Business Marketing Planning: Strategic Perspectives

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Chapter 5 Business Marketing Planning
Strategic Perspectives
PowerPoint by Ray A. DeCormier, Ph.D. Central
Connecticut State University
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Chapter Topics
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1. Marketings strategic role in corporate strategy
   development
2. The multifunctional nature of business marketing
   decision-making
3. Components of a business model that can be
   converted into superior positions of advantage in
   the business market
4. A valuable framework for detailing the processes
   and systems that drive strategy success

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New Strategies
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• New strategies come from new ideas
• New ideas often come from new voices
• To meet both domestic and foreign competition,
  B2B firms are recognizing the vital role of
  marketing in developing and implementing
  successful strategies

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Effective Strategies
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• Effective strategies share a
• Responsiveness to market needs
• Ability to exploit the organizations special
  competencies
• Ability to make valid assumptions about
  environmental trends
• Ability to take advantage of competitive behavior
• Realistic basis for securing and sustaining a
  competitive advantage

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Market-Driven Organizations
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• Market-driven organizations are
• Centered on customers
• Take an outside-in view of strategy
• Demonstrate an ability to sense market trends
  ahead of their competitors

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Hierarchy of Strategies 3 parts
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• Corporate Strategy
• Business-Level Strategy
• Functional Strategy

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Hierarchy of Strategies Part 1
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• Corporate Strategy
• What businesses are we in?
• What are our core competencies?
• How should we allocate resources?
• What businesses should we be in?

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Corporate Strategy
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• At this level, the role of Marketing is to
• Assess market attractiveness and competitive
  effectiveness of the firm
• Promote customer orientation to management
• Formulate the companys overall value proposition
  that is marketed to the customer, management and
  employees

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Marketing Strategy to Corporate
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• An important role for marketing management is
  to make the firm understand the Customer is
  King and advocate a set of values and beliefs
  that put the customer first in the firms
  decision-making process.

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Hierarchy of Strategies Part 2
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• Business-Level Strategy
• How do we compete in a given industry?
• How should we position ourselves against
  competitors?

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Business-Level Strategy
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• The focus is on how firms compete in a given
  industry.
• Competition is not between large corporations.
  It is between individual business units (SBUs)
  that compete in specific markets. Each SBU needs
  to develops its own business and marketing plans
  to answer
• How can we compete?
• How and what is the most efficient way to get to
  the market?
• What are our distinctive skills?

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Hierarchy of Strategies Part 3
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• Functional Strategy
• How can we allocate resources to most efficiently
  and effectively support business-level
  strategies?
• How can we use resources to meet the firms
  objectives within a specific product market?

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Strategic Formulation The Hierarchy of
Strategies
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• The interplay between the three levels of
  strategic formulation
• Cuts across functional areas
• Involves issues related to long term objectives
• Involves allocating resources across SBUs and/or
  product markets
• Includes decisions about the direction of
  corporate strategy, application of technology and
  choice of alliance partners

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Strategic Decision
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• Process involves active participation of several
  functional groups with differing opinions about
• Appropriateness of certain strategies
• Corporate goals
• Altering strategic goals can cause friction
  between them.
• However, strategic decision-making represents a
  bargaining process between competing functional
  factions.

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The Game
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• There are a number of players within an
  organization that want to change strategy to
  further their interests.
• Certain managers feel their functional areas
  belong to them (turf) and if anyone intrudes by
  changing the strategy, they are stepping over
  their bounds.
• Further, various groups possess different
  philosophies, beliefs and incentives resulting in
  different thought-worlds.
• Thus, each subculture has a different agenda.
• The bargaining process for arriving at a mutually
  agreeable strategic decision between these
  competing forces represent the game.

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Collective Action Perspective of Strategy
Formulation Process
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Corporate Progress Requires a Meeting of the
Minds
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• Successful cross-functional connections occur
  when turf wars, thought-worlds, and other various
  interest groups come together and develop a
  workable strategy to deal with the competitive
  world.
• In order for this to occur, the marketing group
  needs to be sensitive toand connect withthese
  stakeholders.

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Cross-Functional Connections Explore
Interrelationships between Marketing and Four
Business Functions
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B2B Top Performers
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• Marketing managers who know how to get the job
  done (i.e., facilitate negotiations across
  functional areas) possess certain
  characteristics
• Responsive timely
• Perspective-taking ability to understand and
  anticipate other functional managers priorities
• Open, frequent and high quality communication
  style
• Their word is their bond and follow through
• Able to develop a strong network

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Functional Integrated Planning
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• Successful marketing managers know how to
  integrate functional areas. They
• Understand their capabilities
• Capitalize on their strengths
• Facilitate strategies that are responsive to
  customer needs
• Successful marketing managers assume a central
  role in strategy implementation.

