The Purpose of Business

The purpose of business is to create and keep

customers and to do this companies would
have to produce goods and services that people
want and value them at prices which are more
attractive than that of the competitors.
- Theodore Levitt
In a competitive market. customers
expect to
Maximize value at the lowest delivery cost
This needs
Creating Value for Customers
An in-depth market orientation of the
organization.
Customer value is the outcome of a
process that begins with a business
strategy anchored in a
deep understanding of customer needs.
Thus the basic premise is that
Markets and the customers should be the
starting point in business strategy formulation.
A key advantage of becoming market oriented is gaining an
understanding of the market and how it is likely to change in
the future.
Developing this vision about the market requires obtaining
information about customers, competitors, and markets;
viewing the information from a total business perspective;
deciding how to deliver superior customer value; and taking
action to provide value to customers.
Basic Premise
Concept of Strategy
Strategy is the pattern of major objectives, purposes, or
goals and essential policies and plans for achieving those
goals, stated in such a way as to define what business the
company is in or is to be in and the kind of company it
is or is to be.
Any organization needs strategy
1. When resources are finite,
2. When there is uncertainty about competitive strengths
and behavior,
3. When commitment of resources is irreversible,
4. When decisions must be coordinated between far-flung
places and over time, and
5. When there is uncertainty about control of the initiative.
Strategy provides a unified sense of direction to
which all members of the organization can
relate.
Strategy is concerned with the deployment of
potential for results and the development of a
reaction capability to adapt to environmental
changes.
Hierarchies of Strategies
There are hierarchies of strategies: corporate strategy
and business strategy
Corporate strategy seeks to unify all the business lines of a
company and point them toward an overall goal.
At the business level, strategy focuses on defining the
manner of competition in a given industry or
product/market segment.
Thus:
Organizations must have to distinct capabilities:
Market Sensing Capabilities
Customer Linking Capabilities
Capabilities to align Structure and Processes
Leverage organizational resources and capabilities
In business organizations, the marketing function represents
the greatest degree of contact with the external
environment, it has a strategic role to steer organizational
growth in the right direction.
Marketing and the Concept of Strategy
In its strategic role, marketing consists of establishing a
match between the firm and its environment.
It seeks solutions to problems of deciding
what business the firm is in and what kinds of business it
may enter in the future and
how the chosen field(s) of endeavor may be successfully run
in a competitive environment by pursuing product, price,
promotion, and distribution perspectives to serve target
markets.
Marketing and the Concept of Strategy
In the context of strategy formulation, marketing has
two dimensions: present and future.
The present dimension deals with the existing relationships
of the firm to its environments.
The future dimension encompasses intended future
relationships (in the form of a set of objectives) and the
action programs necessary to reach those objectives.
Marketing and the Concept of Strategy
Marketing provides the core element for future
relationships between the firm and its environment.
It specifies inputs for defining objectives and helps
formulate plans to achieve them.
Concept of Strategic Marketing
In its strategic role, marketing focuses on a businesss
intentions in a market and the means and timing of realizing
those intentions.
The strategic role of marketing is quite different from
marketing management, which deals with developing,
implementing, and directing programs to achieve designated
intentions.
To clearly differentiate between marketing management and
marketing in its new role, a new termstrategic marketinghas
been coined to represent the latter.
Marketings Role in Organization
Marketings Role in Organization
At the corporate level, marketing inputs (e.g., competitive
analysis, market dynamics, environmental shifts) are essential
for formulating a corporate strategic plan.
Marketing represents the boundary between the marketplace
and the company, and knowledge of current and emerging
happenings in the marketplace is extremely important in any
strategic planning exercise.
At the other end of the scale, marketing management deals with
the formulation and implementation of marketing programs to
support the perspectives of strategic marketing, referring to
marketing strategy of a product/market. Marketing strategy is
developed at the business unit level.

