CHAPTER: IMPERATIVES FOR

MARKET-DRIVEN STRATEGY

Topics to be covered:
Characteristics of Market-Driven Strategy
Determining Distinctive Capabilities
Classifying Capabilities
Creating Value for Customers
Becoming Market-Driven
Corporate, Business, and Marketing Strategy
Challenges of a New Era for Strategic Marketing
Characteristics of Market-Driven Strategy

• Market orientation requires initiatives

or focus on the following aspects:
• Customer Focus
• Competitor Intelligence
• Cross Functional Coordination
• Performance Implications
(continued…)
• Customer Focus: Though both marketing
concept and market orientation are similar,
the important difference is that market
orientation is more than a philosophy since
it consists of a process for delivering
customer value.
(continued…)
• Competitors Intelligence: A market-
oriented organization recognizes the
importance of understanding its competition
as well as the customer. Failure to identify
and respond to competitive threats can
create serious consequences for a
company.
(continued…)
• Cross-Functional Coordination: Market-
oriented companies are effective in getting
all business functions working together to
provide superior customer value. Cross-
functional teamwork guides the entire
organization toward providing superior
customer value.
(continued…)
• Performance Implications: An expanding body
of research findings points to a positive
relationship between market orientation and
superior performance. Companies that are
market-oriented display favorable organizational
performance compared to companies that are not
market-oriented.
Determining 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. Organizational capabilities and organizational process
are closely related as they are shown in the figure given below:
(continued…)
• Understanding the organization’s distinctive
capabilities and how they relate to customers’
value requirements are important considerations
in marketing strategy design. Management
should place a company’s strategic focus on its
distinctive capabilities. A distinctive capability: (1)
offers a disproportionate (higher) contribution to
superior customer value, or (2) enables an
organization to deliver value to customers in a
substantially more cost-effective manner.
Classifying Capabilities
• Types of Capabilities: Classifying the organization’s capabilities is
useful in identifying distinctive capabilities. As shown in the following
figure, one way of classification is to determine whether the processes
operate from outside the business to inside, inside out, or spanning
processes:
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• The organizational process view of distinctive capabilities
requires shifting away from the traditional specialization of
business functions toward a cross-functional process
perspective. Implications of these changes include:
• Managing and participating in the process-driven
organizations create new skill requirements and
challenges.
• Functional organizations require individual skills in
information gathering, data analysis, and external
collaboration.
• Process-driven organizations emphasize skills in
relationship management, internal communication and
persuasion, team building, information interpretation,
and strategic reasoning.
(continued…)
• Capabilities and Customer
Value: Value for buyers consists
of benefits and costs resulting
from the purchase and use of
products. Management must
determine where and how it can
offer superior value, directing
the distinctive capabilities to
customer groups (market
segments) that result in a
favorable capability/value
match.
Creating Value for Customers
• Customer value is the outcome of a process that
begins with a business strategy anchored in a
deep understanding of customer needs. A closer
look at the concept of customer value will be
taken by clarifying the following aspects:
• Customer Value
• Providing Value to Customers
(continued…)
• Customer Value: Buyers form
value expectations and decide to
purchase goods and services
based on their perceptions of
products benefits less the total
cost incurred. Superior customer
value results from a very favorable
use experience compared to
buyers’ expectations and the value
offering of competitors. Superior
customer value leads to customer
satisfaction and loyalty.
(continued…)
• Providing Value to Customers: The
organization’s distinctive capabilities are used to
deliver value by differentiating the product offer,
offering lower prices relative to competing brands,
or a combination of lower cost and differentiation.
Deciding which avenue to follow requires matching
capabilities to the best value opportunities.
Becoming Market Driven
• A market-driven organization must identify
which capabilities to develop and which
investment commitments to make. This
effort calls for the following steps:
• Market Sensing Capabilities
• Customer Linking Capabilities
• Aligning Structure and Processes
(continued…)
• Market Sensing Capabilities: Developing an
effective market sensing capability requires
finding and processing information from various
sources. The collected information must be
shared across functions and interpreted to
determine what actions need to be initiated.
(continued…)
• Customer Linking Capabilities: Creating
and maintaining close relationships with
customers are important in market driven
strategies. They offer advantages for both
buyer and seller through information
sharing and collaboration.
(continued…)
• Aligning Structure and Processes: Becoming
market-driven may require changing the design of
the organization, placing more emphasis on
cross-functional processes. Market orientation
and process capabilities require cross-functional
coordination and involvement.
Corporate, Business, and Marketing Strategy

• Corporate strategy consists of deciding the

scope and purpose of the business, its
objectives, and the initiatives and resources
necessary to achieve the objectives.
Business and marketing strategy is guided
by the decisions top management makes
about how, when, and where to compete.
(continued…)
• This should be a two way relationship as it is shown in the
figure given below:
(continued…)
• Components of Corporate Strategy: Corporate
strategy consists of the decisions made by top
management and the resulting actions taken to
achieve the objectives set for the business. The
major corporate strategy components are as
follows:
• Scope, Mission, and Strategic Intent
• Corporate Objectives
• Strategy
• Resource Allocation
• Synergies
(continued…)
• Business and Marketing Strategy: An important
issue is whether selecting a successful strategy
has a favorable impact on results. The evidence
suggests that strategic choice matters. This issue
will be clarified by focusing on the following
aspects:
• Business and Marketing Strategy Relationships
• Strategic Marketing
(continued…)
• Business and Marketing Strategy
Relationships: An understanding of business
purpose, scope, objectives, capabilities, and
strategy is essential in designing and
implementing marketing strategies that are
consistent with the corporate and business unit
plan of action. The chief marketing executive’s
business strategy responsibilities include—
• Participating in strategy formulation
• Developing marketing strategies that are consistent with
business strategy priorities and integrated with other
functional strategies
(continued…)
• Strategic Marketing: Marketing strategy consists of the
analysis, strategy development, and implementation of
activities in:
• Developing a vision about the market(s) of interest to the
organization
• Selecting market target strategies
• Setting objectives
• Developing, implementing, and managing the marketing program
positioning strategies designed to meet the value requirements of
the customers in each target market.
Challenges of a New Era for Strategic Marketing

• All the challenges for strategic marketing

are basically stemming from the following
phenomena:
• Escalating Globalization
• Technology Diversity and Uncertainty
• Internet Dynamics (The Web 2.0)
• Ethical Behavior and Social Responsiveness
Thank You!