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Inter-Functional Involvement in Marketing
Decision MakingAn Illustrative Responsibility
Chart
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Organizational Function
Decision areas Marketing Manufacturing RD Logistics Tech. Services SBU Manager Corp. Level Manager
Product Design specifications Performance character. Reliability
Price List/Discount
Tech. Services Customer training
Logistics Inventory Customer service level
Sales Force Training
Advertising Message development
Channel Selection
Decision role RResponsibility AApproval
CConsult MImplement IInform, XNo
Role Vocabulary
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Roles in Strategic Decision Making
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• Participants in strategic decision making may
  assume the following roles
• Responsible (R) - Manager takes initiative,
  analyzes situation, develops alternatives,
  consults with others, make initial
  recommendation, facilitates approval of
  decision
• Approve (A) - Manager accepts or rejects
  decisions
• Consult (C) - Manager offers input
• Implement (M) - Manager is accountable for
  implementing decision
• Inform (I) - Manager is informed of the decision

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Marketing Strategy Center (MSC)
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• Representatives may assume more than one role
• Roles evolve during the marketing strategy
  development process
• Composition of the MSC is not strictly prescribed
  by the organization chart
• MSC share certain parallels with the buying center

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Managing Strategic Interdependencies
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• One challenge for the business marketer is to
  minimize interdepartmental conflict.
• Conflicts are motivated by personal and
  organizational goals.
• Organizational objectives may be different for
  different functional areas. (Example Various
  functional areas are rewarded differently.)
• Managing conflict, promoting cooperation,
  developing and coordinating strategy is a
  fundamental responsibility for marketing managers.

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Strategy Success
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• For a strategy to succeed
• Each firm needs to have a business concept that
  separates them apart from their competition.
• There are 4 components
• Customer Interface
• Core Strategy
• Strategic Resources
• Value Network
• Refer to Figure 5.2

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Fig. 5.2 Components of a Business Model
Bridges to Profits
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CUSTOMER BENEFITS
COMPANY BOUNDARIES
CONFIGURATION
VALUE NETWORK
CUSTOMER INTERFACE
STRATEGIC RESOURCES
CORE STRATEGY
Suppliers Partners Coalitions
Fulfillment Support Information
Insight Relationship Dynamics Pricing Structure
Business Mission Product/Market Scope Basis for
Differentiation
Core Competencies Strategic Assets Core Processes
EFFICIENT / UNIQUE / FIT / PROFIT BOOSTERS

• Major business concept components are tied
  together by three important bridge elements
  customer benefits, configuration, and company
  boundaries.

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1. Customer Interface
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Fulfillment Support
Information Insight
Relationship Dynamics
Pricing Structure
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1. Customer Interface
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1. Fulfillment Support They are the channels a
   firm uses to reach and support customers.
2. Information Insight Involves the capture of
   knowledge from customers and uses it to provide
   enhanced value to customers.
3. Relationship Dynamics Involves the dyadic
   nature of the buy/sell relationship in order to
   understand customer expectations so it can exceed
   them, increase the affiliation and lower
   competitive influences.
4. Pricing Structure Employs a pricing policy and
   structure that enhances profits but not at the
   expense of curtailing business.

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Fig. 5.2 Components of a Business Model
Bridges to Profits
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CUSTOMER BENEFITS
COMPANY BOUNDARIES
CONFIGURATION
VALUE NETWORK
CUSTOMER INTERFACE
STRATEGIC RESOURCES
CORE STRATEGY
Suppliers Partners Coalitions
Fulfillment Support Information
Insight Relationship Dynamics Pricing Structure
Business Mission Product/Market Scope Basis for
Differentiation
Core Competencies Strategic Assets Core Processes
EFFICIENT / UNIQUE / FIT / PROFIT BOOSTERS

• Major business concept components are tied
  together by three important bridge elements
  customer benefits, configuration, and company
  boundaries.

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Core Strategy Three Elements
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The business mission describes overall strategic
objective, sets course direction, and defines
performance criteria to measure progress.
Product/market scope defines where firm competes.
Basis for differentiation captures essence of how
firm competes differently than its rivals do.
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Differentiation of Products and Services
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• A business is differentiated when its
  value-adding activities are perceived as superior
  and profitable.
• Value-added features need to motivate customers
  to pay a higher premium than the cost of superior
  performance.

