1. The Marketing Implications of Corporate and Business Strategies
Chapter 2
The Marketing Implications of Corporate and Business Strategies
McGraw-Hill/Irwin
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Marketing’s Role in Formulating and Implementing Strategies
Marketing managers are not only responsible for developing strategic plans for their own product-market entries, but also are often primary participants and contributors to the planning process at the business and corporate level as well.

3. Marketing’s Role in Formulating and Implementing Strategies
Market oriented management
The 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.
Characterized by a consistent focus on customers’ needs and competitive circumstances in the market environment.

4. Marketing’s Role in Formulating and Implementing Strategies
Does being market-oriented pay?
Organizations should be able to enhance, accelerate, and reduce the volatility and vulnerability of their cash flows.
And that should enhance their economic performance and shareholder value.
Profitability is the third leg, together with a customer focus and cross-functional coordination, of the three-legged stool known as the marketing concept.

5. Marketing’s Role in Formulating and Implementing Strategies
Does being market-oriented pay?
Interpreting the marketing concept as a philosophy of trying to satisfy all customers’ needs regardless of the cost would be a prescription for financial disaster.
Studies indicate that a market orientation has a significant positive effect on return on assets, sales growth, and new product success.

6. Marketing’s Role in Formulating and Implementing Strategies
Factors that mediate marketing’s strategic role
Competitive conditions may enable a company to be successful in the short run without being particularly sensitive to customer desires.
Product-orientation or production-orientation
Sales-orientation

7. Marketing’s Role in Formulating and Implementing Strategies
Factors that mediate marketing’s strategic role
Different levels of economic development across industries or countries may favor different business philosophies
Firms can suffer from strategic inertia—the automatic continuation of strategies successful in the past, even though current market conditions are changing.

8. Three Levels of Strategy: Similar Components, but Different Issues
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 hierarchy of strategies
Corporate strategy
Business-level strategy
Functional strategies

9. Three Levels of Strategy: Similar Components, but Different Issues
The components of strategy:
Scope
Goals and objectives
Resource deployments
Identification of a sustainable competitive advantage
Synergy

10. Three Levels of Strategy: Similar Components, but Different Issues
Corporate strategy
Decisions about the firm’s scope and resource deployments across its businesses are the primary focus of corporate strategy.
Essential questions at this level:
What business(es) are we in?
What business(es) should we be in?
What portion of our total resources should we devote to each of these businesses?

11. Three Levels of Strategy: Similar Components, but Different Issues
Business-level strategy
A major issue in a business strategy is that of sustainable competitive advantage.
It must address appropriate scope.
Synergy should be sought across product-markets and across functional departments within the business.

12. Three Levels of Strategy: Similar Components, but Different Issues
Marketing strategy
The primary focus is to effectively allocate and coordinate marketing resources and activities to accomplish the firm’s objectives within a specific product-market.
A critical issue is specifying the target market(s) for a particular product or product line.

13. The Marketing Implications of Corporate Strategy Decisions
A corporate mission statement should clearly define the organization’s strategic scope.
It should answer the following fundamental questions:
What is our business?
Who are our customers?
What kinds of value can we provide to these customers?
What should our business be in the future?

14. The Marketing Implications of Corporate Strategy Decisions
Market influences on the corporate mission.
An organization’s mission should fit both its internal characteristics and the opportunities and threats in its external environment.
It should also focus the firm’s efforts on markets where those resources and competencies will generate value for customers, an advantage over competitors, and synergy across its products.

15. The Marketing Implications of Corporate Strategy Decisions
Criteria for defining the corporate mission.
The most useful mission statements focus on the customer need to be satisfied and the functions that must be performed to satisfy that need.
They are specific as to the customer groups and the products or technologies on which to concentrate.

16. The Marketing Implications of Corporate Strategy Decisions
Social values and ethical principles
Some firms pursue social programs intertwined with their economic objectives.
Others follow the principles of sustainability.
Ethics is concerned with the development of moral standards by which actions and situations can be judged.
It focuses on those actions that may result in actual or potential harm of someone else.

17. The Marketing Implications of Corporate Strategy Decisions
Corporate objectives must be specific and measurable.
Each objective contains four components:
A performance dimension or attribute sought.
A measure or index for evaluating progress.
A target or hurdle level to be achieved.
A time frame within which the target is to be accomplished.

18. The Marketing Implications of Corporate Strategy Decisions
The marketing implications of corporate objectives
Trying to achieve many objectives at once leads to conflicts and trade-offs.
Managers can reconcile conflicting goals by prioritizing them.
Another approach is to state one of the conflicting goals as a constraint or hurdle.
A firm attempts to maximize growth subject to meeting some minimum ROI hurdle.

19. The Marketing Implications of Corporate Strategy Decisions
Corporate sources of competitive advantage
A sustainable competitive advantage at the corporate level is based on company resources: resources that other firms do not have, that take a long time to develop, and that are hard to acquire.

20. The Marketing Implications of Corporate Strategy Decisions
Corporate growth strategies
A firm can go in two major directions in seeking future growth:
Expansion of its current businesses and activities.
Diversification into new businesses, either through internal business development or acquisition.

