Corporate, Business, and Marketing Strategy Corporate strategy consists of the decisions made by top management and the resulting actions taken to achieve the objectives set for the business. The major corporate strategy components are shown in Exhibit 1.5. Scope is concerned with resolving questions about the business the firm should be in, where it should focus, and its enduring strategic pur- pose. Corporate objectives indicate the dimensions of performance upon which to focus and the levels of achievement required. Corporate strategies are concerned with how the company can achieve its growth objectives in current or new business areas. Resource allocation addresses the division of limited resources across businesses and opportuni- ties. Synergies highlight competencies, resources, and capabilities that drive efficiency and effectiveness in the business. Essential to corporate success is matching the capabilities of the organization with opportunities to provide long-term superior customer value. Components of Corporate Strategy It is apparent that in the 21st century marketing environments, companies are drastically altering their business and marketing strategies to get closer to their customers, counter competitive threats, and strengthen competitive advantages. Challenges to management include escalating international competition, new types and sources of competition, political and economic upheaval, dominance of the customer, and increasing marketing complexity. These challenges create imperatives for organizational change, which may sometimes be radical. Corporate Strategy Framework A useful basis for examining corporate strategy consists of (1) management's long-term vision for the corporation; (2) objectives which serve as milestones toward the vision; (3) resources; (4) businesses in which the corporation competes; (5) structure, systems, and processes; and (6) gaining corporate advantage through multimarket activity. Scope, Mission, Corporate gy and Strategic Objectives Strategy Resource Allocation Synergies IntentDeciding Corporate Vision Management's vision defines what the corporation is and what it does and provides impor- tant guidelines for managing and improving the corporation. Strategic choices about where the firm is going in the future-choices that take into account company capabilities. resources, opportunities, and problems-establish the vision of the enterprise. Developing strategies for sustainable competitive advantage, implementing them, and adjusting the strategies to respond to new environmental requirements is a continuing process. Managers monitor the market and competitive environment. Early in the strategy-development proc- ess management needs to define the vision of the corporation. It is reviewed and updated as shifts in the strategic direction of the enterprise occur over time. Top management vision may be radical and sometimes involves risks. While Amazon.com initially promised to revolutionize retailing with its online operations, founder Jeff Bezos wants to transform Amazon into a digital utility-running customers' business logistics and processes using the same state-of-the-art technologies and operations that power Amazon's own online retailing. Amazon is renting out resources it uses to run its own business and has even allowed outside programmers access to its pricing and product data. Objectives Objectives need to be set so that the performance of the enterprise can be gauged. Corpo- rate objectives may be established in the following areas: marketing, innovation, resources, productivity, social responsibility, and finance." Examples include growth and market- share expectations, product quality improvement, employee training and development, new-product targets, return on invested capital, earnings growth rates, debt limits, energy reduction objectives, and pollution standards. Objectives are set at several levels in an organization beginning with those indicating the enterprise's overall objectives. The time frame necessary for strategic change often goes beyond short-term financial reporting requirements. Companies are using more than financial measures to evaluate longer-term strategic objectives, and non-financial measures for short-term budgets. ResourcesResources It is important to place a company's strategic focus on its resources-assets, skills, and capabilities."These resources may offer the organization the potential to compete in dif- ferent markets, provide significant value to end-user customers, and create barriers to competitor duplication. We know that distinctive capabilities are important in shaping the organization's strategy. A key strategy issue is matching capabilities to market opportuni- ties. Capabilities that can be leveraged into different markets and applications are par- ticularly valuable. For example, the GoreTex high performance fabric is used in many applications from apparel to dental floss. Business Composition Defining the composition of the business provides direction for both corporate and market- ing strategy design. In single-product firms that serve one market, it is easy to determine the composition of the business. In many other firms it is necessary to separate the business into parts to facilitate strategic analyses and planning. When firms are serving multiple markets with different products, grouping similar business areas together aids decision-making. Business segment, group, or division designations are used to identify the major areas of business of a diversified corporation. Each segment, group, or division often contains a mix of related products (or services), though a single product can be assigned such a desig- nation. Some firms may establish subgroups of related products within a business segment that are targeted to different customer groups.A business