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Chapter 3 Marketing’s Strategic Role in the Organization Jason C. H. Chen, Ph.D. Professor School of Business Administration Gonzaga University Spokane, WA 99223 [email protected] 3-1 Irwin/McGraw-Hill & Dr. Chen After studying this chapter, you should be able to: 3-2 Discuss the three basic levels in an organization and the types of strategic plans developed at each level. Understand the organizational strategic planning process and the role of marketing in this process. Describe the key decisions in the development of corporate strategy. Irwin/McGraw-Hill & Dr. Chen After studying this chapter, you should be able to: Understand the different general business strategies and their relationship to business marketing, product marketing, and international marketing strategies. Realize the importance of relationships and teamwork in executing strategic plans. 3-3 Irwin/McGraw-Hill & Dr. Chen OPENING VIGNETTE WWW.DISNEY. COM 1. What are the four business segments of Disney? 2. What are the long run objectives of Disney’s? 3. Can the development of a marketing strategy help Disney? How? 3-4 Irwin/McGraw-Hill & Dr. Chen Planning is everything ... develop Customers, market, competition Vision guide Strategy create Tactic Products, Services N 3-5 Irwin/McGraw-Hill & Dr. Chen IT Planning: The Relationship Between Business, IS, and IT Strategies IT Impact and potential Business Strategy • Business Decisions • Objectives and Direction • Change Supports business Direction for business IS Strategy • Business Based • Demand Orientated • Application Focused Infrastructure And services • Activity Based • Supply Orientated • Technology Focused Irwin/McGraw-Hill & Dr. Chen What is required Needs and priorities IT Strategy 3-6 Where is the business going and why How it can be delivered Focusing Marketing Strategy and Evaluating Market Opportunities Opportunities to be turned Into marketing strategies and plans Evaluating Opportunities Focusing marketing Strategy Defining generic markets and product-markets 3-7 Targeting and Segmentation Irwin/McGraw-Hill & Dr. Chen S.W.O.T Analysis Positioning and Differentiation Company mission, objectives, resources Develop product market Screening criteria Competitor analysis Trends in external environment: Technological, Economic, Political & Legal Cultural & Social Organizational Levels The Corporate Level is the highest level in any organization. The Business Level consists of units within the overall organization that are generally managed as self-contained businesses. The Functional Level includes all the various functional areas within a business unit. 3-8 Irwin/McGraw-Hill & Dr. Chen I. Organizational Strategic Planning Higher organizational level strategic plans provide direction for strategic plans at lower levels. 3-9 Irwin/McGraw-Hill & Dr. Chen Lower-level plans are developed to execute higher-level plans. Competitive Advantage • Competitive advantage: the firm has a marketing mix that the target market sees as better than a competitor's mix – A better marketing mix offers target customers better customer value – Note: customers who are not in the target market may not see the marketing mix as offering better value • Requires that the firm: – understand current competitors' offerings – anticipate competitors' likely plans – monitor effects of changes in competition – REALLY understand the target customers' needs 3-10 Irwin/McGraw-Hill & Dr. Chen Shout and Crème Saver ads 3-11 Irwin/McGraw-Hill & Dr. Chen STRATEGY How to cope with a dynamic environment, capitalizing on opportunities and handling threat … How to adopt an integrated system orientation … How to be a market driven organization = STRATEGIC PLANNING. Company-Wide Level Mission Statement (Marketing Concept Orientation) Objectives and Goals Grand Strategy Impact of Competition and other Environmental Items Marketing Strategy and Tactics Target Market (Segments, Position) Marketing Mix P P P Product Place P C Offering to the Market --------Feedback of Results--------- 3-12 Irwin/McGraw-Hill & Dr. Chen Price Promotion Types of Strategic Plans (Exhibit 3-1; p.49) 3-13 Organizational Level Type of Strategic Plan Key Strategic Decisions Corporate Corporate strategic plan Corporate vision Objectives & resource allocation Growth strategies Business Business strategic plan Market scope Competitive advantage Marketing Marketing strategic plan Target market Marketing mix Product marketing plan Specific target market Specific marketing mix Execution action plan Irwin/McGraw-Hill & Dr. Chen Marketing Strategy Planning Process • Narrowing down from broad market opportunities that a firm might pursue to a specific strategy – Marketing strategy specifies