Managing Marketing Processes_Seminar 2
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Second seminar for my Managing Marketing Processes course in the MGM program at the Stockholm School of Economics.
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Managing Marketing Processes_Seminar 2
- 1. Seminar 2 Managing Marketing Processes ---- Aligning Strategy and the Marketing Planning Process Robin Teigland Master of General Management Stockholm School of Economics September 5, 2013
- 2. Seminar 2 Overview Taking a look at strategy Group Assignment presentations Guest Speaker, Fredrik Jansson, Tata Consulting Services 2
- 3. Some core concepts in strategy Mission Purpose: Why we exist Values What we believe in and how we behave Vision What we want to be 3 Collis & Rukstad, 2008
- 4. Walt Disney Purpose/Mission To make people happy Values No cynicism Nurturing and promulgation of “wholesome American values” Creativity, dreams, and imagination Fanatical attention to consistency and detail Preservation and control of the Disney magic 4 Collis & Rukstad 2008
- 5. 5 What matters for success? Companies most successful in creating long-term shareholder value are typically those that: a) Have a vision and mission—They give precedence to purpose and goals other than profitability and shareholder return b) Have strong, consistent, ethical values Examples: • “Visionary”, e.g., Disney, HP, IBM, Merck, P&G, Shell, Wal-Mart • Boeing • Focus pre-1996: “to build great planes,” • Weak financial controls—yet high profitability • Focus 1997-2003 : “creating shareholder value” • Outcome: loss of market leadership, declining profitability Grant 2008
- 6. The Strategy Hierarchy 6 Where should we compete? How should we compete?
- 7. Corporate Headquarters Planning Activities Define the corporate mission Establish strategic business units (SBUs) Assign resources to each SBU Assess growth opportunities Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 2-7
- 8. Characteristics of SBUs (Strategic Business Units) It is a single business or collection of related businesses It has its own set of competitors It has a leader responsible for strategic planning and profitability Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 2-8
- 9. What is business strategy? Strategy An integrated and coordinated set of commitments and actions designed to gain a competitive advantage Competitive advantage When two or more firms compete within the same market, one firm possesses a competitive advantage over its rivals when it earns (or has the potential to earn) a persistently higher rate of profit 9Hitt, Ireland & Hoskisson 2006
- 10. 1. Long-term goal (objective) 1. Scope of the firm (customer or offering, geographic location, vertical integration 1. Competitive advantage Components of business strategy Collis & Rukstad 2008 10
- 11. Strategy ≠ Business Model Business model (Magretta, 2002) Describes, as a system, how the pieces of a business fit together. Does not factor in one critical dimension of performance: competition Reflection of a realized strategy 11 Every organization has a business model . [it] makes some choices, which have consequences. [But] not every organization has a strategy - a plan of action for different contingencies that may arise. (Casadesus et al. 2010)
- 12. Example of Strategy Statement Edward Jones * To grow to 17,000 financial advisers by 2012 by offering trusted and convenient face-to-face financial advice to conservative individual investors who delegate their financial decisions, through a national network of one- financial-adviser offices. *Probably from 2007 12 Collis & Rukstad 2008
- 13. 13 Generic strategies Scope (Customer/ variety) Type of competitive advantage Broad Narrow Differentiation Low cost Differentiation Cost leadership Differentiation- based focus Cost-based focus Porter 1998
- 14. 14 Generic strategies in the auto industry Scope (Customer/ variety) Type of competitive advantage Broad Narrow Differentiation Low cost Mercedes (Differentiation) Nissan (Cost leadership) BMW (Differentiation- based focus) Lada (Cost-based Focus)
- 15. 15 Making choices Strategy is about choosing what NOT to do: Which customers not to serve What products or services not to offer Which activities not to perform Strategy is about NOT being all things to all people Porter
- 16. Avoid being stuck in the middle Market share Return on investment High HighLow Low Differentiation Cost leadership Porter 16
- 17. 17 What is the basis for strategy? Today external environment characterized by increasing pace of change New technologies Globalization Increasing information/knowledge flows Changing customer preferences A firm’s resources and capabilities offer a more secure basis for strategy than market focus Grant 2008
- 18. 18 Exploiting differences, not doing the same! Competitive advantage: Ability to outperform others due to exploiting unique features of firm’s resources and capabilities Grant 2008