segment, group, or division is often too large in terms of product and market composition to use in strategic analysis and planning, so it is divided into more specific strategic units. A popular name for these units is the Strategic Business Unit (SBU). Typi- cally SBUs display product and customer group similarities. A strategic business unit is a single product or brand, a line of products, or a mix of related products that meets a com- mon market need or a group of related needs, and the unit's management is responsible for all (or most) of the basic business functions. Typically, the SBU has a specific strategy rather than a shared strategy with another business area. It is a cohesive organizational unit that is separately managed and produces sales and profit results. For example, part of the remarkable strategic turnaround at Hewlett-packard involved restructuring choices made in 2005 by incoming CEO Mark Hurd. He reversed his pred- ecessor's merge of the computer and printer divisions, on the grounds that smaller, more focused business units would perform better than larger, more diffused alternatives, and separated the computer and printer units. In a business that has two or more strategic business units, decisions must be made at two levels. Corporate management must first decide what business areas to pursue and set priorities for allocating resources to each SBU. The decision makers for each SBU must select the strategies for implementing the corporate strategy and producing the results that corporate management expects. Corporate-level management is often involved in assisting SBUs to achieve their objectives. Structure, Systems, and Processes This aspect of strategy considers how the organization controls and coordinates the activi- ties of its various business units and staff functions."Structure determines the composi- tion of the corporation. Systems are the formal policies and procedures that enable the organization to operate. Processes consider the informal aspects of the organization's activities. Strategic choices provide the logic for different structure, systems, and process configurations. The logic of how the business is designed is receiving considerable attention. "A business design is the totality of how a company selects its customers, defines and differentiates its offerings, defines the tasks it will perform itself and those it will outsource, configures its resources, goes to market, creates utility for customers, and captures profit." The business design (or business model) provides a focus on more than the product and/or technology, instead looking at the processes and relationships that comprise the design.Business and Marketing Strategy Many strategy guidelines are offered by consultants, executives, and academics to guide business strategy formulation. These strategy paradigms propose a range of actions include ing re-engineering the corporation, total quality management, building distinctive compe- tencies, reinventing the organization, supply chain strategy, and strategic partnering. It is not feasible to review the various strategy concepts and methods that are available in many books, seminars, and consulting services. The corporate strategy framework presented here offers a basis for incorporating relevant strategy perspectives and guidelines. An important issue is whether selecting a successful strategy has a favorable impact on results. Does the uncontrollable environment largely determine business performance or instead, will the organization's strategy have a major impact on its performance? The evi- dence suggests that strategic choices matter." While environmental factors such as market demand, intensity of competition, government, and social change influence corporate per- formance, the strategic choices made by specific companies also have a significant impact on their performance. Importantly, the impact may be positive or negative. For example,Business and Marketing Strategy Relationships An understanding of business purpose, scope, objectives, resources, and strategy is essen- tial in designing and implementing marketing strategies that are consistent with the cor- porate and business unit plan of action. The chief marketing executive's business strategy responsibilities include (1) participating in strategy formulation and (2) developing mar- keting strategies that are consistent with business strategy priorities and integrated with other functional strategies. Since these two responsibilities are closely interrelated, it is important to examine marketing's role and functions in both areas to gain more insight into marketing's responsibilities and contributions. Peter F. Drucker described this role: Marketing is so basic that it cannot be considered a separate function (Le., a separate skill or work) within the business, on a par with others such as manufacturing or personnel. Market- ing requires separate work and a distinct group of activities. But it is, first, a central dimen- sion of the entire business. It is the whole business seen from the point of view of its final result, that is, from the customer's point of view." Frederick E. Webster describes the role of the marketing manager: "At the corporate level, marketing managers have a critical role to play as advocates for the customer and for a set of values and beliefs that put the customer first in the firm's decision making, and to communicate the value proposition as part of that culture throughout the organization, both internally and in its multiple relationships and alliances."This role includes assessing market attractiveness in the markets available to the firm, providing a customer orientation, and communicating the firm's specific value advantages. Strategic Marketing Marketing strategy consists of the analysis, strategy development, and