Slide 1.

MARKET-LED
STRATEGIC
MANAGEMENT
CHAPTER 1
Slide 1.2

Course objective
• The marketing concept and market orientation as the
foundations of strategic marketing,
• The role of marketing in addressing various stakeholders in the
organization
• The developing resource-based marketing strategy approach.
Slide 1.3

THE MARKETING CONCEPT AND

MARKET ORIENTATION
SECTION 1
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Evolving Definitions of Marketing

• “The marketing concept is a corporate state of mind that exists on
the integration and coordination of all the marketing functions
which, in turn, are melded with all other corporate functions, for the
basic objective of producing long-range profits” (Felton, 1959)

“The marketing concept holds that achieving organizational goals

depends on determining the needs and wants of target markets and
delivering the desired satisfactions more effectively and efficiently
than competitors do” (Kotler et al., 1996)
Slide 1.5

Evolving Definitions of Marketing

• “Marketing is the process of planning and executing the conception,
pricing, planning and distribution of ideas, goods and services to
create exchanges that satisfy individual and organizational
objectives.” (the American Marketing Association (AMA), 1985)

• Marketing is the activity, set of institutions, and processes for

creating, communicating, delivering, and exchanging offerings that
have value for customers, clients, partners, and society at large
(AMA, 2013).
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Figure 1.1 Mutually beneficial exchanges

Slide 1.7

Marketing Concept (Webster, 1997)

A B C

CULTURE STRATEGY TACTICS

a customer orientation in developing value developing detailed
an organization propositions and marketing action plans is
competitive positioning complex
Slide 1.8

MARKET ORIENTATION
SECTION 2
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Market Orientation (Narver and Slater, 1990)

• A number of components, and the context of marketing, are
proposed (see Figure 1.2):
• Customer orientation: understanding customers well enough continuously to
create superior value for them;
• Competitor orientation: awareness of the short- and long-term capabilities
of competitors
• Interfunctional coordination: using all company resources to create value for
target customers;
• Organizational culture: linking employee and managerial behavior to
customer satisfaction;
• Long-term creation of shareholder value: as the overriding business
objective.
Slide 1.10

Figure 1.2 Components and context of market orientation

Slide 1.11

Table 1.1 The fabric of the new marketing concept

(Webster, 1994).
Create customer focus throughout the 8 Let the customer defne loyalty
1
business 9 Measure and manage customer expectations
2 Listen to the customer 10 Build customer relationships and loyalty
define and nurture the organization’s 11 defne the business as a service business
3
distinct competencies
Commit to continuous improvement and
4 define marketing as market intelligence 12
innovation
5 target customers precisely Manage culture along with strategy and
13
Manage for profitability, not sales structure
6
volume 14 grow with partners and alliances
7 Make customer value the guiding star 15 destroy marketing bureaucracy
Slide 1.12

RESOURCE-BASED VIEW OF
MARKETING
SECTION 2
Slide 1.13

Figure 1.3 Marketing approaches

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Product Push Marketing

• Firms focus their activities on their existing products and services
and look for ways to encourage, or even persuade, customers to buy.
• The key thing is to make customers want what we are good at.
• Example: in 1983, IBM set out objectives to exhibit product leadership across
the entire product line, to be most efficient in all activities undertaken, and to
sustain profitability.
• Interestingly, IBM’s performance was poor, and they have completely revised
their business model to be much more relationship focused and market-led –
as a result its performance became much better.
Slide 1.15

Customer-led Marketing (Slater, 1998)

• Under this approach organizations chase their customers at all costs. The goal is to
find what customers want and, whatever it is, give it to them.
• This approach does not allow manufacturers to maximize scale economies in
production and product line extensions can cause chaos and logistical nightmares.
• Example:
• In the 1980s Procter & Gamble was being hit by increasingly aggressive competitors and
powerful retailers.
• It reacted by giving customers more choice (35 variants of the Bounce fabric conditioner!),
heavy promotions and deals to stimulate purchases, and aggressive salesforce targets.
• Customers were confused by the over-complex promotions (deals, coupons, offers, etc.)
and retailers became angry at having to stock a wide variety of choices on their shelves.
Slide 1.16

Resource-based marketing
• Resource-based marketing essentially seeks a long-term ft between the
requirements of the market and the abilities of the organization to compete in it
• A long-term view of customer requirements is taken in the context of other market
considerations (such as competitor offerings and strategies, and the realities of the supply
chain, etc.)
• The organization maps out the assets, competencies and skills to ensure they are leveraged
to the full.
• Example:
• By the late 1980s IBM had recast the newer approach which recognized the centrality of the
customer, but also the need to be selective in which markets to serve, ensuring they were
markets where IBM’s resources (its assets and capabilities) gave it the chance of leadership.
Slide 1.17

ORGANIZATIONAL STAKEHOLDERS
SECTION 3
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Figure 1.4 Organisational stakeholders

Slide 1.19

Types of stakeholders
• Shareholders
• Financial investors, both individual and institutional, that are seeking to
maximize the long-term value of their investments.
• Employees
• Their priorities are generally some combination of compensation (through
wages and salaries), job satisfaction and security (of employment).
• These may be at odds with the value of the firm to shareholders.
• Managers
• also concerned with personal rewards in the form of salaries and prestige.
• often measured by short-term gains (in sales, for example, or efficiency),
which may not necessarily equate to longer-term performance improvement
for the firm.
Slide 1.20

Types of stakeholders (cont’d)

• Customers
• The ultimate source of shareholder value.
• However, the blind pursuit of customer satisfaction may be at odds with longer-
term shareholder value creation.
• Suppliers
• rely on the firms they serve to ensure the achievement of their own goals.
• May be looking for security, predictability and satisfactory margins.
• Distributors
• The intermediary between the manufacturer and the consumers.
• The distributor may be seeking predictability and continuity at satisfactory margins.
Slide 1.21