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Some ways to Differentiate
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• Provide superior performance through
• Speed
• Responsiveness to complex orders
• Customized to solve customer problems
• Provide superior quality by
• Reducing customer costs
• Improving performance
• Offer innovative product features that employ new
  technologies

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Fig. 5.2 Components of a Business Model
Bridges to Profits
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CUSTOMER BENEFITS
COMPANY BOUNDARIES
CONFIGURATION
VALUE NETWORK
CUSTOMER INTERFACE
STRATEGIC RESOURCES
CORE STRATEGY
Suppliers Partners Coalitions
Fulfillment Support Information
Insight Relationship Dynamics Pricing Structure
Business Mission Product/Market Scope Basis for
Differentiation
Core Competencies Strategic Assets Core Processes
EFFICIENT / UNIQUE / FIT / PROFIT BOOSTERS

• Major business concept components are tied
  together by three important bridge elements
  customer benefits, configuration, and company
  boundaries.

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Competitive Advantage
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• Employing superior strategic resources and skills
  can gain a competitive advantage.
• Core competencies are set of skills, systems, and
  technologies that create uniquely high value for
  customers.
• Strategic assets are more tangible requirements
  for advantage includes brands, customer data,
  distribution coverage, patents.
• Core processes are methodologies and routines
  that companies use to transform competencies,
  assets, and other inputs into value for customers.

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Fig. 5.2 Components of a Business Model
Bridges to Profits
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CUSTOMER BENEFITS
COMPANY BOUNDARIES
CONFIGURATION
VALUE NETWORK
CUSTOMER INTERFACE
STRATEGIC RESOURCES
CORE STRATEGY
Suppliers Partners Coalitions
Fulfillment Support Information
Insight Relationship Dynamics Pricing Structure
Business Mission Product/Market Scope Basis for
Differentiation
Core Competencies Strategic Assets Core Processes
EFFICIENT / UNIQUE / FIT / PROFIT BOOSTERS

• Major business concept components are tied
  together by three important bridge elements
  customer benefits, configuration, and company
  boundaries.

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Value Network
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• A value network includes those who complement and
  enrich the organization.
• Do we have good relations with suppliers,
  partners, vendors and other supporters?
• Can we partner with others in such a way that we
  can use their assets as if they were our own?
• Example Using UPS as shipping service

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Strategic Positioning
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• Competitive positioning is about being different
  and competing in a distinct way by using a unique
  mix of customer values.
• Michael Porter states there are six fundamentals
  principles that a company should employ for
  establishing and maintaining a distinct strategic
  position.

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Michael Porter Asks What is Strategic
Positioning?
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Michael Porter Strategic Positioning
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• Right goal Superior long term ROI instead of
  performance goals (i.e., share market)
• Create and deliver a good customer value
  proposition
• Create a distinctive value chain by offering or
  performing similar features but in a different
  way
• Accept trade-offs You cant be everything to
  everyone, therefore give up some things and
  reinforce others that enhance the distinctions
• Emphasize those element that facilitate the
  strategic fit and reinforce them
• Continuity of direction means to define a
  distinctive value proposition and build strong
  customer relations by staying consistent to that
  plan

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Building the Strategic Plan
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• Companies need to do many things well.
• However, underperformance is caused by a
  breakdown between strategy and operations.
• Kaplan Norton contend that successful strategic
  execution involves two rules
• Understand the Management cycle that links
  strategy and operations, and
• Know what tools to apply at each stage of the
  cycle.

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The Management System
This system allows management to plan, coordinate
and monitor the links between strategy and
operations.

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The Management System
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• Involves 5 stages
• Strategy development
• Translate strategy into objectives
• Design key processes
• Monitor performance
• Adapt the strategy
• 2 Key tools for successful strategy
  implementation are
• Balanced Scorecard
• Strategy Map

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Balanced Scorecard
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• Developed by Kaplan and Norton.
• We know measures are central to any strategy.
• The Balanced Scorecard is a comprehensive system
  for converting a companys vision and strategy
  into a tightly connected set of performance
  measures.

