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Chapter 2
Corporate Strategy Decisions and Their
Marketing Implications
Exhibit 2.1 – Corporate Strategy Components and Issues
Exhibit 2.1 – Corporate Strategy Components and Issues
Mission Statement
Guides managers to identify market opportunities:
To be pursued
Out side the firm’s strategic domain
Helps instill:
A sense of direction, relevance, and achievement amongst employees
Defines the organization’s strategic scope
Exhibit 2.2 - Characteristics of Effective Corporate
Mission Statements
Social Values and Ethical Principles
Important to craft mission statements specifying
explicit social values, goals and programs
Ethics: Development of moral standards by which
actions and situations can be judged
Proactive than the law
The Marketing Implications of Ethical Standards
Unethical practices can:
Damage the trust between a firm and its suppliers or customers
Disrupt the development of long-term exchange
relationships
Result in the likely loss of sales and profits over time
2-7
Corporate Objectives
Components of an objective
Performance dimension
Measure or index
Target or hurdle
Time frame
Corporate Objectives
Must be SMART
Specific
Measureable
Attainable
Relevant
Time bound
Enhancing Shareholder Value
Requires balancing the interests of:
Corporate constituencies
Employees
Customers
Suppliers
Debt holders
Stockholders
Enhancing Shareholder Value
Management’s primary objective
Capital investments
Acquisitions
Business strategies
Enhancing Shareholder Value
Requires firm to set explicit objectives
Can be expressed in terms of one of the following
Economic value added
Market value added
Objectives are sometimes expressed in terms of
market value added (MVA)
Dangers of Shareholder Value Objectives
Standard accounting measures are not always
reliably linked to the true value of a company’s stock
Narrow focus on objectives lead managers to
Pay little attention to actions necessary to provide value to
the firm’s customers and sustain a competitive advantage
The Marketing Implications of Corporate Objectives
Managers can reconcile conflicting goals by
Prioritizing them
Stating one of them as a constraint
Customer-focused objectives
Satisfaction
Retention
Loyalty
2-14
Competitive Advantage
Is based on company resources that:
Other firms do not have
Take a long time to develop
Are hard to acquire
Requires developing a:
Competitive strategy for each division
Strategic marketing program for each product
2-15
Competitive Advantage
Should provide one or more superior benefits
Should be effectively communicated to potential customers
Corporate Growth Strategies
Directions that firms can go for future growth
Expansion of its current businesses and activities
Diversification into new businesses
Exhibit 2.5 - Alternative Corporate Growth Strategies
Allocating Corporate Resources
Sets of analytical tools are used in making decisions
Portfolio models
Value-based planning
Models that measure customer equity
Portfolio Models
The Boston Consulting Group’s (BCG) growth-share
matrix
Market growth rate: Proxy measure for the maturity and
attractiveness of an industry
Relative market share: Proxy for its competitive strength
within its industry
Exhibit 2.6 - BCG’s Market Growth Relative Share Matrix
Exhibit 2.7 - Cash Flows across Businesses in BCG
Portfolio Model
Value-Based Planning Method
Resource allocation tool that:
Addresses questions pertaining to worthiness of
businesses by assessing the shareholder value a given
strategy is likely to create
Provides a basis for comparing the economic returns
Value-Based Planning
Assess the economic value of a strategy by
examining the cash flows it will generate
Estimate the shareholder value produced by:
Discounting forecasted cash flows by the business’s
risk-adjusted cost of capital
Value-Based Planning
Evaluates strategies based on the likelihood that:
Investments required by a strategy will deliver returns
greater than the cost of capital
Exhibit 2.8 - Factors Affecting the Creation of Shareholder Value
Using Customer Equity to Estimate the Value of Alternative
Marketing Actions
Calculates the economic return for a prospective
marketing initiative based on:
Its likely impact on the firm’s customer equity
Sources of Synergy
Knowledge-based synergies
Function of the corporation’s scope and mission
Corporate identity and the corporate brand
Flows from the communications, impressions, and
personality projected by an organization
Corporate Branding Strategy
Company’s own name and logo serves as the brand na
me of all or most of the firm’s products
Dual branding strategy - Each offering carries
a corporate identifier and an individual product brand
Each product offering might be given a unique brand
and identity
Synergy from Shared Resources
Inherent in sharing operational resources, facilities,
and functions across business units
Helps increase economies of scale or
experience-curve effects