplished
Objectives at all levels must be S-M-A-R-T
Specific - Measurable Attainable - Relevant -Time bound
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ENHANCING SHAREHOLDER VALUE
Managements primary objective:
Capital investments Acquisitions Business strategies
Many firms set explicit objectives targeted to increase
shareholder value Objectives are sometimes expressed in terms of market value added (MVA) In the long term, a firm can continue to provide attractive returns to shareholders only so long as it retains and satisfies its customers
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MARKETING IMPLICATIONS OF CORPORATE OBJECTIVES
Managers can reconcile conflicting goals by:
Prioritising them Stating one of them as a constraint or hurdle
Consistent customer-focused objectives are:
Satisfaction Retention Loyalty
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3. SOURCE OF COMPETITIVE STRATEGY
Sustainable competitive advantage at the corporate
level is governed by the companys exclusive resources,
i.e. those that other firms do not have
Such resources might include:
A reputable brand name (known and trusted) Long term customer relationships
Established cooperative alliances
The firm must employ its resources in such a way that
customers will have good reason to remain loyal
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Supplementary
MARKETING METRICS:
Measuring and Delivering Marketing Performance
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ELEMENTS OF PERFORMANCE INDICATORS
Performance measures tell us:
Where we are
Where we have been
Where we want to go .
A good performance measure should be:
Quantitative
Easy to understand
Visible Well defined and mutually understood
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FORECASTING
Business Forecasting process of estimating or predicting future patterns using business
data.
Estimations are made based on specific assumptions Example of factors that can be estimated business forecasting:
quarterly sales, product demand,
customer lifetime value and churn potential,
inventory and supply-chain performance workforce attrition, website traffic etc
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FORECASTING APPROACHES
Quantitative methods
Statistical analysis- regression analysis, structural equation modeling
etc
Econometric analysis i.e. moving averages, time series and trend
analysis
Qualitative methods Observation Judgmental-jury of executive opinion
Customer research & market tests
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PERFORMANCE MEASURES
Multi-dimensional approach to performance measurement Financial perspective shareholders view i.e. the company's bottom-line.
Customer perspective
Innovation and learning measures the formation of new or the
improvement of existing products and processes.
Internal business process perspective how the company excels
Social and environmental perspective
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FINANCIAL MEASURES RATIOS
Profitability Ratios measure management's ability to control
expenses and to earn a return on the resources committed to the business i.e. Net profit margin, ROA, ROE, Earnings per share
Liquidity Ratios measure a firm's ability to meet its current obligations
i.e. Acid test or quick ratio, Current ratio
Leverage Ratios: measure the degree of protection of suppliers of long-
term funds, indicates a firm's ability to raise additional debt and its capacity to pay its liabilities on time i.e. Debt to asset ratio, debt to equity
Activity Ratios: provide information about management's ability to
control expenses and to earn a return on the resources committed to the business. Inventory turnover, fixed asset turnover, account receivable turnover
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FINANCIAL MEASURES - SALES ANALYSIS
Sales analysis can be based on
Territory Product
Order size
Customer Line-item-margin and expenses
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USE OF PERFORMANCE MEASURES
Provides tools to undertake benchmarking/comparisons
Benchmarking provides a critical demonstration of firm competitiveness
Involves the comparison of the firms metrics and processes with best
practice performance Knowledge of performance of the industry and competitors (if available) provides firms with a relative competitive position
Types of benchmarking:
Internal benchmarking Competitive benchmarking Non-restricted benchmarking
Beyond-metrics companies should include processes, focus on
communities and Quality of life, society and environmental issues
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SITUATION ANALYSIS
Success of strategy implementation depends on a strategic fit
between external environment situation, industry & market situation, and capabilities and resources of the firm
situation analysis often the key issue is to categorise markets,
companies, products & services to enable to analysis and comparison.
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STRATEGIC ANALYSIS PROCESS
Environment
Internal operations
Strategic analysis
Industry
Objectives
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SITUATION ANALYSIS
External analysis
Industry & competitor analysis Industry attractiveness, trends & characteristics Competitor analysis (customer/competitive based approaches)
Level of competition- product (vitamin drink), category (energy drink), generic (all drinks) value chain analysis, Generic strategies
Market analysis Product/service category analysis Size, growth, product life cycle, seasonality, cyclic, trends & profitability. Customer analysis- market segments, characteristics & motivations
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INTERNAL ANALYSIS
Analysis of strategic options & positioning Analysis of organisational capabilities, core competencies &
constraints Performance analysis Sales, market share, profitability, Customer satisfaction & loyalty Product & service quality Business and product image Relative cost NPD, NPI & Innovation (product, process /service) Employee satisfaction
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CUSTOMERS MARKET SEGMENTATION
Segments of the market (narrow, niche, large, extensive etc) Consider even narrower issues of categorisation such as geographic,
technology, etc.
Categories help you to define, compare, analyse and evaluate, and
summarise.
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