Marketing strategy deals essentially with the interplay of three
forces known as the strategic three Cs: the customer, the
competition, and the corporation.
Marketing Strategy Variables
Marketing strategies focus on ways in which the corporation can
differentiate itself effectively from its competitors, capitalizing
on its distinctive strengths to deliver better value to its
customers.
A good marketing strategy should be characterized by
(a) a clear market definition;
(b) a good match between corporate strengths and the needs of the market;
and
(c) superior performance, relative to the competition, in the key success
factors of the business

Marketing Strategy Variables
Major Differences between Strategic Marketing and
Marketing Management
Major Differences between Strategic Marketing and
Marketing Management (contd.)

Corporate Inputs
Strategic marketing decisions require inputs from three
corporate aspects:
Corporate Culture: Style, whims, fancies, traits, taboos, customs,
and rituals of top management that over time have come to be
accepted as intrinsic to the corporation
Corporate Publics: Various stakeholders with an interest in the
organization. Customers, employees, vendors, governments, and
society
Corporate Resources: Human, financial, physical, and
technological assets/experience of the company.
Corporate inputs set the degree of freedom a marketing strategist has in deciding which market to
enter, which business to divest, which business to invest in, etc. The use of corporate-wide inputs
in formulating marketing strategy also helps to maximize overall benefits for the organization.
Varying Roles for Different
Products/Markets
Traditionally it has been held that all products exert effort to maximize
profitability. Strategic marketing starts from the premise that different
products have varying roles in the company.
For eg: some products may be in the growth stage of the plc, some in the maturity
stage, others in the introduction stage. Each position in the life cycle requires a
different strategy and affords different expectations. Products in the growth stage
need extra investment; those in the maturity stage should generate a cash surplus.
Although conceptually this conceptdifferent products serving different purposes
has been understood for many years, it has been articulated for real-world
application only in recent years. The lead in this regard was provided by the Boston
Consulting Group, which developed a portfolio matrix in which products are
positioned on a two-dimensional matrix of market share and growth rate, both
measured on a continuous scale from high to low.
Varying Roles for Different
Products/Markets
The portfolio matrix essentially has two properties:
it ranks diverse businesses according to uniform criteria, and
it provides a tool to balance a companys resources by showing which
businesses are likely to be resource providers and which are resource
users.
The practice of strategic marketing seeks first to examine
each product/market before determining its appropriate
role.
Further, different products/markets are synergistically
related to maximize total marketing effort.
Finally, each product/ market is paired with a manager who
has the proper background and experience to direct it.
Organizational Level
Strategic marketing is conducted primarily at the business unit
level in the organization. At GE, major appliances are organized
into separate business units for which strategy is separately
formulated. At Gillette, strategy for the Duracell batteries is
developed at the batteries business unit level.
Organizational Level
Strategic marketing is conducted primarily at the business
unit level in the organization. At General Electric, for
example, major appliances are organized into separate
business units for which strategy is separately formulated.
At Gillette Company, strategy for the Duracell batteries is
developed at the batteries business unit level.
Relationship to Finance
Strategic marketing decision making is closely related
to the finance function.
The importance of maintaining a close relationship
between marketing and finance and, for that matter,
with other functional areas of a business is nothing
new.
But in recent years, frameworks have been developed
that make it convenient to simultaneously relate
marketing to finance in making strategic decisions

Future of Strategic Marketing
Insignificant growth due to competition
Deregulation
Diversification especially in unrelated areas
Shifts in the channel structure
competition from overseas companies leading to renewed emphasis
on marketing strategy achieves significance.
Fragmentation of markets requiring strategic-marketing capability.
In planning an early entry into the marketplace, strategic marketing
achieves significance.
To successfully develop corporate imagination and expeditionary
policies, companies need strategic marketing.
Demographic shifts have created a new customer environment that
makes strategic marketing an imperative.

Process of Strategic Marketing
Assignment: NE Case - 35 - 38