- 19. -Inputs into a firm’s production process -A firm’s tangible, intangible, and human assets What is their potential for creating competitive advantage? What are resources? 19 Grant 1991
- 20. “A capability is the capacity for a set of resources to perform a task or an activity in an integrative manner.” In other words … The deployment of resources to achieve a goal The ability to do something… Used interchangeably with competence What are capabilities? 20 Grant 2008
- 21. 21 Identifying organizational capabilities: A functional classification FUNCTION CAPABILITY EXAMPLES Corporate Financial management ExxonMobil, GE Management Strategic control IBM, Samsung Coordinating business units BP, P&G Managing acquisitions Citigroup, Cisco MIS Speed and responsiveness through Wal-Mart, Dell, rapid information transfer Capital One R&D Research capability Merck, IBM Development of innovative new products Apple, 3M Manufacturing Efficient volume manufacturing Briggs & Stratton Continuous Improvement Nucor, Harley-D Flexibility Zara, Four Seasons Design Design capability Apple, Nokia Marketing Brand management P&G, LVMH, Coke Quality reputation Johnson & Johnson Responsiveness to market trends MTV, L’Oreal Sales, Distribution Sales responsiveness PepsiCo, Pfizer & Service Efficiency and speed of distribution LL Bean, Dell Customer Service Singapore Airlines Caterpillar Grant 2008
- 22. 22 RESOURCES TANGIBLE INTANGIBLE HUMAN •Financial •Physical Architecture of resources and capabilities Management Systems Organization Structure ORGANIZATIONAL CAPABILITIES •Skills/know-how •Capacity for communication & collaboration •Motivation •Technology •Reputation •Culture •Brand •Customer loyalty Grant 2008
- 23. 23 •Skills/know-how •Capacity for communication & collaboration •Motivation Links between resources, capabilities and competitive advantage STRATEGY INDUSTRY ENVIRONMENT COMPETITIVE ADVANTAGE ORGANIZATIONAL CAPABILITIES RESOURCES TANGIBLE INTANGIBLE HUMAN •Financial •Physical •Technology •Reputation •Culture •Brand •Customer loyalty Grant 2008
- 24. Defining organizational capabilities Organizational Capabilities = firm’s capacity for undertaking a particular activity (Grant) Distinctive Competence = activity that an organization does particularly well relative to competitors (Selznick) Core Competence = capabilities that are fundamental to a firm’s strategy and performance (Hamel and Prahalad) 24
- 25. Characteristics of Core Competencies A source of competitive advantage Applications in a wide variety of markets Difficult to imitate Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 2-25
- 26. Core Competencies -Tree Diagram Core Product 1 Core Product 2 Business 1 Business 2 1 2 3 4 5 6 Business 3 Business 4 7 8 9 10 11 12 End Products Competence 1 Competence 1 Competence 2 Competence 2 Competence 3 Competence 3 Competence 4 Competence 4 Core Product 3 End Products Prahalad & Hamel 1990Prahalad & Hamel 1990 http://www.youtube.com/watch?http://www.youtube.com/watch? v=Ar_r2kE9Ej4&NR=1v=Ar_r2kE9Ej4&NR=1 26
- 27. Disney • Movies for theatrical, television and home video markets • Cable channel • Magic Kingdom • Golfing • Shopping Village • Conference Center • Epcot Center • Camping • Hotels • General real estate brokerage & resort & property mgmt services • Develops commercial & industrial properties • Plans resort & primary home communities • Character Merchandise • Records • Merchandise & publishing licenses • Educational computer software, films, cassettes & filmstrips Filmed Entertainment Brand Image Creativity (Characters) Imagineering Real Estate Development Consumer Products Visual Media • Walt Disney Studios • Disney Channel • Home video Theme Parks & Resorts • Disneyland • Walt Disney World • Epcot Center • Tokyo Disney Community Development • Disney Development Co. • Arvida Community Development Other Media • Character merchandising & publications • Records & music publishing • Educational media Core Competencies Core Products Business Units End Products Walt Disney Studios’ 1984 Strategic Architecture Capabilities • Distribution (Buena Vista) Entertainment & Recreational Parks, Shows & Resorts 27 Grant 2008
- 28. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 2-30 What is Holistic Marketing? Holistic marketing sees itself as integrating the value exploration, value creation, and value delivery activities with the purpose of building long-term, mutually satisfying relationships and co-prosperity among key stakeholders.
- 29. Holistic Marketing Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1-31 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 2-31
- 30. Questions to Address in Holistic Marketing Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 2-32 Value Exploration: What value opportunities are available? Value Creation: How can we create new value offerings efficiently? Value Delivery: How can we deliver the new offerings efficiently?
