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Lecture 4. Market oriented planning �

PhD., E.Khodjanioyazov

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Market-Driven Strategy

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    • All business strategy decisions should start with a clear understanding of markets, customers, and competitors.

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    • The market and the customers that form the market should be the starting point in business strategy

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Characteristics of a Market-Driven Strategy

Superior

Performance

Leveraging of

Distinctive

Capabilities

Customer

Value/

Capabilities

Match

Market-

Orientation

TM 1-2

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Why Pursue a Market-Driven Strategy?

  • Strong supporting logic
  • Achievements of companies displaying market-driven characteristics are impressive
    • E.g. Dell Computer, Southwest Airlines, Tiffany & Co., Wal-Mart etc.

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Becoming Market Oriented

  • Customer becomes the focal point
  • Commitment to continuous creation of superior customer value
  • Utilization of superior organizational skills
  • Requires involvement and support of the entire workforce

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Becoming Market Oriented

  • 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

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Effective

Market Sensing

Processes

Cross-Functional

Analysis of Information

Shared Diagnosis

and Coordinated

Action

Delivery of

Superior Customer

Value

Becoming Market Oriented

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Characteristics of Market Orientation

  • Continuous information gathering
    • Customers, competitors, markets
  • Total business perspective
  • Value deliverance to customers
  • Organizational culture: customer value
  • Cross-functional cooperation and involvement

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Market Orientation Process

Competitor

Information

Customer

Information

Other Market

Information

Shared

Diagnosis

and

Coordinated

Action

Superior

Customer

Value

Source: Slater and Narver, Business Horizons, 1994, p. 23

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Market Orientation

  • Customer Focus
    • Understand values customers seek
      • Dell Computer
  • Competitor Intelligence
    • Identify and understand the principal competitor’s short-term strengths and weaknesses and long-term capabilities and strategies
      • Polaroid

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Market Orientation

  • Information Acquisition
    • Gather relevant information
    • Involve all business functions
      • Intuit’s Quicken
  • Interfunctional Assessment
    • Share information and develop innovative products with people from different functions
      • Zara
  • Shared Diagnosis and Action

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Capabilities

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

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(Day, JM 1994, p.38)

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Components of Organizational Capabilities

Skills

(cross-functional

teams)

Accumulated

knowledge

(new product experience)

Organizational

Processes

Superior

Customer

Value

(new product

development)

Coordination

of Activities

(communication)

Assets

(brand image)

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Compelling

Logic of Distinctive

Capabilities

Disproportionate (higher)

contribution to superior

customer value

Provides value to

customers on a more

cost-effective basis

Capabilities

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Capabilities

Desirable

Capabilities

Superior to

the

Competition

Difficult to

Duplicate

Applicable to

Multiple

Competitive

Situations

Source: George S. Day, Journal of Marketing, October 1994, 49.

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Types of Capabilities

Outside-In

Processes

Inside-Out

Processes

Spanning

Processes

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Capabilities

Source: George S. Day, Journal of Marketing, October 1994, 41.

Spanning Processes

Outside-In Processes

Inside-Out Processes

EXTERNAL EMPHASIS

INTERNAL EMPHASIS

  • Market sensing
  • Customer linking
  • Channel bonding
  • Technology monitoring
  • Customer order fulfillment
  • Pricing
  • Purchasing
  • Customer service delivery
  • New product/service development
  • Strategy development
  • Financial management
  • Cost control
  • Technology development
  • Integrated logistics
  • Manufacturing/ transformation processes
  • Human resources management
  • Environment health and safety

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Matching Customer Value/ Distinctive Capabilities

Value Requirements

Distinctive Capabilities

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Creating Value for Customers

  • Value:
    • Value for buyers consists of the benefits and costs resulting from the purchase of products.
      • Perceived by the buyer
      • 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.

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Creating Value for Customers

Benefits Costs

Customer

Value

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Creating Value for Customers

Monetary costs

Time

Psychic and physic costs

Product

Services

Employees

Image

Benefits

Costs

(sacrifices)

Value

(gain/loss)

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Becoming Market Driven

MARKET –

DRIVEN

STRATEGIES

Market Sensing

Capabilities

Customer Linking

Capabilities

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Becoming Market Driven

  • 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

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Becoming Market Driven

  • Aligning Structure and Processes
    • Potential change of organizational design
      • Improve existing processes
      • Process redesign
    • Cross-functional coordination and involvement
    • Primary targets for reengineering:
      • Sales and marketing, customer relations, order fulfillment, and distribution

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The Market-Driven Road Map

Diagnosing the Current Capabilities

Anticipating Future Needs for Capabilities

Designing the Change Program