a specific target market and a specific marketing mix – Not just “some” strategy, but one that will offer target customers superior value • Segmentation helps pinpoint a specific target market • Differentiation helps pinpoint a marketing mix that is different from and better than what is available from a competitor • Screening criteria make it clear why you select a specific strategy (and why others are “screened out”) • S.W.O.T. analysis identifies and lists a firm’s strengths and weaknesses and its opportunities and threats – S.W.O.T helps identify relevant screening criteria (what is needed to get a competitive advantage) 3-14 Irwin/McGraw-Hill & Dr. Chen A Marketing Strategy C 3-15 Irwin/McGraw-Hill & Dr. Chen Marketing Strategy Marketing strategy can be defined as the firm’s identification of desirable market segments and the development of appropriate marketing mixes to appeal to these segments. 3-16 Irwin/McGraw-Hill & Dr. Chen A Marketing Strategy – showing the 4 P’s of a Marketing Mix Product Place C Price 3-17 Irwin/McGraw-Hill & Dr. Chen Promotion Overview of Marketing Strategy Planning Process Narrowing down to focused strategy with quantitative and qualitative screening criteria Customers Needs and other Segmenting Dimensions Company Objectives & Resources S. W. O. T. Segmentation & Targeting Segmentation & Positioning Current & Prospective External Market Environment Technologies Political and Legal Cultural and Social Economic Irwin/McGraw-Hill & Dr. Chen Place C Competitors 3-18 Product Price Promotion Japanese McDonalds photo 3-19 Irwin/McGraw-Hill & Dr. Chen Narrowing Down to Target Markets Select target marketing approach Segmenting into possible target markets Narrowing down to specific product-market All customer needs Some generic market One broadproduct market Homogenous (narrow) productmarkets Single target marketing approach Multiple target marketing approach Combined target marketing approach 3-20 Irwin/McGraw-Hill & Dr. Chen The Strategic Role of Brand Loyalty Generating Market Share Developing a Strong Customer Base Customer Equity 3-21 Irwin/McGraw-Hill & Dr. Chen The Learning Process Drive Cues Reinforcement Response 3-22 Irwin/McGraw-Hill & Dr. Chen The Strategic Planning Process Exhibit 3-2 Examine current situation General Strategic Planning Identify potential threats & opportunities See also Appendix A (p. 501) 3-23 Irwin/McGraw-Hill & Dr. Chen Set objectives Develop strategies Execute IT Planning: Basic four-stage model 3-24 Dr. Chen, The Trends of the Information Systems Technology Irwin/McGraw-Hill & Dr. Chen TM -24 The Role of Marketing 1. Strategic Marketing: Marketing activities that affect corporate, business, and marketing strategic plans. See also Exhibit 3-3 (p.52) 3-25 Irwin/McGraw-Hill & Dr. Chen The Role of Marketing (Activities) Marketers orient everyone in the organization toward markets and customers. Marketers analyze the current situation, identify trends in the marketing environment, and assess the potential impact of these trends. Marketers development corporate, business, and marketing strategic plans. 3-26 Irwin/McGraw-Hill & Dr. Chen The Role of Marketing (cont.) 2. Marketing Management: 3-27 Relates to specific product marketing strategies. Develop and execute product marketing plans Irwin/McGraw-Hill & Dr. Chen 3. Networks: Comprise strategic alliances among suppliers, distributors, and the marketing firm. Marketing Strategy and the Internet After the failure of many dot com companies Rewrite the rules of business Lessons firms should learn Three basics of business success Customers Capabilities Competitive advantages Future 3-28 impact of the Internet Irwin/McGraw-Hill & Dr. Chen Three Ways to Develop Market-Oriented Strategies • Single Target Market Approach – select one homogeneous segment as the target • Multiple Target Market Approach – select two or more target segments – develop a different marketing mix for each segment • Combined Target Market Approach – combine submarkets into a single target market – develop one marketing mix for the combined target 3-29 Irwin/McGraw-Hill & Dr. Chen © 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Basic Marketing II. Corporate Strategy Decisions Corporate Vision Corporate Objectives & Resource Allocation Corporate Growth Strategies Business-unit Composition 3-30 Irwin/McGraw-Hill & Dr. Chen Corporate Vision Corporate Vision: The basic values of an organization. 