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Balanced Scorecard
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• Examines the performance of a business unit from
  four perspectives
• Financial
• Customer
• Internal Business
• Learning and growth

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The Balanced Scorecard - Translating Strategy
Into Operational Terms
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Cause-and-Effect Relationships Defines the chain
of logic by which intangible assets will be
transformed to tangible value.
Customer Value Proposition Clarifies conditions
that create value for the customer.
Value-Creating Processes Defines processes that
transform intangible assets into customer and
financial outcomes.
Manage Regulatory and Social Processes
Manage Operations
Manage Customers
Manage Innovation
Clustering Assets and Activities Defines
intangible assets to be aligned and integrated to
create value.
4. Learning and Growth Perspective
Human Capital
Information Capital
Organization Capital


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1. Financial Perspective
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• Cause Effect Relationship defines the logic
  that transforms intangible assets into tangible
  assets.
• Consideration is give to
• Productivity
• Long-term shareholder value
• Revenue growth

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1. Financial Perspective Growth Stage
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• Balanced Scorecard seeks to match financial
  objectives with business units growth and other
  life cycle stages.
• Growth stage
• Operation This stage is where the company needs
  to commit resources for new product or service.
• Financial objectives
• Know sales growth rate by segment
• Know of revenue from new product, services and
  customers

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1. Financial Perspective Sustain Stage
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• Sustain Stage
• Operation This stage represents majority of
  business where the strategy is to maintain and
  grow slowly.
• Financial objectives
• Focus on share of target customers and account
• Know customer and product line profitability

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1. Financial Perspective Harvest
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• Harvest Stage
• Mature SBUs or products
• Operations Provide only enough investment to
  maintain product equipment and capabilities.
• Financial Objectives
• Goal is payback
• Know customer and product-line profitability

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The Balanced Scorecard - Translating Strategy
Into Operational Terms
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Cause-and-Effect Relationships Defines the chain
of logic by which intangible assets will be
transformed to tangible value.
Customer Value Proposition Clarifies conditions
that create value for the customer.
Value-Creating Processes Defines processes that
transform intangible assets into customer and
financial outcomes.
Manage Regulatory and Social Processes
Manage Operations
Manage Customers
Manage Innovation
Clustering Assets and Activities Defines
intangible assets to be aligned and integrated to
create value.
4. Learning and Growth Perspective
Human Capital
Information Capital
Organization Capital


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2. Customer Perspective
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• Clarifies conditions that create customer value
• Take into consideration
• Product/Service attributes (price, quality, time
  function)
• Relationships (partnerships)
• Image (brand)

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2. Customer Perspective Core Measures
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Market Share Proportion of business in a particular market by share of market Total number of customers Dollars spent or unit volume sold
Customer Acquisition Tracks in absolute or relative terms rate at which SBU attracts and/or wins new customers
Customer Retention Tracks in absolute or relative terms rate at which SBU retains new customers
Customer Satisfaction Matches the satisfaction level of customers on specific performance criteria such as quality, service, delivery, reliability, etc.
Customer Profitability Assesses the net profit on each customer, or a segment, after deducting unique expenses allocated to support that customer or segment
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3. Internal Process Perspective
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• This highlights the value-creating processes that
  define the other processes that will transform
  intangible assets into tangible assets.
• It considers
• Operations management
• Customer management
• Innovation management
• Regulatory social processes management

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3. Aligning Internal Business Processes

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Key Value Propositions Customer Strategy
The Focus of Internal Business Processes
Operations Management Customer Relationship
Management Innovation Management
Low Total Cost Strategy Highly Efficient
Operating Ease of Customer Access Seek
Process Innovations Processes Superb
Post-Sales Service Gain Scale
Economies Efficient, Timely Distribution
Product Leadership Flexible Manufacturing
Capture Customer Ideas for Disciplined,
High-Performance Strategy Processes
New Offering Product
Development Rapid Introduction of Educate
Customers about Complex First-to-Market
New Products New Products/Services
Complete Customer Deliver Broad Product/
Create Customized Solutions Identify New
Opportunities Solutions Strategy Service
Line for Customers to Serve
Customers Create Network of Suppliers
Build Strong Customer Anticipate Future
Customer for Extended Product/
Relationships Needs Service
Capabilities Develop Customer Knowledge
Lock-in Provide Capacity for Create
Awareness Develop and Enhance Strategies
Proprietary Product/ Influence Switching
Costs of Proprietary Product Service
Existing and Potential Increase
Breadth/ Reliable Access and
Customers Applications of Standard Ease
of Use
Source Adapted from Robert S. Kaplan and David
P. Norton, Strategy Maps Converting Intangible
Assets into Tangible Outcomes (Boston Harvard
Business School Publishing Corporation, 2004),
pp. 322-344.
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The Balanced Scorecard - Translating Strategy
Into Operational Terms
0
Cause-and-Effect Relationships Defines the chain
of logic by which intangible assets will be
transformed to tangible value.
Customer Value Proposition Clarifies conditions
that create value for the customer.
Value-Creating Processes Defines processes that
transform intangible assets into customer and
financial outcomes.
Manage Regulatory and Social Processes
Manage Operations
Manage Customers
Manage Innovation
Clustering Assets and Activities Defines
intangible assets to be aligned and integrated to
create value.
4. Learning and Growth Perspective
Human Capital
Information Capital
Organization Capital


