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Market- Driven Strategy
3 pages

Market- Driven Strategy

Market- Driven Strategy (MDS) is very essential in formulating business strategy.
Thisapproach used is always market-oriented and customer-oriented. Next,
understanding whatthe customers do, understanding the customers behaviors and
measuring the interactionamong customers. Therefore, the main point is always
orienting to the market and customersin every business activity performed.
Characteristics Market- Driven Strategy
Market driven strategy is considerably the most popular organizational approach in
runningthe business nowadays, as the strategy allows the company to obtain a
better understanding of the market, as well as their customers; thus, it allows
company to achieve competitiveadvantage, and develop a long-term relationship
with the customers.The fundamental logic of this strategy is that the market and the
customers that form themarket should be the starting point in business strategy
formulation; which therefore anunderstanding of the market and the customers that
form the market is essential.The characteristics of market driven strategies include:
B
ecoming market orientedDetermining distinctive capabilitiesFinding a match
between customer value and organizational capabilitiesObtaining superior
performance by providing superior customer value
A
lthough it is a highly promising strategy, yet it is argued that a long-term
commitment iscrucial in order to develop these strategies.
BecomingmarketorientatedDeterminingDistinctiveCapabilitiesCustomerValue/Capabi
litiesMatchAchievingsuperiorperformance
B
ecoming Market Oriented
A
market orientation is a business perspective that placed the customer as the center
of acompanys total operations. This concepts is basically holds the same idea as
the marketingconcept. However, for a business to achieve market orientation, it
involves the use of superior organizational skills in understanding and satisfying
customers.
A
market-oriented organization always gathers information about its customers,
competitors,and the markets; analyze it from a total business perspective, decides
how to deliver superior customer value, and finally takes actions to provide value to
customers.
(Characteristics of Market Orientation)
Customer focus
C
ustomer focus basically stands for understand the customer needs, wants, and
responsestowards the products delivered. The market-oriented organization
understands customers preferences and requirements and effectively deploys the
skills and resources of the entireorganization to satisfy customers.
B
ecoming customer oriented requires finding out whatvalues buyers want to help
them satisfy their purchasing objectives.
B
uyers decisions are based on the attributes and features of the product that offer
the best value for the buyers usesituation. The buyers experience in using the
product is compared to his or her expectationsto determine customer satisfaction.
Example:
Dell
C
omputers direct contact with its buyers is an important information sourcefor
guiding actions to provide superior customer value. The direct, built-to-order
process used by Dell avoids the stocking of computers that may not contain state-
of-the-art technology.
A
lso, each computer contains the specific features requested by the buyer.
C
ompetitors of Dell that market their computers through distributors and retailers
have higher costs because price reductions in purchased components (e.g., chips)
cannot be utilized for computers ininventory.
Competitor intelligence
A
market-oriented organization recognizes the importance of understanding its
competitionas well as the customer. Failure to identify and respond to competitive
threats can createserious consequences for a company.
Example:
Western Union did not define its competitive area as
telecommunications,concentrating instead on telegraph services, and eventually
the 100-year-old company wasoutflanked by fax technology. Had Western Union
been market oriented, its managementmight have better understood the changes
taking place, recognized the competitive threat, anddeveloped strategies to counter
that threat.
Cross-Functional Coordination
Market-oriented companies are effective in getting all business functions to work
together to provide superior customer value. These organizations are successful in
removing the walls between business functions-marketing talks with manufacturing
and finance.
C
ross-functional teamwork guides the entire organization toward providing superior
customer value.

P
erformance Implications
C
ompanies that are market oriented begin strategic analysis with a penetrating view
of themarket and the competition. Moreover, an expanding body of research
findings points to astrong relationship between market orientation and superior
performance.
C
ompanies that aremarket oriented display favorable organizational performance
compared with companies thatare not market oriented.
Distinctive Capabilities
Identifying an organizations distinctive capabilities is a crucial part of market-
drivenstrategy.
C
apabilities can be defined as complex bundles of skills and accumulatedknowledge,
exercised through organizational processes that enable firms to coordinateactivities
and make use of their assets.The Major components of distinctive capabilities
are:Organizational ProcessesSkills and
A
ccumulated Knowledge
C
oordination of
A
ctivities
A
ssets
Example:
Zaras new-product development process, which illustrates the retailersdistinctive
capabilities, where the new-product development applies the skills of their
designteam and benefits from the teams accumulated knowledge; the
coordination of activities across business functions during new-product development
is facilitated byinformation and technology. The asset is the strong brand image
possessed by Zara whichhelps the launching of the new product.
Creating Value for Customers
Customer Value
C
ustomer Value is the outcome of a process that begins with a business strategy
anchored ina deep understanding of customer needs. The creation of customer
value is an importantchallenge for the managers, since it is an ongoing competitive
challenge in maintainingsuccessful market-driven strategies.
B
eing able to overcome these challenge, the organizationis believed to be able to
successfully deliver the customer value; hence fulfilled their goals.
Superior customer value
Superior customer value occurs when the buyer has a very positive use experience
compared to his/her expectations as well as the value offerings of
competitors.Furthermore, the values could be product differentiation, lower prices
than competing brands,or a combination of lower cost and differentiation.
Conclusion
Through the deep understanding of this concept, ability to implement and manage
all theelements, as well as the constant management and updates of the strategy,
it is believed thatthe organization will able to achieve its goals.