Chapter1.

Imperatives for
Market-Driven
Strategy

Dr. Javeria Hassan Khan

 Corporate,
Market-Driven Business, and
Strategy Marketing
Topics to be Strategy

covered Challenges of a
New Era for
Strategic
Marketing
What Is a Strategy?
• Although strategy first became a popular business buzzword during the 1960s, it continues
to be the subject of widely differing definitions and interpretations.

• The following definition, however, captures the essence of the term:

“A strategy is a fundamental pattern of present and planned objectives, resource deployments,

and interactions of an organization with markets, competitors, and other environmental
factors”.

Our definition suggests that a strategy should specify

(1) what (objectives to be accomplished),
(2) where (on which industries and product-markets to focus), and
(3) how (which resources and activities to allocate to each product-market to meet
environmental opportunities and threats and to gain a competitive advantage).
Components of Strategy
• A well-developed strategy contains five components or sets of issues:

1. Scope - the breadth of its strategic domain—the number and types of

industries, product lines, and market segments it competes in or plans
to enter.
• Decisions about an organization’s strategic scope should reflect
management’s view of the firm’s purpose or mission.
• This common thread among its various activities and product-markets
defines the essential nature of what its business is and what it should
be.
Components of Strategy
2. Goals and objectives - Strategies also should detail desired
levels of accomplishment on one or more dimensions of
performance, such as
• volume growth,
• profit contribution,
• or return on investment (ROI) —over specified time periods for
each of those businesses and product-markets and for the
organization as a whole.
Components of Strategy
3. Resource deployments- Every organization has limited financial
and human resources.
• Formulating a strategy also involves deciding how those resources
are to be obtained and allocated across
i. businesses,
ii. product-markets, and
iii. functional departments and activities within each business or
product-market.
Components of Strategy
4. Identification of a sustainable competitive advantage
• One important part of any strategy is a specification of how the
organization will compete in each business and product market
within its domain.
• How can it position itself to develop and sustain a differential
advantage over current and potential competitors?
• To answer such questions, managers must examine the market
opportunities in each business and product-market and the
company’s distinctive competencies or strengths relative to its
competitors
Components of
Strategy
5.1. Synergy
• Synergy exists when the firm’s businesses,
product-markets, resource deployments,
and competencies complement and
reinforce one another.
• Synergy enables the total performance of
the related businesses to be greater than it
would otherwise be:
“The whole becomes greater than the sum of
its parts.””.
Challenges in Modern Markets
1. Radical Market Changes
i. Rising demands for superior performance
ii. Ever-intensifying competition
iii. Blurring market and industry boundaries due to disruptive competition.

2. Customer Knowledge and Expectations

i. Unprecedented demands for superior value
ii. Increasing customer knowledge and perception in value judgments
3. New Competitive Dynamics: Web 4.0 4. External Pressures on Businesses

i. Introduction of new Internet i. Dramatic escalation of external

business models influences and lobbying
ii. Wholly new forms of competition ii. Heightened scrutiny on corporate
following the Web 1.0 dot-com responsibility and ethical
crashed standards

https://www.lizard.global/blog/what-is-
web4-explained

5. Opportunities in a Complex Market Environment

• Increased risks, but also heightened rewards for value-driven strategies
• Innovative companies (e.g., Google, eBay) and conventional industries
(e.g., Arcelor Mittal Steel) as success examples
Market Driven Strategy
• Business strategy starts with understanding the market and its customers

• Market and customer needs are the foundation of strategic decisions

• Market-driven strategy mandates a company-wide perspective

• Focus on more effective integration of activities and processes impacting

customer value.

• Developing a market-driven strategy requires long-term effort.

• Building a market-driven culture and processes takes time

The Hierarchy of Strategies
The three major levels of strategy in most large, multiproduct
organizations are
i. Corporate strategy
ii. Business-level strategy
iii. Functional strategies focused on a particular product-market
entry.
A. Corporate Strategy
• Coordination of activities across multiple business units or legal entities
(conglomerates)
• Decisions on organizational scope and resource allocation across
divisions
Key questions:
• What business(es) are we in?
• What business(es) should we be in?
• How should we allocate resources to meet overall goals?

