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Module 2
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- 1MODULE 2 Corporate Strategies and Their Marketing Implications- What Is Marketing’s Role in Formulating and Implementing Strategies?
- Three Levels of Strategy: Similar Components But Different Issues
- The Marketing Implications of Corporate Strategy Decisions - 2Marketing’s Role in Formulating and Implementing Strategies?- marketing managers are usually most
familiar with conditions & trends environment.
- responsible for developing strategic plans for product-market entries,
-primary participants and contributors to the planning process at the business and corporate level as well. - 3marketing and sales managers influence-decisions concerning the strategic direction of the business unit,
-expansion into new geographic markets, - the selection of strategic business partners,
-new product development. - 4Market-Oriented Managementoperate according to the business philoso-
phy known as the marketing concept - 5marketing conceptthe planning and coordination of
all company activities around the primary goal of satisfying customer needs is the most effective means to attain and sustain a competitive advantage and achieve
company objectives over time. - 6market-oriented firms are characterised by- consistent focus on customers’ needs and competitive circumstances in the market environment.
-willingness to quickly adapt products/ functional programmes to environment changes
- segmenting market-> adapting product offerings & programmes to the special needs of different target markets. - 7Market-oriented improve the responsiveness of their decision making by using-detailed environmental scanning and
- continuous, real-time information systems;
-seeking frequent feedback from and coordinating plans with key customers
and major suppliers; encouraging entrepreneurial thinking among lower-level managers;
-interfunctional management teams to analyse issues and initiate strategic actions outside the formal planning process. - 8Three legs of the Marketing concept stool- profitability
- customer focus
- cross-functional coordination, - 9dimensions of performance effected by market orientationreturn on assets,
sales growth, and
new product success - 10reasons why some companies don't use Market orientation as a strategy- Competitive conditions enable a success in the short run without sensitivity to customer desires.
- Different levels of economic development in industries or countries favour different strategies
- strategic inertia – the automatic continuation of strategies successful in the past. - 11Competitive Factors Affecting a Firm’s Market Orientation- Stage of product cycle when firm enters into the market, early entrants (inwardly focused and not market orientated)
late entrants needing to seek new segments or steal share of market - 12Production-oriented company description- Product: Company sells what it can make;
- Product line Narrow
Pricing Based on production and
distribution costs.
- Research Technical research; focus on
product improvement and cost cutting in production process.
- Packaging Protection for the product;
minimise costs.
Credit A necessary evil; minimise bad
debt losses.
Promotion Emphasis on product features, quality and price. - 13market- oriented organisations description-Company makes what it can sell;
primary focus on customers’ needs and market opportunities.
-Product line Broad.
- Pricing Based on perceived benefits provided.
- Market research; focus on identifying new opportunities and
applying new technology to satisfy
customer needs
-Packaging Designed for customer convenience; a promotional tool.
Credit A customer service; a tool to attract customers.
Promotion Emphasis on product benefits and ability to satisfy customers’ needs
or solve problems. - 14sales-oriented response to increasing competitionaggressive promotional activities – such as hiring more salespeople, increasing advertising budgets, or offering frequent price promotions – to maintain market share and hold down unit costs.
- 15Draw backs of sales-oriented responsecompetitors can easily match such aggressive sales tactics. Simply spending
more on selling efforts usually does not create a sustainable competitive advantage. - 16Effects of industry maturingsales volume levels off and technological differences among brands tend to disappear as manufacturers copy the best features of each other’s products.
- 17The Influence of Different Stages of Development across Industries and Global MarketsIndustries that are
in earlier stages of their life cycles, or that benefit from barriers to entry or otherfactors reducing the intensity of competition, are likely to have relatively fewer market-oriented firms. - 18Strategic Inertiaa firm that achieved success by being in tune with its environment loses touch with its market because managers are reluctant to tamper with strategies and marketing programmes that worked in the past. They begin to believe there is one best way to satisfy customers.
- 19What type of envirnoments need ongoing strategic planning?In all environments where changes happen frequently, the strategic planning process needs to be ongoing and adaptive.
