Chapter 1
Market-Oriented Perspectives Underlie
Successful Corporate, Business, and Marketing
Strategies
I. “Samsung—Changing Strategies to Build a Global Brand” discusses Samsung’s strategic
transition from a cost-driven competitive strategy to a new and ambitious competitive strategy
that made Samsung the most valuable consumer electronics brand today.
II. Strategic challenges addressed in Chapter 1
Chapter 1 tackles some of the questions of importance raised by the interrelationships
among the various levels of strategy (corporate strategy, business-level strategy,
marketing strategy, etc.) marketing managers as well as managers in other functional
areas and top executives must resolve:
oWhat do strategies consist of, and do they have similar or different components at the
corporate, business, and functional levels?
oWhile marketing managers clearly bear the primary responsibility for developing
strategic marketing plans for individual product offerings, what role do they play in
formulating strategies at the corporate and divisional or business unit level?
oWhy do some organizations pay more attention to customers and competitor when
formulating their strategies (i.e. why are some firms more market-oriented) than
others, and does it make any difference in their performance?
oWhat specific decisions and analytical processes underlie the formulation and
implementation of effective marketing strategies?
III. Three levels of strategy: Similar components but different issues
A. What is Strategy?
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.
The definition suggests that a strategy should specify:
oWhat (objectives to be accomplished)
oWhere (on which industries and product-markets to focus)
oHow (which resources and activities to allocate to each product-market to
meet environmental opportunities and threats and to gain a competitive
advantage)
B. The Components of Strategy
A well-developed strategy contains five components, or sets of issues:
oScope: The scope of an organization refers to the breadth of its strategic
domain—the number and types of industries, product lines, and market
segments it competes in or plans to enter.
oGoals and objectives: Strategies should detail desired levels of
accomplishment on one or more dimensions of performance—such as volume
growth, profit contribution, or return on investment—over specified time
periods for each of those businesses and product-markets and for the
organization as a whole.
oResource deployments: Formulating a strategy involves deciding how the
resources are to be obtained and allocated across businesses, product-markets,
and functional departments and activities within each business or
product-market.
oIdentification 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.
oSynergy: Synergy exists when the firm’s businesses, product-markets,
resource deployments, and competencies complement and reinforce one
another.
C. The Hierarchy of Strategies
Most organizations have a hierarchy of interrelated strategies, each formulated at a
different level of the firm.
The three major levels of strategy in most large, multiproduct organizations are:
oCorporate strategy
oBusiness-level strategy
oFunctional strategies, focused on a particular product-market entry
Strategies at all three levels contain the five components (scope, goals and
objectives, resource deployments, identification of a sustainable competitive
advantage, and synergy), but because each strategy serves a different purpose
within the organization, each emphasizes a different set of issues.
D. Corporate Strategy
At the corporate level, managers must coordinate the activities of multiple business
units and, in case of conglomerates, even separate legal business entities.
E. Business-level strategy
How a business unit competes within its industry is the critical focus of
business-level strategy.
F. Marketing strategy
The primary focus of marketing strategy is to effectively allocate and coordinate
marketing resources and activities to accomplish the firm’s objectives within a
specific product market.
IV. What is Marketing’s Role in Formulating and Implementing Strategies?
The wide-ranging influence of marketing managers on higher-level strategic decisions is
clearly shown in a survey of managers in 280 U.S. and 234 German business units of firms
in the electrical equipment, mechanical machinery, and consumer package goods
industries.
The study found that, on average, marketing and sales executives exerted significantly
more influence than managers from other functions on strategic decisions concerning
traditional marketing activities, such as advertising messages, pricing, distribution,
customer service and support, and measurement and improvement of customer satisfaction.
A. Variations in Marketing’s Strategic Influence
Although marketing managers often have substantial influence on strategy
formation at the corporate and business unit levels, the strength of that influence
varies across organizations.
Marketing is more influential in firms that have strong “customer-connecting”
capabilities, especially when marketing has responsibility for the sales force.
B. Market-Oriented Management
Marketing managers do not play an equally extensive strategic role in every firm
because not all firms are equally market-oriented.
Market-oriented organizations tend to operate according to the business philosophy
known as the marketing concept.
oThe marketing concept holds that the planning and coordination of all
company activities around the primary goal of satisfying customer needs is
the most effective means to attain and sustain a competitive advantage and
achieve company objectives over time.
Market-oriented firms are characterized by a consistent focus by all personnel in all
departments and at all levels on customers’ needs and competitive circumstances in
the market environment.
oThey also are willing and able to quickly adapt products and functional
programs to fit changes in the market environment.