- 31. Phases of Value Creation and Delivery Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 2-33 Choosing the value (STP) Providing the value (price, place, product) Communicating the value (promotion)
- 32. Group Assignment for Today 1. What do you think that the mission statement says about the customer focus, value creation, market scope, guiding values, and core competencies of this company? 2. For your company, how do specific marketing actions appear to relate to the stated mission? E.g., does the advertising reflect the customer focus in the mission statement? In preparation for later stages of your work, make notes about how the mission affects the markets and customers to be served, the product/service offering, the competition, and higher-level strategy. 3. What changes would you suggest to the mission statement in order to make it more effective as a guide for the marketing planning process or an inspiration for managers and employees? 34
- 33. Marketing Plan Teams 35 MGM MARKETING FALL 2013 GROUPS PREFERENCES DRAGON 1. B2C (Fortune 500) Product THE MOJITOS 1. B2C (Fortune 500) Service PEAK PERFORMANCE 1. B2B SME Service ORANGE 1. B2C SME (<250) Product (ASSESSIO) OPERATION BRAHMA 1. B2B SME (<250) Product (VETROLIFE) THE TRANSFORMERS 1. B2C SME Services (LINAS MATKASSE)
- 34. Seminar 3 Overview Market Analysis and Planning Group Assignment presentations Guest Speaker, Peter Gavelin, SSE 36
Notas del editor
- Tieto Enator Vision: - The world's leading provider of high-value-added IT services in selected vertical markets Strategy: - Global leverage of vertical expertise - Solutions - Partnerships Mission: - Building the Information Society Values: - Customer benefit & Personal growth Banking & Insurance IT services for banking, finance and insurance Telecom & Media IT services for telecom and media industry Healthcare & Welfare IT services for healthcare and welfare Government, Manufacturing & Retail IT services for central and local government, manufacturing, retail and logistics Forest & Energy IT services for forest and energy industries Processing & Network End-to-end processing and network services
- Which objective is most likely to maximize shareholder value over the next several years? (Growth? Achieving a certain market share? Becoming the market leader?) Objectives = goals A firm’s scope encompasses three dimensions: customer or offering, geographic location, and vertical integration. The complete definition of a firm’s competitive advantage consists of two parts. The first is a statement of the customer value proposition. Any strategy statement that cannot explain why customers should buy your product or service is doomed to failure. Activity map Tieto Enator Vision: - The world's leading provider of high-value-added IT services in selected vertical markets Strategy: - Global leverage of vertical expertise - Solutions - Partnerships Mission: - Building the Information Society Values: - Customer benefit & Personal growth
- When new mgt team took over Boeing in mid-1990s, focus was on building a vale-based environment where unit cost, return on investment, shareholder return are measures employees judged by. So lack of investment in major new civil aviation projects and diversification into defense and satellites. So lost considerable market share to Airbus. When Condit resigned in 2003, then boeing ’s stock was 20% lower than when he was appointed. Companies that enjoy enduring success have a core ideology that remains fixed while their business strategies and practices endlessly adapt to a changing world - From Built to Last: Successful Habits of Visionary Companies by Collins & Porras, 1996
- W hat words would you highlight in the definition? Why?
- Grant 2008: the nature of strategy in a turbulent direction – it ’s about direction, not detailed planning. Madonna (like Virgin or Google) displays clear direction combined with the flexibility to adapt to and exploit unexpected change Collis & Rukstad: It is always easy to claim that maximizing shareholder value is the company ’s objective. In some sense all strategies are designed to do this. However, the question to ask when creating an actionable strategic statement is, Which objective is most likely to maximize shareholder value over the next several years?What our competitive game plan will be BALANCED SCORECARD How we will monitor and implement that plan of a Strategy Statement OBJECTIVE = Ends SCOPE = Domain ADVANTAGE = Means MISSION Why we exist VALUES What we believe in and how we will behave VISION What we want to be STRATEGY What our competitive game plan will be BALANCED SCORECARD How we will monitor and implement that plan The BASIC ELEMENTS of a Strategy Statement OBJECTIVE = Ends SCOPE = Domain ADVANTAGE = Means Single goal – profitability vs market share – what matters more? Scope - 3 dimensions – customer or offering, geographic location, vertical integration, clearly defined areas Advantage –1) value proposition – why should people buy your product over others? 2) combination of activities to deliver value proposition
- Industry factors only account for a small part of the differences in interfirm profits. The larger differences are had in each firms resource and capabilities! Stockholm University & SSE; both resources and capabilities Analyze R&D to understand potential for creating competitive advantage
- 21 resource – a relatively stable, observable asset – stuff the firm owns or hires machines land a store a brand. usually can be bought and sold.