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4. Learning Growth
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• Intangible assets must be aligned to long term
  strategy to achieve long term growth.
• Intangible assets represent the capabilities of
  the companys employees to satisfy customer
  needs.
• They include
• Human capital
• Information capital
• Organization capital

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4. Learning Growth (continued)
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• To implement strategy, the organization needs
• Human Capital Availability of employees with
  skills talent
• Information Capital Availability of information
  systems and infrastructure
• Organization Capital The culture, leadership,
  incentives and teamwork

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Benefit of the Balanced Scorecard
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• The Balanced Scorecard helps align the firms
  tangible and intangible assets with the
  organizations strategic goals.
• See next frame
• 3. Aligning Internal Business Processes

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3. Aligning Internal Business Processes

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Key Value Propositions Customer Strategy
The Focus of Internal Business Processes
Operations Management Customer Relationship
Management Innovation Management
Low Total Cost Strategy Highly Efficient
Operating Ease of Customer Access Seek
Process Innovations Processes Superb
Post-Sales Service Gain Scale
Economies Efficient, Timely Distribution
Product Leadership Flexible Manufacturing
Capture Customer Ideas for Disciplined,
High-Performance Strategy Processes
New Offering Product
Development Rapid Introduction of Educate
Customers about Complex First-to-Market
New Products New Products/Services
Complete Customer Deliver Broad Product/
Create Customized Solutions Identify New
Opportunities Solutions Strategy Service
Line for Customers to Serve
Customers Create Network of Suppliers
Build Strong Customer Anticipate Future
Customer for Extended Product/
Relationships Needs Service
Capabilities Develop Customer Knowledge
Lock-in Provide Capacity for Create
Awareness Develop and Enhance Strategies
Proprietary Product/ Influence Switching
Costs of Proprietary Product Service
Existing and Potential Increase
Breadth/ Reliable Access and
Customers Applications of Standard Ease
of Use
Source Adapted from Robert S. Kaplan and David
P. Norton, Strategy Maps Converting Intangible
Assets into Tangible Outcomes (Boston Harvard
Business School Publishing Corporation, 2004),
pp. 322-344.
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Strategy Map
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• The cause effect components of the Balanced
  Scorecard template is transformed into visual
  model called the strategy map.
• The strategy map allows the company to describe
  and illustrate its
• Objectives, initiatives targets
• Measurements used to assess performance
• Linkages which are the foundation of the
  strategic direction

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Strategy Map
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• The next frame illustrates a firms strategic map
  for pursuing a product leadership strategy.
• To start the company emphasize
• Productivity strategy
• Revenue Growth strategy
• Refer to Strategy Map Template

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Balanced ScorecardStrategy Map Template Product
Leadership
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Long-Term Shareholder Value
Financial Perspective
Productivity Strategy
Revenue Growth Strategy
Manage Total Life-Cycle Product Costs
Revenues from New Products
Gross Margins New Products
Products and Services That Expand Existing
Performance Boundaries into the Highly Desirable
Customer Perspective
High-Performance Products Smaller, Faster,
Lighter, Cooler, More Accurate, More Storage,
Brighter
New Customer Segments
First to market
Operations Management
Customer Management
Innovation
Regulatory and Social
Flexible Robust Processes
Rapid Introduction of New Products
Educate Customers about Complex
New Products/Services
Disciplined, High-Performance Product Development
Minimize Product Liability And Environmental Impac
t
Internal Perspective
Supply Capacity for Rapid Growth
In-line Experimentation and Improvement
Capture Customer Ideas for New Products/Services
Product Development Time From Idea to Market
Contribute to Communities
Find, Motivate, Grow, and Retain the Best Talent
A Capable, Motivated and Technologically Enabled
Workforce
Learning and Growth Perspective
Human Capital
Information Capital
Organization Capital
Computer-Aided Design and Manufacturing (CAD/CAM)
Deep Functional Expertise
Creative, Versatile Employees Cross- functional
Teamwork
Virtual Product Prototyping and Simulation
Creativity, Innovation