- 20Three Levels of Strategy- Definition
- Components
- Hierachy - 21Strategy: A Definitionpattern of present and planned objectives, resource deployments, and interactions of an organisation markets, competitors, and other environmental factors. Tackles 1) what (objectives) (2) where (industries and product-markets ), and (3) How
- 22The Components of Strategy- Scope.(number and types of industries, product lines, and market segments it competes in)
- Goals and objectives. (desired levels of accomplishment/dimensions of performance
-Resource deployments. (how the organisation will compete/position itself)
- Identification of a sustainable competitive advantage.
-Synergy. (when the firm’s businesses, product-markets, resource
deployments, and competencies complement and reinforce one another.) - 23The Hierarchy of Strategies- corporate strategy,
- business-level strategy
- functional strategies - 24corporate strategycoordinate the activities of multiple business units and, in the case of conglomerates, even separate legal business entities.
Decisions about the organisation’s scope and resource deployments across its
divisions or businesses are the primary focus of corporate strategy. - 25Business-Level Strategysustainable competitive advantage. What distinctive competencies can give the business unit a competitive advantage? And which of those competencies best match the needs and wants of
the customers in the business’s target segment(s)? - 26Marketing Strategyspecifying the target market(s) for a particular product or product line. Next, firms seek competitive advantage and synergy through a well- integrated programme of marketing mix elements (the 4 Ps)
- 27THE SIX INTERRELATED DECISIONS THAT CREAT The Marketing Implications- the overall scope and mission of the organisation; - company goals objectives; - gaining a competitive advantage; a development
- strategy for future growth; - the allocation of corporate resources
- development of synergies across those businesses and their products. - 28Corporate Scope – Defining the Firm’s MissionA mission statement guides managers on which market opportunities to pursue. Instils shared sense of direction, relevance, achievement for employees. Should answer: What is our business? Who are our customers? What kind of value is provided to customers?What should our business be in the future?
- 29Market Influences on the Corporate Missionshould fit both internal characteristics and the opportunities and threats in external environment.
focus the firm’s efforts on markets where resources and competencies will generate value for customers, advantage over competitors, synergy across products. - 30Criteria for Defining the Corporate Missionfocus on what customer needs are to be satisfied and the functions the firm must perform to satisfy them.
- 31Social Values and Ethical PrinciplesEthics is concerned with development of moral standards by which actions and situations can be judged. focuses on actions that may result in actual or potential harm of some kind (e.g., economic, mental, physical) to a individual, group, or organisation
- 32The Marketing Implications of Ethical StandardsUnethical practices damage the trust between a firm and its suppliers or customers-> disrupting the development of long-term exchange relationships & results in loss of sales and profits over time.
- 33How to deal with ethical issuesA company can reduce such problems by spelling out formal social policies and ethical standards in its corporate mission
statement and communicating and enforcing those standards. - 34Corporate Objectives part 1Formal objectives provide decision criteria to guide business units and toward specific dimensions/ performance levels. Each objective has four components: A performance dimension or attribute sought. A measure/index for evaluating progress. A target or hurdle level to be achieved. A timeframe .
- 35Common performance criteria• Growth ($ sales,Unit sales,%change in sales)
• Competitive strength(Market share,Brand awareness & preference
• Innovativeness(sales from new products
% of sales from product-market entries, % cost savings from new processes)
• Profitability ($ profits, Profit as % of sales
Contribution margin*
(ROI) (RONA) (ROE)
• Utilisation of resources (% capacity utilisation, Fixed assets as % of sales)
• Contribution to owners EPS, P/E ratio - 36Common performance criteria part 2• Contribution to customers (Price relative to competitors, Product quality, Customer satisfaction, retention, loyalty
Contribution to employees(Wage rates, benefits, Personnel development, promotions Employment stability, turnover
• Contribution to society ($ contributions to charities or community institutions Growth in employment) - 37what causes conflicting objectives?Trying to achieve many objectives at once leads to conflicts and trade-offs. Managers can reconcile conflicting goals by prioritising them. Another approach is to state one of the conflicting goals as a constraint or hurdle. Thus, a firm attempts to maximise growth subject to meeting some minimum ROI hurdle.
- 38How to deal with conflicting objectives.break them down into sub-objectives, then assign sub-objectives to different business units or products. sub-objectives vary across business units/ product offerings depending on attractiveness & potential of industries + strength of their competitive positions, & the resource allocation decisions.
- 39customer-focused objectivesfocus on satisfaction, retention, and loyalty – given the profit implications of a customer’s lifetime value, maximising satisfaction & loyalty makes good sense satisfied, loyal customers of one product can be leveraged to provide synergies for other company products or services.
