Chapter-1

Imperatives for market driven Strategy

Market driven Strategy: The underlying logic of market-driven strategy is that
the market & the customers that form the market should be the starting point in business
strategy. Market driven strategy provides a company wide perspective, which mandates
more effective integration of activities & processes that impact customer value.
The characteristics of market driven strategy is projected here:
Becoming Market-Oriented
etermining istinctive !apabilities
Matching !ustomer value "e#uirements to !apabilities
$chieving %uperior &erformance
Becoming Market-Oriented: $ business is market-oriented when its culture is
systematically & entirely committed to the continuous creation of superior customer
value.
$ market-oriented organi'ation performs the following functions(
!ontinuously gathers information about customers, competitors, & markets)
*iews information from a total business perspective)
ecides how to deliver superior customer value) &
Takes actions to provide value to customers
Market orientation re#uires +
!ustomer focus,
!ompetitor intelligence, &
!ross-functional coordination
Determining Distinctive Capai!ities: ,dentifying distinctive capabilities of an
organi'ation is a vital part of market-driven strategy.
-!apabilities are comple. bundles of skills & accumulated knowledge, e.ercised through
organi'ational processes, that enables firms to coordinate activities & make use of their
assets./
C!assifying capai!ities:
"#T"$%&' "M()&SIS I%T"$%&' "M()&SIS
O*tside-in process Inside-O*t process
Spanning (rocess
Market sensing !ustomer order fulfillment 0inancial Management
!ustomer linking &ricing !ost control
!hannel bonding purchasing Technology development
Technology monitoring !ustomer service delivery ,ntegrated logistics
1ew product2service development Manufacturing
%trategy development 3"M
4nvironmental health &
safety
The outside-in process connects the organi'ation to the e.ternal environment, providing market feedback &
forging e.ternal relationships. The inside-out processes are activities necessary to satisfy customer value
re#uirements. The outside-in processes play a key role in offering direction for the spanning & inside-out
capabilities. Market sensing, customer linking, channel bonding, & technology monitoring provide vital
information for new product opportunities, service re#uirements, & competitive threats.
Creating + (roviding ,a!*e for c*stomers: !ustomer value can be defined as the difference between what
the customer gets from owning & using a product & the costs of obtaining the product. The organi'ation5s
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 & differentiation.
&chieving S*perior (erformance: The supporting logic for becoming market oriented, leveraging
distinctive capabilities, & finding good match between customer5s value re#uirements is that they are
e.pected to lead to superior customer value & organi'ational performance. Market-driven organi'ations
display higher performance than their counterparts that are not market-driven.
Corporate Strategy:
!orporate strategy consists of deciding the scope & purpose of the business, its ob6ectives, & the initiatives &
resources necessary to achieve the ob6ectives. !orporate strategies are concerned with how the company can
achieve its growth ob6ectives in current or new business areas.
Components of corporate strategy:
7. !orporate vision( *ision is an almost -impossible dream/ that provides a direction for the company.
Management5s vision defines what the corporation is & what it does & provides important guidelines
for managing & improving the corporation.
8. Ob6ectives( Ob6ectives need to be set so that the performance of the enterprise can be gauged.
!orporate ob6ectives may be established in the following areas( marketing, innovation, resources,
productivity, social responsibility, & finance.
9. Business composition( efining the composition of business provides direction for both corporate &
marketing strategy design. $ business segment, group, or division is often too large in terms of product
& market composition to use in strategic analysis & planning, so it is divided into more specific
strategic units. $ popular name for these units is the %trategic Business :nit ;%B:<. %trategic Business
:nit is a unit of the company that has a separate mission & ob6ectives & that can be planned
independently from other company businesses. ,t can be a company division, a product line within the
division, or sometimes a single product or brand
=. "esources( ,t is important to place a company5s strategic focus on its resources- assets, skills, &
capabilities. These resources may offer the organi'ation the potential to compete in different markets,
provide significant value to end-user customers, & create barriers to competitor duplication.
>. %tructure, %ystems, & processes( %tructure determines the composition of the corporation. %ystems are
the formal policies & procedures that enable the organi'ation to operate. &rocesses consider the
informal aspects of the organi'ation5s activities.