implementation of activities in: developing a vision about the market(s) of interest to the organization, select- ing market target strategies, setting objectives, and developing, implementing, and manag- ing the marketing program positioning strategies designed to meet the value requirements of the customers in each market target. Strategic marketing is a market-driven process of strategy development, taking into account a constantly changing business environment and the need to deliver superior cus- tomer value. The focus of strategic marketing is on organizational performance rather than a primary concern about increasing sales. Marketing strategy seeks to deliver superior customer value by combining the customer-influencing strategies of the business into a coordinated set of market-driven actions. Strategic marketing links the organization with the environment and views marketing as a responsibility of the entire business rather than a specialized function. The Marketing Strategy Process The marketing strategy analysis, planning, implementation, and management process that we follow is described in Exhibit 1.6. The strategy stages shown are examined and applied through the later parts of this book. Markets, segments and customer value consider market and competitor analysis, market segmentation, strategic customer relationship management, and continuous learning about markets. Designing market-driven strategy examines customer targeting and positioning strategies, marketing relationship strategies,Implementing and managing Designing market-driven market-driven strategies strategies Market-driven program development and innovation and new product strategy. Market-driven program development consists of brand, value-chain, pricing, and promotion and selling strategies designed and imple- mented to meet the value requirements of targeted buyers. Implementing and managing market-driven strategies considers organizational design and marketing strategy imple- mentation and control. Markets, Segments, and Customer Value Marketing management evaluates markets and customers to guide the design of a new strategy or to change an existing strategy. Analysis is conducted on a regular basis after the strategy is underway to evaluate strategy performance and identify needed strategy changes. Activities include: . Markets and Competitive Space. Markets need to be defined so that buyers and com- petition can be analyzed. A product-market consists of a specific product (or line of related products) that can satisfy a set of needs and wants for the people (or organi- zations) willing and able to purchase it. The objective is to identify and describe the buyers, understand their preferences for products, estimate the size and rate of growth of the market, and find out what companies and products are competing in the market. Evaluation of competitors' strategies, strengths, limitations, and plans is a key aspect of this analysis. . Strategic Market Segmentation. Market segmentation offers an opportunity for an organization to focus its business capabilities on the requirements of one or more groups of buyers. The objective of segmentation is to examine differences in needs and wants and to identify the segments (subgroups) within the product-market of interest. The segments are described using the various characteristics of people, the reasons that they buy or use certain products, and their preferences for certain brands of products. Likewise, segments of industrial product-markets may be formed accord- ing to the type of industry, the uses for the product, frequency of product purchase, and various other factors. The similarities of buyers' needs within a segment enable better targeting of the organization's capabilities to buyers with corresponding value requirements. Strategic Customer Relationship Management. A strategic perspective on Customer Relationship Management (CRM) emphasizes delivering superior customer value by personalizing the interaction between the customer and the company and achieving thecoordination of complex organizational capabilities around the customer. CRM aims to increase the value of a company's customer base by developing better relationships with customers and retaining their business. CRM can play a vital role in market targeting and positioning strategies. Since CRM is an enterprise-spanning initiative, it needs to be carefully integrated with marketing strategy. . Capabilities for Continuous Learning About Markets. Understanding markets and competition has become a necessity in modern business. Sensing what is happening and is likely to occur in the future is complicated by competitive threats that may exist beyond traditional industry boundaries. Managers and professionals in market-driven firms are able to sense what is happening in their markets, develop business and market- ing strategies to seize opportunities and counter threats, and anticipate what the market will be like in the future. Several market sensing methods are available to guide the col- lection and analysis of information. Designing Market-Driven Strategies Evaluating markets, segments, and customer value drivers at the outset of the marketing strategy process identifies market opportunities, defines market segments, evaluates com petition, and assesses the organization's strengths and weaknesses. Market sensing infor- mation plays a key role in designing marketing strategy, which includes market targeting and positioning strategies, building marketing relationships, and developing and introduc- ing new products (goods and services).and positioning strategies, building marketing relat ing new products (goods and services). . Market Targeting and Strategic Positioning, A where to compete, given a firm's market and con market targeting strategy is to select the peop wishes to serve in