MARKET-DRIVEN STRATEGY

Objectives 

• Market-Driven Strategy 
• Becoming Market Oriented 
• Distinctive Capabilities 
• Creating Value for Customers 
• Becoming Market Driven 
• Challenges of a New Era for Strategic Marketing

Market-Driven Strategy

• All business strategy decisions should start with a clear understanding of markets, customers, and competitors.
• The market and the customers that form the market should be the starting pint in shaping business strategy.

Why Pursue a Market-Driven Strategy?

• Strong supporting logic
• Achievements of companies displaying market-driven characteristics are impressive

Examples include:

• Dell Inc.
• Louis Vuitton
• Southwest Airlines
• Tesco
• Tiffany & Co.
• Wal-Mart
• Zara

BECOMING MARKET ORIENTED

• Customer is the focal point of the organization
• Commitment to continuous creation of superior customer value
• Superior skills in understanding and satisfying customers
• Requires involvement and support of the entire workforce
• Monitor rapidly changing customer needs and wants
• Determine the impact of changes on customer satisfaction
• Increase the rate of product innovation
• Pursue strategies to create competitive advantage

Characteristics of Market Orientation

Customer Focus
What are the customer’s value requirements? 
Competition Intelligence
Importance of understanding the  competition as well as the customer.
Cross-Functional Coordination
Remove the walls between business functions.
Performance Consequences
Market orientation leads to superior organizational  performances.


Market Orientation

Information Acquisition

• Gather relevant information on customers, competition, and markets
• Involve all business functions
• Intuit’s Quicken

Inter-functional Assessment

§  Share information and develop   innovative products with people from different functions.

§

§Shared diagnosis and action

§ Deliver superior customer value

DISTINCTIVE CAPABILITIES


“Capabilities are complex bundles of skills and accumulated knowledge, exercised through organizational processes, that enable firms to coordinate activities and make use of their assets.”

Southwest Airline’s Distinctive Capabilities Organizational Processes

Southwest uses a point-to-point route system rather than the hub-and-spoke design used by many airlines.  The airline offers services to 57 cities in 29 states, with an average trip about 500 miles.  The carrier’s value proposition consists of low fares and limited services (no meals).  Nonetheless, major emphasis throughout the organization is placed on building a loyal customer base.  Operating costs are kept low by using only Boeing 737 aircraft, minimizing the time span from landing to departure, and developing strong customer loyalty.  The company continues to grow by expanding its point-to-point route network.

Skills and Accumulated Knowledge

The airline has developed impressive skills in operating its business model at very low cost levels.  Accumulated knowledge has guided management in improving the business design over time.

Coordination of Activities

Coordination of activities across business functions is facilitated by the point-to-point business model.  The high aircraft utilization, simplification of functions, and limited passenger services enable the airline to manage the activities very efficiently and to provide on-time point-to-point services offered on a frequent basis.

Assets

Southwest’s key assets are very low operating costs, loyal customer base, and high employee esprit de corps.

CREATING VALUE  FOR CUSTOMERS

Customer Value:

§Value for buyers consists of the benefits less the costs resulting from the purchase of products.

§Superior value:  positive net benefits

Creating Value:

§“Customer value is the  outcome of a process that   begins with a business  strategy anchored in a deep   understanding of customer  needs.” 

Market Driven Initiatives

Market Sensing Capabilities

–Effective processes for learning about markets

–Sensing:

•Collected information needs to be shared across functions and interpreted to determine proper actions.

Customer Linking Capabilities

–Create and maintain close customer relationships

CHALLENGES OF A NEW ERA FOR STRATEGIC MARKETING

§Strategic marketing faces unprecedented challenges and opportunities:

• Turbulent markets 
• Intense competition 
• Disruptive innovations 
• Escalating customer demands 

§Ethical Challenges

§Societal and Global Change

§Social Responsiveness of Organizations

Escalating Globalization

It is important to understand the differences (and similarities) between the developed economies and the new world beyond.

Market opportunities  

Competitive threats 

Partnering opportunities

Outsourcing initiatives

The world’s poor

Ethical Behavior and Social Responsiveness

Increasingly demanding ethical challenges

Corporate responsibility

Responsibilities to stakeholders