- First: the formal definition from the book. Second: a way to think about this, how it is generally used in newspapers. Capabilities Are the firm ’s capacity to deploy resources that have been purposely integrated to achieve a desired end state Emerge through complex interactions among resources The foundation of many capabilities lies in: The unique skills and knowledge of employees The functional expertise of those employees Often developed in specific functional areas capability – firm ’s ability, using its organization and people, to accomplish tasks at a high level of expertise (repeatedly). usually can ’t be bought/sold unless you sell a whole business.
- Firm ’s capacity for undertaking particular productive activity in relation to other firms
- Industry environment and competition shape strategy Whereas industry analysis is concerned with which industry to be in and positioning. Firm analysis is concerned with ownership and uniqueness. Industry analysis leads to the same, but firms must not do the same! What is potential for creating comp adv? Must distinguish between resources and capabilities. Resources are productive assets owned by the firm, capabilities are what the firm does with them. Individual resources do not confer competitive advantage, they must work together to create organizational capabilities. Whichever approach is used, the goal is to build a list of resources and capabilities that can then be appraised in terms of their importance and relative strength . The resources and capabilities can then be shown on a single chart (see Figure 5.9). This analysis requires an example, preferably an organization that is familiar to everyone. At Georgetown I typically use our own business school. 4. The purpose of this analysis is to generate strategy implications. Here students readily identify the potential for building on weaknesses in resources and capabilities. Perceptive students will inquire into the possibility of outsourcing activities where the firm ’s capabilities are weak. But the key area of strategy is the exploitation of strengths. In which market segments, in relation to which customers are a firm ’s resource and capabilities strengths likely to be most effective? What are the implications for how the firm should compete?
- 16 16 15 H&P: A big big big bundle of simpler resources and capabilities that together gives you strong ability to do a huge number of things. Test to see if core competence Provides potential to a wide variety of markets Makes a significant contribution to the benefits of the product as perceived by the customer Should be difficult for competitors to imitate
- http://www.youtube.com/watch?v=Ar_r2kE9Ej4&NR=1 (microsoft) – ballmer and kawasaki Start at 1:43 to get discussion of skill sets Core competences are Make a disproportionate contribution to ultimate customer value or to efficiency that value is delivered Provide a basis for entering new markets
- An organization ’s resources are the assets, capabilities, processes, information, and knowledge that the organization controls. Firms use their resources to improve organizational effectiveness and efficiency. Resources are critical to organizational strategy, because they can help companies create and sustain an advantage over competitors. Organizations can achieve a competitive advantage by using their resources to provide greater value for customers than competitors can. A competitive advantage becomes a sustainable competitive advantage when other companies cannot duplicate the value a firm is providing to customers. Importantly, sustainable competitive advantage is not the same as a long-lasting competitive advantage, though companies obviously want a competitive advantage to last a long time. Instead, a competitive advantage is sustained if that advantage still exists after competitors have tried unsuccessfully to duplicate the advantage and have, for the moment, stopped trying to duplicate it. to achieve sustainable competitive advantage, you need to think about how to create lots of value for acceptable cost, then An offense – how you will sustain your leadership in creating value at the right price. A defense – either make it hard for others to copy you or make it hard for customers to switch
- John Kay (an influential economist and writer on business strategy) identifies three main classes of organisational capability that meet the above criteria: innovation, architecture and reputation. Innovation is an obvious source of distinctive capability, but it is much less often a sustainable or appropriable source because successful innovation quickly attracts imitation. Maintaining an advantage is most easily possible for those few innovations for which patent protection is effective. There are others where process secrecy or other characteristics make it difficult for other firms to follow. More often, turning an innovation into a competitive advantage requires the development of a whole range of supporting strategies. What appears to be competitive advantage derived from innovation is frequently the return to a system of organisation capable of producing a series of innovations. This is an example of a second distinctive capability which I call architecture. Architecture is a system of relationships within the firm, or between the firm and its suppliers or customers, or both. Generally the system is a complex one and the content of the relationships implicit rather than explicit. The structure relies on continued mutual commitment to monitor and enforce its terms. A firm with distinctive architecture gains strength from the ability to transfer information which is specific to the firm, product or market within the organisation and to its customers and suppliers. It can also respond quickly and flexibly to changing circumstances. It has often been through their greater ability to develop such architecture that Japanese firms have established competitive advantage over their American rivals. A third distinctive capability is reputation . Reputation is, in a sense, a type of architecture but it is so widespread, and so important, that it is best to treat it as a distinct source of competitive advantage. Easier to maintain than create, reputation meets the essential conditions for sustainability. Indeed an important element of the strategy of many successful firms has been the transformation of an initial distinctive capability based on innovation or architecture to a more enduring one derived from reputation. (Kay, 1993, p. 14)