Developing Distinctive Competencies at the Corporate Level

i. Superior human, financial, and technological resources
ii. Designing effective organizational structures and processes
iii. Achieving synergy between business units
Importance of Synergy in Corporate Strategy
Synergy as a Competitive Advantage

Shared resources across related businesses:

• R&D investments

• Product or production technologies

• Distribution channels

• Common salesforce

• Promotional themes
 Key Components
Corporate Strategy • Long-term vision
• Objectives as milestones
Framework Overview • Resource allocation
• Business portfolio
• Organizational structure and systems
• Multimarket corporate advantage
1. Defining Corporate Vision
• Vision defines what the corporation is and what it does
• Provides guidelines for managing and improving the organization
• Where the firm is headed in the future
• Based on capabilities, resources, opportunities, and challenges

Vision Development Process

i. Establishes a future direction aligned with strategic choices
ii. Involves continuous adjustments for sustainable competitive advantage

Key Actions
i. Strategy development
ii. Implementation and monitoring
iii. Adjustment to environmental changes

Role of Management in Vision

• Ongoing market and competitive environment analysis
• Vision is reviewed and updated as shifts occur in strategic direction
 2. Importance of Setting Objectives
1. Why Set Objectives? 2. Key Areas for Objectives: 3. Examples of Specific Objectives:

• To measure the • Marketing • Growth and market share expectations

performance of the • Innovation • Product quality improvements
enterprise • Resources • Employee training and development goals
• Productivity • New-product development targets
• Guide strategy and • Social responsibility • Return on invested capital
decision-making across • Finance • Earnings growth rates
the organization • Debt limits
• Energy reduction objectives
• Pollution and environmental standards

4. Levels and Time Frames of Objectives

• Objectives set at multiple levels, starting with the enterprise's overall goals
• Long-term objectives may exceed short-term financial reporting
• Use of both financial and non-financial measures to gauge success
3. Importance of Resources in Strategy
• Resources includes assets, skills, and capabilities
• Resources drive competitive advantage and shape strategy

Benefits of Resources
i. Helps firm compete across different markets
ii. Provide value to end-user customers
iii. Create barriers to competitor duplication

Role of Distinctive Capabilities:

• Essential in shaping the organization's strategy
• Match capabilities with market opportunities

Leverage Across Markets:

• Capabilities that work across different markets are highly valuable

• GoreTex Case Example

• High-performance fabric with multiple applications
• Used in industries ranging from apparel to dental products (e.g., dental floss)
4. Business Composition
• Business Composition provides direction for corporate and marketing strategy design
• Simple for single-product firms but complex for diversified companies serving multiple markets

Grouping Business Areas for Strategy:

• Firms serving multiple markets often separate businesses into segments, groups, or divisions
• Grouping similar products or services helps in decision-making and planning

Role of Strategic Business Units (SBUs)

• SBU is a strategic unit with product and customer group similarities
• Responsible for specific business functions and has a dedicated strategy

Examples of SBUs:
• A single product, a line of products, or a mix of related products targeting common market needs

Significance:
i. Business Composition: Essential for strategic planning and decision-making
ii. SBUs: Offer focus and flexibility within a larger corporate structure
iii. Strategic Coordination: Necessary between corporate management and individual SBUs for success
 5. Structure, Systems, and Processes
Components of Organizational Strategy:
• Structure: Defines the composition of the corporation
• Systems: Formal policies and procedures for operations
• Processes: Informal aspects of organizational activities
Role of Structure in Strategy Systems: Formal Policies & Procedures Processes: Informal Activities

Organizational Structure: Systems Overview: Processes Overview:

• Determines how business • Set the framework for how tasks • Focus on informal aspects
units and staff functions are are performed of organizational
controlled and coordinated operations
• Provide consistency and
efficiency across various • Relate to how people and
• Impacts strategic decisions departments and business units teams work together
and operational beyond formal systems
effectiveness
5. Structure, Systems, and Processes
Business Design (Business Model)
• The totality of how a company selects customers, differentiates offerings,
configures resources, and captures profit
Elements of Business Design:
• Customer selection
• Defining and differentiating offerings
• Task performance (internal vs. outsourced)
• Going to market and creating utility for customers
Focus Beyond Product and Technology
• Business design focuses on processes and relationships, not just product or technology
• Ensures alignment of operations with strategic goals
Significance:
i. Structure, Systems, and Processes: Critical to control, coordinate, and
optimize business activities
ii. Business Design: Offers a comprehensive approach to delivering value
and profitability beyond the product itself
B. Business-Level Strategy
• Business-Level Strategy focus on competing effectively within a specific industry
• The key concern is Sustainable Competitive Advantage
i. What distinctive competencies can give the business unit a competitive
advantage?
ii. Which of those competencies best match the needs and wants of the
customers in the business’s target segment(s)?