&!! corporate head-*arters *ndertake fo*r p!anning activities(
7. efining the corporate mission
8. 4stablishing strategic business units ;%B:s<
9. $ssigning resources to each %B:
=. &lanning new business, downsi'ing or terminating older business.
1. Defining the corporate mission: Mission is a statement of the organi'ation5s purposes what it wants to
accomplish in the larger environment. To define the mission, the company should address the following
#uestions(
?hat is our business@
?ho is the customer@
?hat is of value to the customer@
?hat will our business be@
?hat should our business be@
Mission statements are at their best when they are guided by a vision, an almost -impossible dream/ that
provides a direction for the company for the ne.t 7A to 8A years.
Bood mission statement has three characteristics(
0irst, they focus on a limited number of goals.
%econd, mission statements stress the ma6or policies & values the company wants to honor.
Third, they define the ma6or competitive scopes within which the company will operate. 0or e.ample,
industry scope, products & application scope, competence scope, market segment scope, *ertical
scope, geographical scope.
/. "sta!ishing Strategic B*siness 0nits ( %trategic Business :nit is a unit of the company that has a separate
mission & ob6ectives & that can be planned independently from other company businesses. ,t can be a
company division, a product line within the division, or sometimes a single product or brand.
$n %B: has three characteristics(
7. ,t is a single business or collection of related businesses that can be planned separately from the rest of
the company
8. ,t has its own set of competitors
9. ,t has a manager who is responsible for strategic planning & profit performance & who controls most
of the factors affecting profit.
1. &ssigning reso*rces to each SB0: The purpose of identifying the company5s strategic business units is to
develop separate strategies & assign appropriate funding. Two of the best-known business portfolio evaluation
models are(
Boston !onsulting Broup ;B!B< $pproach
Beneral 4lectric ;B4< $pproach
Boston Cons*!ting 2ro*p 3BC24 &pproach:
Boston !onsulting Broup analysis is a chart that had been created by Bruce 3enderson for the Boston
!onsulting Broup in 7CDE to help corporations with analy'ing their business units or product lines. This helps
the company allocate resources and is used as an analytical tool in brand marketing, product management,
strategic management, and portfolio analysis.
5ig*re: B!B Browth-%hare Matri.
The growth-share matri. has two controlling aspect namely relative market share and market
growth rate. ,t is divided into four cells, each indicating different types of business.
Question Marks: These are products with a low share of a high growth market. They consume
resources and generate little in return. They absorb most money as the company attempt to
increase market share.
Stars: These are products that are in high growth markets with a relatively high share of that
market. %tars tend to generate high amounts of income. The company must spend substantial
funds to keep up with the high market growth, & to fight off competitors attack.
Cash Cows: These are products with a high share of a low growth market. !ash !ows generate
more than is invested in them. %o the company should keep them in its portfolio of products for
the time being.
Dogs: These are products with a low share of a low growth market. These are the canine
version of Freal turkeysG5 They do not generate cash for the company, they tend to absorb it. The
company should get rid of these products.
2enera! "!ectric 32"4 &pproach:
The Beneral 4lectric Business %creen was originally developed to help marketing managers
overcome the problems that are commonly associated with the Boston Matri. ;B!B<, such as
the problems with the lack of credible business information, the fact that B!B deals primarily
with commodities not brands or %trategic Business :nits ;%B:Fs<, and that cash flow if often a
more reliable indicator of position as opposed to market growth2share.
The B4 approach introduces a three by three matri., which now includes a medium
category. ,t utili'es industry attractiveness as a more inclusive measure than B!BFs market
growth and substitute5s competitive position for the originalFs market share.
Market attractiveness depends on(
%i'e of market.
Market rate of growth.
The nature of competition and its diversity.
&rofit margin.
,mpact of technology, the law, and energy efficiency.
4nvironmental impact.
Competitive position depends on(
Market share.
Management profile.
" & .
Huality of products and services.
Branding and promotions success.
&lace ;or distribution<.
4fficiency.
!ost reduction.