3-31 Irwin/McGraw-Hill & Dr. Chen The vision specifies what the organization stand for, where it plans to go, and how it plans to get there. What Comprises Corporate Vision? Markets Products and services Geographic domain Core competencies Organizational objectives Organizational philosophy Organizational self-concept Desired public image 3-32 Irwin/McGraw-Hill & Dr. Chen Exhibit 3-4 (p.54) Core Purpose: A Company’s Reason for Being 3-33 3M: To solve problems innovatively. Hewlett-Packard: To make technical contributions for the advancement and welfare of humanity. Mary Kay Cosmetics: To give unlimited opportunity to women. Merck: To preserve and improve human life. Sony: To experience the joy of advancing and applying technology for the benefit of the public. Wal-Mart: To give ordinary folks the chance to buy the same things as rich people. Irwin/McGraw-Hill & Dr. Chen Exhibit 3-5 (p.54) Core Purpose Core Competency: 3-34 A bundle of skills that are possessed by individuals across the organization. Irwin/McGraw-Hill & Dr. Chen Questions Leading to an Effective Corporate Vision 1. 2. 3. 4. 5. 6. 7. 3-35 Which customers will you be serving in the future? Through which channels will you reach customers in the future? Who will be your competitors in the future? Where will your margins come from in the future? In what end-product markets will you participate in the future? What will be the basis for your competitive advantage in the future? What skills or capabilities will make you unique in the future? Irwin/McGraw-Hill & Dr. Chen Exhibit 3-6 (p.55) Corporate Objectives and Resource Allocation Corporate objectives specify the achievement of desired levels of performance during particular time periods. 3-36 Irwin/McGraw-Hill & Dr. Chen Corporate Objectives and Resource Allocation Corporate objectives and resource allocation affect marketers in 2 basic ways: 2) Providing guidance for the development and Implementation of marketing strategies. 1) In setting the objectives for different organizational levels. 3-37 Irwin/McGraw-Hill & Dr. Chen New or Existing Customers Which one is more important Growth and new-customer generation, or Retain existing customer Two important capabilities of successful market-oriented firms Market sensing capability Customer-linking capability By George Day, Wharton School of Business 3-38 Irwin/McGraw-Hill & Dr. Chen Corporate Growth Strategies (Four Basic Types of Opportunities) 3-39 Present New Present Market Penetration Product Expansion New Markets Products Market Expansion Diversification Irwin/McGraw-Hill & Dr. Chen Examples of Different Types of Opportunities • Market Penetration – Arm & Hammer promotes new uses of its baking soda • Market Development – Marriott Hotels target families for weekend "getaways" to rent rooms filled by business travelers during the week • Product Development – Microsoft develops a new version of its Windows operating system to appeal to the people who bought an earlier version but now want more features • Diversification – RJR, the cigarette producer, adds baked goods to its product line to appeal to new customers 3-40 Irwin/McGraw-Hill & Dr. Chen Business-Unit Composition Strategic Business Unit (SBU): 3-41 Focuses on “a single product or brand, a line of products, or mix of related products that meets a common market need or a group or related needs, and the unit’s management is responsible for all (or most) of the basic business functions” Irwin/McGraw-Hill & Dr. Chen Business-Unit Composition 3-42 Companies often organize around competency-based SBUs to establish Sustained Competitive Advantage. Irwin/McGraw-Hill & Dr. Chen III. Business Strategy Decisions 3-43 The basic objective of a business strategy is to determine how the business unit will compete successfully. Irwin/McGraw-Hill & Dr. Chen Business Strategy Decisions Dimensions of Strategy: Market scope. How broadly the business views its target market. 3-44 Competitive advantage. Irwin/McGraw-Hill & Dr. Chen Competitive Advantage: The way a business tries to get consumers to purchase its products over those offered by competitors. General Business Strategies Market Scope 3-45 Low price Differentiation Competitive Advantage Focused Irwin/McGraw-Hill & Dr. Chen • Easyjet Broad • Southwest • Jet Blue • Conair • Alaskan Airlines • Midwest • American Global carriers • Delta • United Jet Blue The Rule of Three The Rule of Three: 3-46 Naturally occurring competitive forces will create a consistent structure in many mature markets. Irwin/McGraw-Hill & Dr. Chen Three major players often compete by offering a wide range of related products and services and serve most major market segments. IV. Marketing Strategy Decisions A Marketing Strategy Addresses: • Selection of a target market. • Development of a marketing mix. Functional strategies are at the business-unit level. Operating strategies are at the product level. 