1. Competitive Advantage and Distinctive Competencies

i. Identify distinctive competencies that offer a competitive edge
ii. Align competencies with customer needs and target segments

Example Strategies:
• Low-cost strategy: Low-cost supply sources, efficient production
• Differentiation strategy: Strong marketing and superior customer service
B. Business-Level Strategy
2. Market Scope and Segmentation
i. Determining how many market segments to target
ii. Choosing the breadth of product offerings and marketing programs
iii. Tailoring strategies to appeal to target segments

3. Achieving Synergy at Business Level

i. Leveraging synergy across product markets
ii. Promoting collaboration across functional departments for strategic
advantage
C. Marketing Strategy
1. Primary Focus of Marketing Strategy is to:
i. Allocate and coordinate marketing resources
ii. Achieve firm’s objectives within specific product-markets

2. Scope of Marketing Strategy is to:

i. Identify specific product or product line’s target market(s)
ii. Tailor marketing strategy to meet the needs of potential customers in
those markets

3. Competitive Advantage and Synergy is to

i. Develop a well-integrated marketing program to stand out from
competitors
ii. Seek synergy across marketing efforts to maximize impact
Business and Marketing Strategy Relationships
• Understanding business purpose, scope, objectives, resources, and strategy is
essential for designing consistent marketing strategies
• Marketing must align with corporate and business unit plans of action

Marketing Executive’s Role in Business Strategy

i. 1. Participation in Strategy Formulation: Contribute to business strategy
development
ii. 2. Developing Marketing Strategies: Ensure marketing is aligned with business
priorities and other functions

Peter Ducker’s View

• Not just a separate function but a central dimension of the entire business
• Customer-Centric Perspective: Business must be viewed from the customer’s point of
view

Advocating for the Customer:

• Marketing managers champion customer-first decision-making in corporate strategy
• They also communicate the firm’s value proposition internally and externally
Strategic Marketing
1. Key Activities
i. Market Vision Development: Analyze markets of interest
ii. Target Market Selection: Choose strategies for specific market segments
iii. Objective Setting: Define measurable goals for performance
iv. Marketing Program Management: Implement and position marketing strategies to meet
customer value requirements
v. Adapting to a Changing Environment:
• Marketing strategy evolves with a dynamic business landscape
• Focus is on delivering superior customer value rather than just increasing sales

2. Role of Strategic Marketing

Performance-Oriented Focus:
i. Links the organization with its environment.
ii. Ensures marketing is viewed as a responsibility of the entire business rather than a
specialized function
Marketing Strategy Process
• Overview of Stages:
• Analysis, Planning, Implementation, and Management
• Designed to address customer value and market-driven strategies
Elements of the Marketing Strategy Process

1. Markets, Segments, and Customer Value

2. Designing Market-Driven Strategy

3. Market-Driven Program Development

4.Implementing and Managing Market-Driven Strategies

1. Markets, Segments, and Customer Value
• Define the product-market and understand buyer preferences
• Evaluate competitors’ strategies, strengths and limitations

Strategic Market Segmentation:

• Identify subgroups within the market based on different needs and preferences
• Focus on segments where organizational capabilities match buyer value
requirements

i. Objective: Examine differences in needs and wants across customer

subgroups
ii. Approach: Segment based on characteristics like purchase behavior,
industry type, and brand preferences
iii. Outcome: Better targeting of capabilities to meet buyer demands
Strategic Customer Relationship Management (CRM)
i. Deliver superior customer value through personalized engagement.
ii. Integrate complex organizational capabilities around customer needs
iii. CRM is vital for market targeting, positioning strategies, and retaining
customers

Continuous Learning About Markets

i. Sensing current market trends and anticipating future changes
ii. Seizing opportunities and countering threats beyond traditional industry
boundaries
iii. Use data-driven methods to guide information collection and analysis for
future planning
2. Designing Market-Driven Strategy
• Tailoring strategies to reach and serve the most valuable customer
segments