Market-oriented firms also adopt a variety of organizational procedures and
structures to improve the responsiveness of their decision-making, including using
more detailed environmental scanning and continuous, real-time information
systems; seeking frequent feedback from and coordinating plans with key
customers and major suppliers; etc.
oThese and other actions make an organization more market-driven and
responsive to environmental changes.
C. Do Customers Always Know What They Want?
Some managers argue that customers cannot always articulate their needs and
wants, in part because they do not know what kinds of products or services are
technically possible.
Critics of a strong customer focus argue that paying too much attention to customer
needs and wants can stifle innovation and lead firms to produce nothing but
marginal improvements or line extensions of products and services that already
exist.
One way to resolve the conflict between the views of technologists and marketers is
to consider the two components of R&D:
oMost consumers have little knowledge of scientific advancements and
emerging technologies. Therefore, they usually don’t—and probably
shouldn’t—play a role in influencing how firms allocate their research dollars
because they have little knowledge of scientific advancements.
oA customer focus is critical to development. Someone within the organization
must have either the insight and market experience or the substantial
customer input necessary to decide what product to develop from a new
technology, what benefits it will offer to customers, and whether customers
will value those benefits sufficiently to make the product a commercial
success.
D. Does Being Market-Oriented Pay?
By paying careful attention to customer needs and competitive threats—and by
focusing activities across all functional departments on meeting those needs and
threats effectively—organizations should be able to enhance, accelerate, and reduce
the volatility and vulnerability of their cash flows.
Profitability is the third leg, together with a customer focus and cross-functional
coordination, of the three-legged stool known as the marketing concept.
The marketing concept is consistent with the notion of focusing on only those
segments of the customer population that the firm can satisfy both effectively and
profitably.
Substantial evidence supports the idea that being market-oriented pays dividends, at
least in developed economy.
E. Factors That Mediate a Firm’s Market Orientation
Among the reasons firms are not always in close touch with their market
environments are these:
oCompetitive conditions may enable a company to be successful in the short
run without being particularly sensitive to customer desires.
oDifferent levels of economic development across industries or countries may
favor different business philosophies.
oFirms can suffer from strategic inertia—the automatic continuation of
strategies successful in the past, even though current market conditions are
changing.
Competitive Factors Affecting a Firm’s Market Orientation
oEarly entrants into newly emerging industries, particularly industries based on
new technologies, are especially likely to be internally focused and not very
market-oriented.
oThere are likely to be relatively few strong competitors during the formative
years of a new industry, customer demand for the new product is likely to
grow rapidly and outstrip available supply, and production problems and
resource constraints tend to represent more immediate threats to the survival
of such new businesses.
oBusinesses facing such market and competitive conditions are often
product-oriented or production-oriented. They focus most of their attention
and resources such functions as product and process engineering, production,
and finance in order to acquire and manage the resources necessary to keep
pace with growing demand.
oAs industries grow, they become more competitive. Industry capacity often
grows faster than demand, and the environment shifts from a seller’s market
to a buyer’s market.
oFirms often respond to changes with aggressive promotional activities—such
as hiring more salespeople, increasing advertising budgets, or offering
frequent price promotions—to maintain market share and hold down unit
costs.
oThis kind of sales-oriented response to increasing competition focuses on
selling what the firm wants to make rather than on customer needs.
oSpending more on selling efforts does not create a sustainable competitive
advantage.
oAs industries mature, sales volume levels off, and technological differences
among brands disappear, as manufacturers copy the best features of each
other’s products.
oManagers can most readily appreciate benefits of a market orientation and
marketers are often given a bigger role in developing competitive strategies at
this stage.
The Influence of Different Stages of Development across Industries And Global
Markets
oIndustries that are in earlier stages of their life cycles or that benefit from
factors reducing the intensity of competition are likely to have relatively
fewer market-oriented firms.
oGiven that entire economies are in different stages of development around the
world, the popularity—and even the appropriateness—of different business
philosophies may also vary across countries.
oInternational differences in business philosophies can cause some problems
for the globalization of a firm’s strategic marketing programs, but it can
create some opportunities as well, especially for alliances or joint ventures.
Strategic Inertia
oIn some cases, a firm that achieved success by being in tune with its
environment loses touch with its market because managers become reluctant
to tamper with strategies and marketing programs that worked in the past.
oSuch strategic inertia is dangerous because customers’ needs and competitive
offerings change over time.