3-47 Irwin/McGraw-Hill & Dr. Chen Business & Product Marketing Strategies Decision Area Business Marketing Strategy Product Marketing Strategy Target market Segmented or mass approach Specific definition of target market Product Number of different products Specific features of each product Price General competitive price level Specific price Distribution General distribution policy Specific distributions Marketing communications General emphasis on marketing communications tools Specific marketing communications program 4P’s= Product + Price + Promotion + Place 3-48 Irwin/McGraw-Hill & Dr. Chen Exhibit 3-11, p.63 Alternative Views of Strategy The implicit Strategy Model of the Past Decade • One ideal competitive position in the industry • Unique competitive position for the company • Benchmarking of all activities and achieving best practice • Activities tailored to strategy • Aggressive outsourcing and partnering to gain efficiencies • Advantages rest on a few success factors, critical resources, core competencies • Flexibility and rapid responses to all competitive and market changes 3-49 Sustainable Competitive Advantage Irwin/McGraw-Hill & Dr. Chen • Clear trade-offs and choices vis-à-vis competitors • Competitive advantage arises from fit across activities • Sustainability comes from the activity system, not the parts • Operational effectiveness a given International Marketing Strategies Entry Strategy: The Basic Options: 3-50 The approach used to market products in an international market. Exporting Joint Ventures Direct Investment Irwin/McGraw-Hill & Dr. Chen International Strategic Orientation: Selection of a (international) strategic orientation. International Marketing Strategies Standardized Marketing Strategy: The same product, price, distribution, & promotion programs in all international markets. Customized Marketing Strategy: A different marketing mix for each target market country. Global strategy vs. Multinational strategy 3-51 Irwin/McGraw-Hill & Dr. Chen Effective Global Branding Four common ideas about effective global branding: Stimulate the sharing of insights and best practices across countries Support a common global brand-planning process Assign managerial responsibility for brands in order to create cross-country synergies and to fight local bias Execute brilliant brand-building strategies A study of 35 countries in Japan, Europe, and the US 3-52 Irwin/McGraw-Hill & Dr. Chen “… In turbulent times, an enterprise has to be managed both to withstand sudden blows and to avail itself of sudden unexpected opportunities. This means that in turbulent times the fundamentals have to be managed, and managed well.” Source: P. Drucker, Managing in Turbulent Times, 1980 3-53 Irwin/McGraw-Hill & Dr. Chen Environmental Drivers Globalization Environmental Drivers Time compression 3-54 Irwin/McGraw-Hill & Dr. Chen Technology Integration Framework for Global Competition: Alignment of Global Vision with IT using Global Drivers Globalization Global Vision and Strategy Global Drivers Network Organization Information Technology • Data • Application • Infrastructure N 3-55 Irwin/McGraw-Hill & Dr. Chen V. Executing Strategic Plans with Teamwork 3-56 1. Cross-Functional Teamwork 2. Marketing Teamwork 3. Co-Marketing Alliances Irwin/McGraw-Hill & Dr. Chen Business Function Orientations 3-57 Function Basic Orientation Marketing Production Finance Accounting Purchasing R&D Engineering To attract and retain customers To produce products at lowest cost To keep within budgets To standardize financial reports To purchase products at lowest cost To develop newest technologies To design product specifications Irwin/McGraw-Hill & Dr. Chen Management vs. Leader Management Planning Budgeting Organizing Staffing Controlling Problem-solving Leadership Establishing direction Aligning people Motivating Inspiring Empowering Problem-preventing “Soft” Interpersonal Skills •Effective communication •Working with conflict •Deep listening •Relationship building •Facilitating •Understanding how to work •Negotiating effectively in teams •Knowing when to say NO! 3-58 Dr. Chen, Information, Organization, Control Irwin/McGraw-Hill & Dr. and Chen TM -58 Business Drivers Market Technology Regulation Employees/ Work Organization Business Processes Solution to Business Requirements 3-59 Dr. Chen, Information, Organization Control Irwin/McGraw-Hill & Dr.and Chen A Systematic Approach Vision Strategy Tactics Business Plan Competitive Options Roles and Relationships Redefine/ Define Telecommunications as the Delivery Vehicle Success Factor Profile 3-60 Irwin/McGraw-Hill & Dr. Chen Business Systems Planning (BSP) Approach (Top-Down) Business strategies Business processes Data classes Applications Organizational databases Information architecture 3-61 Irwin/McGraw-Hill & Dr. Chen IT Planning: Stages, Methods, and Outputs Dr. Chen, IT Operations and Management Processes TM -62 N