• Build long-term relationships through trust and value creation

• Focus on creating new products that align with market demand

3. Market-Driven Program Development
Developing Strategies for:

Branding: Establish strong brand equity

Value Chain: Optimize supply chain and delivery to customers

Pricing and Promotion: Set competitive prices and create effective

promotional campaigns

Sales Strategies: Drive growth by meeting the value expectations of buyers

4. Implementing and Managing Strategies
• Structure the organization to support the marketing strategy
• Monitor performance and adjust as needed for success

The Marketing Strategy Process

Holistic Approach:
• Market analysis, CRM, and continuous learning drive successful
strategies
• Integration of customer value at every stage ensures competitive
advantage
Designing Market-Driven Strategies
Purpose:
• Identify market opportunities

• Define market segments

• Assess competition

• Evaluate the organization's strengths and weaknesses

Market Sensing and Information Gathering
• Market Sensing Information:

• Critical for understanding customer needs, market dynamics, and

competition

• Provides foundation for strategy decisions in targeting, positioning, and

relationship-building
Market Targeting and Strategic Positioning

• When, where, and how to compete based on the firm’s market and
competitive environment

• Market targeting strategy: Identifying the customers or organizations to

serve in a product-market

• Positioning strategy: Setting the product, price, promotion, and value

chain strategies to meet segment needs effectively
Market Targeting Strategy
• Select segments with the best match between the value requirements
of customers and the firm’s distinctive capabilities

• Identify and prioritize segments based on importance to the firm

• Develop targeting strategy to match each segment with the organization's
strengths
Strategic Positioning Process
Product positioning: Differentiating the product to meet specific segment
needs

Competitive positioning: Establishing how the product compares to

competitors

Desired outcomes: Sales growth, customer retention, market share, and

profit contributions
Marketing Mix: Tactics for Positioning
Product Strategy:
• Design products/services that resonate with targeted segments

Value Chain Strategy:

• Ensure efficient and effective delivery of value

Pricing Strategy:
• Set prices that reflect both value to the customer and market conditions

Promotion Strategy:
• Tailor communication efforts to build brand awareness and position effectively
against competitors
Positioning for Long-Term Success
Sustaining Competitive Advantage:

• Continuous evaluation and adjustment of positioning strategy based on

market feedback and competitive shifts

• Use of market sensing for future strategies and product development

Strategic Relationships in Marketing
• Key marketing relationships with end-users, channel members, suppliers,
competitor alliances, and internal teams
• Collaboration enhances customer satisfaction and adaptability in a dynamic
environment

Types of Strategic Marketing Relationships

End-User Customers:
• Direct relationships through customer engagement, loyalty programs, and
personalized marketing strategies
Marketing Channel Members:
• Collaboration with distributors, retailers, and wholesalers to streamline product
flow and meet customer demand
Types of Strategic Marketing Relationships

Suppliers:
• Strong partnerships to ensure quality, reduce costs, and drive innovation in
product development

Competitor Alliances:
• Strategic alliances for co-creation, joint ventures, or industry-wide
collaborations to capitalize on mutual strengths

Internal Teams:
• Cross-functional collaboration between marketing, R&D, and operations to
align goals and deliver value efficiently
Importance of Building Long-Term
Relationships
Superior customer value: Enhanced service quality and product offerings
through sustained collaboration

Adaptability: Partnerships enable firms to adjust swiftly to changes in the

business landscape

Shared resources: Pooling expertise, technology, and other assets to

boost innovation and efficiency
Strategic Partnering in Action
Outsourcing Manufacturing:
• Example: Many global companies outsource manufacturing (e.g., Apple,
Nike) while maintaining strong relationships with suppliers to ensure
product quality and brand consistency

Co-Branding and Collaborations:

• Example: Strategic collaborations between brands (e.g., Red Bull and
GoPro) enhance customer reach and value
Role of Strategic Partnerships in Success
i. Strategic partnerships help brands innovate, expand reach, and
improve efficiency

ii. Both the company and its partners benefit from shared success,
leading to stronger market positioning

iii. Partnerships help in staying closer to customer needs and delivering

value more effectively
Managing and Sustaining Strategic
Relationships
i. Regular, open communication to align on objectives and performance

ii. Building trust over time through consistent quality, reliability, and
shared goals

iii. Continuously evaluating the effectiveness of partnerships and making

adjustments as needed