Additional Stakeholders
• Society and the community
• in which a firm exists can be significantly affected by its actions.
• Example: During the takeover by Kraft (US firm) of Cadbury (UK firm) in
early 2010. Local residents and workers alike campaigned for Cadbury
to remain a ‘UK firm’, largely due to concerns regarding the possibility of
manufacturing moving to another part of the world.
• The natural or physical environment
• It is a proxy for future society: what we do to the environment and the
natural resources available today, will affect future generations who will
have to deal with the consequences tomorrow.
Slide 1.22

The Contribution of Marketing to Stakeholder Objectives

• Where market orientation is high;
• => It leads to an emphasis on developing marketing assets such as
company and brand reputation, market innovation capabilities and
the development of customer relationship management (CRM) skills.
• => Well-developed marketing resources can make a significant
contribution to creating satisfied and loyal customers and
subsequently increased sales volume and market share (market
performance).
• => Increased sales volume and market share, which in turn, leads to
financial performance (objectives of shareholders)
Slide 1.23

Figure 1.5: Marketing and performance outcomes

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MARKETING FUNDAMENTALS
SECTION 4
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Principle 1: Focus on the Customer

• This recognizes that the long-term objectives of the organization
are best served by achieving a high degree of customer focus –
but not a blind focus!
• The need for a close investigation of customer wants and needs,
followed by a clear definition of if and how the company can
best serve them.
• It also follows that the only arbiters of how well the organization
satisfies its customers are the customers themselves.
Slide 1.26

Principle 2: Only Compete in Markets Where You Can

Establish a Competitive Advantage
• Market selection is one of the key tasks for any organization –
choosing where to compete and where to commit its resources.
• Many factors will come into the choice of market, including how
attractive the market appears to the firm.
• Especially important will be the question: Do we have the skills and
competencies to compete here?
• The corporate graveyard is littered with firms that were seduced into markets
which looked attractive, but when competition got tough they found they
had no real basis on which to compete.
Slide 1.27

Principle 3: Customers Do Not Buy Products

• Customers do not buy products, they buy what the product can do for them, or to
put it another way, the problem it solves.
• In other words customers are less interested in the technical features of a product
or service than in what benefits they get from buying, using or consuming the
product or service.
• Example:
• Gardeners don’t really want a lawnmower. What they want is grass that is 1 inch high.
Hence a new strain of grass seed, which is hard-wearing and only grows to 1 inch in height,
could provide very substantial competition to lawnmower manufacturers.
• It is critical that marketers view products and services as ‘bundles of benefits’, or a
combination of attractions that all give something of value to the customer.
Slide 1.28

Principle 4: Marketing Is Too Important to Leave to the

Marketing Department
• As organizations become flatter, reducing layers of bureaucracy,
and continue to break down the spurious functional barriers
between departments, so it becomes increasingly obvious that
marketing is the job of everyone.
• It is equally obvious that marketing is so central to both survival
and prosperity that it is far too important to leave only to the
marketing department.
Slide 1.29

Principle 5: markets are heterogeneous

• It is becoming increasingly clear that most markets are not homogeneous,
but are made up of different individual customers, sub-markets or segments.
• Example:
• While some customers,, may buy a car for cheap transport from A to B, others may
buy for comfortable travel, or safe travel, or energy efficient travel, and still others
may buy for status reasons or to satisfy and project their self-image.
• Products and services that attempt to satisfy a segmented market through a
standardized product almost invariably fall between two or more stools and
become vulnerable to more clearly targeted competitors.
Slide 1.30

Principle 6: Markets and Customers Are Constantly

Changing
• This recognition that products follow a product life cycle pattern
of introduction, growth, maturity and decline, has led
companies to look and plan more long term; to ensure that by
the time the current breadwinners die there are new products in
the company’s portfolio to take their place.
• Customer expectations change, usually becoming more
demanding in the benefits they expect from a given product or
service, so organizations need to upgrade their offerings
continuously to retain, let alone improve, position.
Slide 1.31

Figure 1.6 Product and process improvement

Improvement in products and/or processes

Continuous Improvement through Kaizen

Step-change through innovation

Time
Slide 1.32

THE ROLE OF MARKETING IN

LEADING STRATEGIC MANAGEMENT
SECTION 5
Slide 1.33

Figure 1.7 The role of marketing in the organization

Identify and communicate customer wants and needs

throughout the organization

Determining the competitive positioning to match the

needs of the customers with company capabilities

Marshal all relevant organizational resources to

deliver customer satisfaction
Slide 1.34

Identification of customer requirements

• This involves conducting or commissioning relevant customer
research to uncover:
• Who the customers are: is not always obvious. In some circumstances buyers
may be different from users or consumers
• What will give them satisfaction. The organization that can give customers
something closer to what they want than what they expect has an
opportunity to go beyond customer satisfaction and create ‘customer
delight’.
• Customer expectations, wants and needs must all be understood and
clearly communicated to those responsible for designing, creating or
producing, and delivering it.
Slide 1.35

Deciding On The Competitive Positioning To Be Adopted

• That decision is made on the basis of two main sets of factors:
• First, how attractive the alternative potential targets are; and
• Second, how well the company can hope to serve each potential target
relative to the competition.
Slide 1.36

Implementing the marketing strategy

• The most difficult key task of marketing, is to marshal all the
relevant organizational resources to plan and execute the
delivery of customer satisfaction.
• This involves ensuring that all members of the organization are
aware of what is expected of them and are coordinated in their
efforts to satisfy customers, and that no actual or potential gaps
exist between offer design, production and delivery.
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