- 40Gaining a Competitive Advantagesustainable competitive advantage at the corporate level is based on company
resources; that other firms do not have, that take a long time to develop, & are hard to acquire.
- develop a competitive strategy for each division/business unit & strategic marketing programme for each product-market entries, that convert the company’s resources into something of value to customers. - 41Corporate Growth Strategies- the two directionsmajor directions in seeking future growth:
- expansion of its current businesses and activities, or
-diversification into new businesses, either through internal business development or acquisition. - 42Alternative corporate growth strategies
- 43Types of expansion/growth strategies- Increasing Penetration of Current Product-Markets
- Developing New Products for Current Customers
-Selling Existing Products to New Segments or Countries
- Diversifying (Vertical integration- Forward integration & Backward integration, Related (or concentric) diversification. unrelated (or conglomerate) diversification)
- Organisational Relationships or Networks - 44Allocating Corporate Resourcesmanagers make decisions on how to allocate financial and human resources across the firm’s various businesses and product-markets. using Two tools: portfolio models and value-based planning.
- 45Portfolio Modelsmodels enable managers to classify and review their current and prospective businesses by viewing them as portfolios of investment opportunities and then evaluating each business’s competitive strength and the attractiveness of the markets it serves. ie (BCG) Growth-Share Matrix
- 46The growth-share matrixassumes that a firm must generate cash from businesses with strong competitive positions in mature markets. Then it can fund investments and expenditures in industries that represent attractive future opportunities.
- 47The growth-share matrix axis' examinationthe market growth rate on the vertical axis is a proxy measure for the maturity and attractiveness of an industry.
relative market share is a proxy for competitive strength within industry-> divide business’s absolute market share in dollars or units by that of the leading competitor in the industry. - 48Resource Allocation and Strategy Implications/ comparison on matrix quadrants- question marks or problem children
- A star
- Cash cows. - 49question marks or problem childrenquestion marks or problem children (Businesses in high-growth industries with low relative market shares) require large amounts of cash, for expansion to keep up with the rapidly growing market, & for marketing activities (or reduced margins) to build market share and catch the industry leader.
- 50A star- A star is the market leader in a high-growth industry. Stars are critical to the continued success of the firm. As their industries mature, they move into the bottom-left quadrant and become cash cows. Paradoxically, they often are net users rather than suppliers of cash in the
short run - 51Cash cowsBusinesses with a high relative share of low-growth markets, primary generators of profits and cash, markets are stable, & share leadership position usually means economies of scale & high profit margins. Consequently, the corporation can use the cash from them to support its question marks and stars
- 52DogsLow-share, in low-growth markets, although they may throw off some cash, they typically generate low profits, or losses. Divestiture is one option though it can be difficult to find a buyer. Another strategy is to harvest -> maximising short-term cash flow by paring investments & expenditures until business is gradually phased out.
- 53Limitations of the Growth-Share MatrixMarket growth rate is inadequate descriptor of industry attractiveness.
Relative market share is inadequate a description of competitive strength.
The outcomes of a growth-share analysis are highly sensitive to variations in how growth and share are measured.
While the matrix specifies appropriate investment strategies for each business, it provides little guidance on how best to implement those strategies.
The model implicitly assumes that all business units are independent of one another except for the flow of cash. - 54Value-Based Planningprovides a basis for comparing the economic returns to be gained from investing in different businesses pursuing different strategies or
from alternative strategies that might be adopted by a given business unit. - 55Features of Value-Based Planning1. assess the economic value a strategy is likely to produce by examining the cash flows it will generate, rather than relying on distorted accounting measures
2.estimate the shareholder value that a strategy will produce by discounting its forecasted cash flows by the business’s risk-adjusted cost of capital.
3.they evaluate strategies based on the likelihood that the investments required by a strategy will deliver returns greater than the cost of capital. - 56economic value added, or EVAThe amount of return a strategy or operating programme generates in excess of the cost of capital
- 57Sources of SynergyKnowledge-Based Synergies
Corporate Identity and the Corporate Brand as a Source of Synergy
Synergy from Shared Resources
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- Karteikarten am Module 2, erstellt von Nicolette Kirsty am 28/02/2016.
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- Nicolette Kirsty
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