the product-market. When bu target is usually one or more segments of the p identified and their relative importance to the f is selected. The objective is to find the best mat each segment and the organization's distinctive the focal point of marketing strategy since targ and developing a positioning strategy. Examples levels of sales, market share, customer retention, faction. Positioning strategy is the combination promotion strategies a firm uses to position itself the needs and wants of the market target. The str rable position are called the marketing mix or th strategy seeks to position the brand in the eyes the product from the competition. The product, egy components make up a bundle of actions thatEvaluating markets, segments, and customer value drivers at the outset of the marketing strategy process identifies market opportunities, defines market segments, evaluates com- petition, and assesses the organization's strengths and weaknesses. Market sensing infor- mation plays a key role in designing marketing strategy, which includes market targeting and positioning strategies, building marketing relationships, and developing and introduc- ing new products (goods and services). . Market Targeting and Strategic Positioning. A core issue is deciding how, when, and where to compete, given a firm's market and competitive environment. The purpose of market targeting strategy is to select the people (or organizations) that management wishes to serve in the product-market. When buyers' needs and wants vary, the market target is usually one or more segments of the product-market. Once the segments are identified and their relative importance to the firm determined, the targeting strategy is selected. The objective is to find the best match between the value requirements of each segment and the organization's distinctive capabilities. The targeting decision is the focal point of marketing strategy since targeting guides the setting of objectives and developing a positioning strategy. Examples of market target objectives are desired levels of sales, market share, customer retention, profit contribution, and customer satis- faction. Positioning strategy is the combination of the product, value chain, price, and promotion strategies a firm uses to position itself against its key competitors in meeting the needs and wants of the market target. The strategies and tactics used to gain a favor rable position are called the marketing mix or the marketing program. The positioning strategy seeks to position the brand in the eyes and mind of the buyer and distinguish the product from the competition. The product, distribution, price, and promotion strat- egy components make up a bundle of actions that are used to influence buyers' position- ing of a brand. Strategic Relationships. Marketing relationship partners may include end-user custom- ers, marketing channel members, suppliers, competitor alliances, and internal teams. The driving force underlying these relationships is that a company may enhance its ability to satisfy customers and cope with a rapidly changing business environment through col- laboration of the parties involved. Building long-term relationships with customers and value chain partners offers companies a way to provide superior customer value. Strategic partnering has become an important strategic initiative for many well-known companies and brands. Many firms outsource the manufacturing of their products. Strong relation- ships with outsourcing partners are vital to the success of these powerful brands.. Strategic Brand Management. Products (goods and services) often are the focal point of positioning strategy, particularly when companies or business units adopt organi- zational approaches emphasizing product or brand management. Product strategy includes: (1) developing plans for new products; (2) managing programs for successful products; and (3) deciding what to do about problem products (e.g., reduce costs or improve the product). Strategic brand management consists of building brand value (equity) and managing the organization's system of brands for overall performance. . Value-Chain Strategy. Market target buyers may be contacted on a direct basis using the firm's salesforce or by direct marketing contact (e.g., Internet), or, instead, through a value-added chain (distribution channel) of marketing intermediaries (e.g., wholesal- ers, retailers, or dealers). Distribution channels are often used in linking producers with end-user household and business markets. Decisions that need to be made include the type of channel organizations to use, the extent of channel management performed by the firm, and the intensity of distribution appropriate for the product or service. . Pricing Strategy. Price also plays an important role in positioning a product or serv- ice. Customer reaction to alternative prices, the cost of the product, the prices of the competition, and various legal and ethical factors establish the extent of flexibility man- agement has in setting prices. Price strategy involves choosing the role of price in the positioning strategy, including the desired positioning of the product or brand as well as the margins necessary to satisfy and motivate distribution channel participants. Promotion Strategy. Advertising, sales promotion, the salesforce, direct marketing, and public relations help the organization to communicate with its customers, value-chain partners, the public, and other target audiences. These activities make up the promotion strategy, which performs an essential role in communicating the positioning strategy to buyers and other relevant influences. Promotion informs, reminds, and persuades buy- ers and others who influence the purchasing process. Implementing and Managing Market-Driven Strategy Selecting the customers to target