The 2" matri6 is divided into nine ce!!s7 8hich in t*rn fa!! into three 9ones. The three
ce!!s in the *pper !eft corner indicate strong SB0s in 8hich the company sho*!d invest or
gro8. The diagona! ce!!s stretching from the !o8er !eft to *pper right indicate SB0s that
are medi*m in overa!! attractiveness. The company sho*!d p*rs*e se!ectivity + manage
for earnings in these SB0s. The three ce!!s in the !o8er right corner indicate SB0s that
are !o8 in overa!! attractiveness. The company sho*!d give serio*s tho*ght to harvesting
or divesting these SB0s.
=. (!anning ne8 *siness7 Do8nsi9ing or terminating o!der *siness: The company
plans for its e.isting businesses allow it to pro6ect total sales & profits. ,f there is a gap
between future desired sales and pro6ected sales corporate management will have to
develop or ac#uire new business to fill it.
Strategic p!anning gap:
Three options are available to fill up the strategic planning gap(
,. The first is to identify opportunities to achieve further growth within current businesses
;Intensive gro8th opport*nities<
,,. The second is to identify opportunities to build or ac#uire businesses that are related to
current businesses ;Integrative gro8th opport*nities<
,,,. The third is to identify opportunities to add attractive businesses tat are unrelated to
current businesses ;Diversification gro8th opport*nities<
Intensive 2ro8th Strategies:
Integrative 2ro8th strategies: there are three types of integrative growth strategies(
7. Backward integration ;integration with the suppliers<
8. 0orward integration ;integration with the distributors<
9. 3ori'ontal integration ;integration with one or more of the competitors<
Diversification 2ro8th Strategies: iversification growth makes sense when good
opportunities can be found outside the present businesses. Three types of diversification are
possible(
7. !oncentric diversification strategy ; new products, new market, technology or
marketing may be related<
8. 3ori'ontal diversification strategy ;new products, new2current market, technology
unrelated<
9. !onglomerate diversification strategy ;new products, new market, new technology<
Do8nsi9ing or terminating o!der *siness: !ompanies must not only develop new
businesses, but must also carefully prune, harvest, or divest tired old businesses in order to release
needed resources & reduce costs.
B*siness 0nit Strategy: The business unit strategic planning consists of eight steps(

Many strategy guidelines are offered by consultants, e.ecutives, & academics to guide
business strategy formulation. These strategy paradigms propose a range of actions including
re-engineering, THM, overall cost leadership, building distinctive capabilities, supply chain
strategy, differentiation, focus, strategic partnering, etc.
The Marketing Strategy (rocess: There are four stages of marketing strategy
process. They are(
7. Markets, %egments, & !ustomer *alue
8. esigning market driven strategy
9. Market-driven program development
=. ,mplementing & managing market-driven strategies
Markets7 Segments7 and C*stomer va!*e: Markets, segments, & customer value
consider-
Market + competitor ana!ysis: Markets need to be defined so that buyers and
competition can be analy'ed. ,dentifying the product-market, evaluation of
competitor5s strategies, strengths, limitations, and plans is a key aspect of this
analysis.
Strategic market segmentation: Market segmentation offers an opportunity for
an organi'ation to focus its business capabilities on the re#uirements of one or
more groups of buyers. The ob6ective of market segmentation is to e.amine the
differences in needs and wants to identify the segments ;subgroups< in the
product-market of interest.
Strategic c*stomer re!ationship management: $ strategic perspective on
!ustomer "elationship Management ;!"M< emphasi'es delivering superior
customer value by personali'ing the interaction between the customers and the
%?OT
$nalysis
Boal
formulation
%trategy
formulation
&rogram
formulation
,mplementation Business
mission
7. 0eedback
8. & !ontrol
company and achieving the coordination of comple. organi'ational capabilities
around the customer.
Capai!ities for contin*o*s !earning ao*t markets: :nderstanding markets
and competition has become a necessity in modern business. %ensing what is
happening and is likely to occur in the future is complicated by competitive
threats that may e.ist beyond the traditional industry boundaries. Manager and
professionals in market-driven firms are able to sense what is happening in their
markets, develop business and marketing strategies to sei'e the opportunities and
counter the threats, and anticipate what the market will be like in the future.