21. The Marketing Implications of Corporate Strategy Decisions
Expansion by increasing penetration of current product-markets
Expansion by developing new products for current customers
Expansion by selling existing products to new segments or countries

22. Alternative Corporate Growth Strategies

23. The Marketing Implications of Corporate Strategy Decisions
Expansion by diversifying
Vertical integration
Forward vertical integration
Backward integration
Related (or concentric) diversification
Unrelated (or conglomerate) diversification
Expansion by diversifying through organizational relationships or networks

24. The Marketing Implications of Corporate Strategy Decisions
Portfolio models
The Boston Consulting Group’s (BCG) growth-share matrix analyzes the impact of investing resources in different businesses on the corporation’s future earnings and cash flows.
Each business is positioned within a matrix.
The vertical axis indicates the industry’s growth rate and the horizontal axis shows the business’s relative market share.

25. BCG’s Market Growth Relative Share Matrix

26. Cash Flows across Businesses in the BCG Portfolio Model

27. The Marketing Implications of Corporate Strategy Decisions
Limitations of the growth-share matrix
Market growth rate is an inadequate descriptor of overall industry attractiveness.
Relative market share is inadequate as a description of overall competitive strength.
The outcomes are highly sensitive to variations in how growth and share are measured.
It provides little guidance on how best to implement investment strategies for each business.
It assumes that all business units are independent of one another except for the flow of cash.

28. The Marketing Implications of Corporate Strategy Decisions
Alternative portfolio models
Multifactor models are more detailed and provide more strategic guidance concerning appropriate resource allocation across businesses.
More useful for evaluating potential new product markets.
The multifactor measures in these models can be subjective and ambiguous.
Conclusions drawn still depend on the way industries and product-markets are defined.

29. The Industry Attractiveness–Business Position Matrix

30. The Marketing Implications of Corporate Strategy Decisions
Value-based planning
A resource allocation tool that attempts to address such questions by assessing the shareholder value a given strategy is likely to create.
The amount of return a strategy or operating program generates in excess of the cost of capital is commonly referred to as its economic value added, or EVA.

31. The Marketing Implications of Corporate Strategy Decisions
Discounted cash flow model.
Shareholder value created by a strategy is determined by the cash flow it generates, the business’s cost of capital, and the market value of the debt assigned to the business.

32. The Marketing Implications of Corporate Strategy Decisions
Some limitations of value-based planning.
It is not a substitute for strategic planning.
Good forecasts that are difficult to make, are critical to the validity of value-based planning.
Human tendencies to overvalue the financial projections associated with some strategy alternatives and to undervalue others.
Value-based planning can evaluate alternatives, but it cannot create them.

33. The Marketing Implications of Corporate Strategy Decisions
Using customer equity to estimate the value of alternative marketing actions.
A variation of value-based planning.
This approach calculates the economic return for a prospective marketing initiative based on its likely impact on the firm’s customer equity, which is the sum of the lifetime values of its current and future customers.

34. The Marketing Implications of Corporate Strategy Decisions
Sources of synergy
Knowledge-based synergies
Performance enhancement through transfer of competencies, knowledge, or customer-related intangibles from other units within the firm.
Corporate identity and the corporate brand
Corporate identity flows from the communications, impressions, and personality projected by an organization.

35. The Marketing Implications of Business-unit Strategy Decisions
Strategic business units, or SBUs are the components of a firm engaged in multiple industries or businesses.
Deciding how to divide into SBUs.
SBU managers must recommend:
The unit’s objectives.
The scope of its target customers and offerings.
Which broad competitive strategy to pursue.
How resources should be allocated.

36. The Marketing Implications of Business-unit Strategy Decisions
Ideally, strategic business units have the following characteristics:
A homogeneous set of markets to serve with a limited number of related technologies.
A unique set of product-markets.
Control over those factors necessary for successful performance.
Responsibility for their own profitability.

37. The Marketing Implications of Business-unit Strategy Decisions
The dimensions that define the scope and mission of the entire corporation also define individual SBUs.
Gaining a competitive advantage: To be successful over the long haul, a competitive strategy should have three characteristics.
It should generate customer value.
The superior value must be perceived by the customer.
The advantage should be difficult for competitors to copy.

38. The Marketing Implications of Business-unit Strategy Decisions
Strategies for entrepreneurial start-ups
Most successful start-ups have a narrow strategic scope, at least in the beginning.
Successful start-ups tend to concentrate on niche segments that are not being adequately served and/or on finding ways to provide unique benefits and superior value.
The symbiosis between market analysis and customer knowledge, competitive strategy, marketing programs, and successful performance is often stronger in small firms and new start-ups.

39. Take-Aways
Marketing perspectives lie at the heart of strategic decision making.
Market-oriented firms tend to outperform other firms.
Unethical behavior by a firm’s employees can damage the trust between a firm and its suppliers and customers.

40. Take-Aways
The four major paths to corporate growth imply differences in a firm’s strategic scope, require different competencies and marketing actions, and involve different types and amounts of risk.

41. Take-Aways A strong corporate brand makes sense.
The ultimate goal in formulating business-unit strategies is to establish a basis for a sustainable competitive advantage that provides superior value to customers.

42. Take-Aways
Successful new firm formation typically requires a competitive strategy that delivers superior value to a narrowly defined target segment in a way that either avoids direct confrontation with established competitors or is difficult for them to emulate.