and the positioning strategy for each target moves mar- keting strategy development to the action stage (Exhibit 1.6). This stage considers design- ing the marketing organization and implementing and managing the strategy. . Designing Market-Driven Organizations. An effective organization design matches people and work responsibilities in a way that is best for accomplishing the firm's mar- keting strategy. Deciding how to assemble people into organizational units and assign responsibility to the various mix components that make up the marketing strategy are important influences on performance. Organizational structures and processes must be matched to the business and marketing strategies that are developed and implemented. Organizational design needs to be evaluated on a regular basis to assess its adequacy and to identify necessary changes. Restructuring and reengineering of organizations has led to many changes in the structures of marketing units. . Marketing Strategy Implementation and Control. Marketing strategy implementa- tion and control consists of: (1) preparing the marketing plan and budget; (2) imple- menting the plan; and (3) using the plan in managing and controlling the strategy on an ongoing basis. The marketing plan includes details concerning targeting, position- ing, and marketing mix activities. The plan spells out what is going to happen over the planning period, who is responsible, how much it will cost, and the expected results (e.g., sales forecasts). The preparation of the marketing plan is discussed in the Appen- dix to this chapter.Strategic Marketing Planning The frequency of planning activities varies by com- parry and marketing activity. Market targeting and posi- Developing the Strategic Plan tioning strategies are not changed significantly during for Each Business the year. Tactical changes in product, distribution, price, and promotion strategies may be included in Strategic analysis is conducted to: (1) diagnose busi- the annual plan. For example, the aggressive response ness units' strengths and limitations, and (2) select of competitors to Healthy Choice's successful market strategies for maintaining or improving performance. entry required changes in Con Agra's pricing and pro- Management decides what priority to place on each motion tactics for the frozen food line. business regarding resource allocation and implements Planning Considerations a strategy to meet the objectives for the SBU. The stra- Suppose that you need to develop a plan for a new tegic plan indicates the action agenda for the business. The strategic analysis guides establishing the SBU's product to be introduced into the national market next year. The plan for the introduction should include the mission, setting objectives, and determining the strat- expected results (objectives), market targets, actions, egy to use to meet these objectives. The SBU's strategy responsibilities, schedules, and dates. The plan indi- indicates market target priorities, available resources, financial constraints, and other strategic guidelines cates details and deadlines, product plans, a market needed to develop marketing plans. Depending on the introduction program, advertising and sales promo- tion actions, employee training, and other information size and diversity of the SBU, marketing plans may either be included in the SBU plan or developed sepa- necessary to launching the product. The plan needs to answer a series of questions-what, when, where, who, rately. If combined, the marketing portion of the busi- how, and why-for each action targeted for completion ness plan will represent half or more of the business during the planning period. plan. In a small business (e.g., retail store, restaurant, etc.), the marketing portion of the plan may account Responsibility for Preparing Plans for most of the plan. Plans may be developed to obtain A marketing executive or team is responsible for pre- financial support for a new venture, or to spell out paring the marketing plan. Some companies combine internal business and marketing strategies. the business plan and the marketing plan into a single planning activity. Regardless of the format used, the Preparing the Marketing Plan marketing plan is developed in close coordination with the strategic plan for the business. There is also much Marketing plans vary widely in scope and detail. Nev- greater emphasis today to involve all business func- ertheless, all plans need to be based on analyses of the tions in the marketing planning process. A product or product-market and segments, industry and competi- marketing manager may draft the formal plan for his/ tive structure, and the organization's value proposition. her area of responsibility, coordinating and receiving We look at several important planning issues that pro- inputs from advertising, marketing research, sales, and vide a checklist for plan preparation. other marketing specialists. Coordination and involve- Planning Relationships and Frequency ment with other business functions (R&D, finance, Marketing plans are developed, implemented, evalu- operations) is also essential. ated, and adjusted to keep the strategy on target. Since Planning Unit the marketing strategy normally extends beyond one The choice of the planning unit may vary due to the year, it is useful to develop a three-year strategic plan product-market portfolio of the organization. Some and an annual plan to manage marketing activities firms plan and manage by individual products or during the year. Budgets for marketing activities (e.g., brands. Others work with product lines, markets, or advertising) are set annually. Planning is really a series specific customers. The planning unit may reflect how of annual plans guided by the marketing strategic plan. marketing activities and responsibilities are organized