Designing Market-driven Strategy: esigning market-driven strategies e.amines-
Market targeting + strategic positioning: The purpose of market targeting
strategy is to select the people ;or organi'ations< that the management wishes to
serve in the product-market. The ob6ective is to find the best match between the
value re#uirements of each segment and the organi'ation5s distinctive capabilities.
(ositioning strategy is the combination of the product, value chain, price, and
promotional strategies a firm uses to position itself against its key competitors in
meeting the needs and wants of the market target.
Strategic re!ationships: Marketing relationship partner may include end-user
customers, marketing channel members, suppliers, competitor alliances, and
internal teams. The driving force underlying these relationships is that a company
may enhance its ability to satisfy customers and cope with a rapidly changing
business environment through collaboration of the parties involved.
Innovation + ne8 prod*ct strategy( 1ew products are needed to replace the old
products when sales and profit growth decline. 1ew product decisions include
finding and evaluation ideas, selecting the most promising for development,
designing the products, developing marketing programs, market testing the
products, and introducing them to the market.
Market-Driven (rogram Deve!opment: Market-driven program development consists
of-
Strategic rand management: %trategic brand management consists of building
brand value and managing the organi'ation5s system of brands for overall
performance.
,a!*e-chain 3 Distri*tion channe!4 strategy( decision that need to be made
include the type of channel organi'ation to use, the e.tent of channel
management, and the intensity of distribution appropriate for the product or
service.
(ricing strategy: &rice strategy involves choosing the role of price in the
positioning strategy, including the desired positioning of the product or brand as
well as the margins necessary to satisfy and motivate distribution channel
participants.
(romotion strategy: advertising, sales promotion, the sales force, direct
marketing, and public relation help the organi'ation to communicate with the
customers, value-chain partners, the public and other target audiences. &romotion
informs, reminds, and persuades buyers and others who influence the purchasing
process.
Imp!ementing + Managing Market-Driven Strategy: ,mplementing & managing
market-driven strategies considers the following things(
Designing market-driven organi9ation: $n effective organi'ation design
matches people and work responsibilities in a way that is best for accomplishing
the firm5s marketing strategy. Organi'ational structures and processes must be
matched to the business and marketing strategies that are developed and
implemented.
Marketing strategy imp!ementation + contro!: Marketing strategy
implementation and control consists of( ;7< &reparing the marketing plan and
budget) ;8< implementing the plan and ;9< :sing the plan in managing and
controlling the strategy on an ongoing basis.
Contents of a Marketing (!an:
Cha!!enges of a %e8 "ra for Strategic Marketing: The modern era
for a market-driven strategy involves many comple. & challenging issues for the
marketers. The challenges are pro6ected here(
4scalating Blobali'ation
Technology iversity & :ncertainty
The internet
4thical Behavior & !orporate %ocial "esponsiveness
"sca!ating 2!oa!i9ation: Blobali'ation refers to the shift toward a more integrated &
interdependent world economy. The internali'ation of business is well-recogni'ed in
terms of the importance of e.port2import trade & the growth of international
corporations. ,t is challenging for the marketers to take the advantages & disadvantages
of globali'ation.
Techno!ogy Diversity + 0ncertainty( The skills & vision re#uired to decide which
radical innovation opportunities can be successfully commerciali'ed will be e.tremely
demanding, & the risks of failure will be high. ,nnovations have the potential to
revolutioni'e a range of different industries. They demand a strategic perspective that
accepts the potential for revolution but balances this with commercial imperatives. The
danger is that conventional approaches & short-sighted management may miss out on the
most important opportunities.
The Internet: $nother challenge of a new era for strategic marketing is the internet. The
web is creating new opportunities for marketers & providing a collaboration mechanism
allowing companies to tap into the collective intelligence of employees, customers &
outsiders to solve problems & identify opportunities.
"thica! Behavior + Corporate Socia! $esponsiveness( ,n the past corporate ethics &
social responsibility may not have been center-stage in corporate & business strategy, this
situation has changed dramatically. $t present ma6or concerns about fairness & 6ustice, &
the business activities on the physical environment are high on the management agenda.