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A) Primary activities:
1) Inbound logistics (material procurement).
2) Operations (converting materials into final product).
3) Outbound logistics (shipping and warehousing).
4) Marketing (marketing and sales).
5) Servicing (service after the sale).
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B) Support activities:
1) Procurement.
2) Technology
development.
3) Human resource
management.
4) Firm infrastructure.
The firm’s task is to
examine its costs and
performance in each
value-creating activity and
to look for ways to improve
performance.
Core Competencies
Companies need resources (labor, materials, energy, etc.)
1) competencies: the essence of the business—outsource if competency is cheaper and available.
2) Competitive advantage: = distinctive capabilities (excellence in broader business processes).
3) Competitive advantage: = core competencies + distinctive capabilities activity systems
A Holistic Marketing Orientation and Customer Value
Figure 2.3 shows the interaction between customers, company, collaborators, and value-based activities
(value exploration, value creation, and value delivery) to create, maintain, and renew customer value
Holistic marketing addresses three key management questions:
1) Value exploration—identify new value opportunities.
2) Value creation—create more promising new value offerings.
3) Value delivery—deliver the new value offerings more efficiently.
Strategy requires the understanding of the relationships and interactions among these three spaces.
Value Exploration
Customer’s cognitive space (reflects existing and latent needs and includes participation, stability,
freedom, and change).
Company’s competence space (broad versus focused scope of business and depth physical versus
knowledge-based capabilities).
The collaborator resource space (horizontal and vertical partnerships).
Value Creation: Marketer’s need to:
1. Identify new customer benefits from the customer’s view.
2. Utilize core competencies.
3. Select and manage business partners from its collaborative networks.
Business realignment may be necessary to maximize core competencies.
a. (Re) defining the business concept—big idea.
b. (Re) shaping the business scope—lines of business.
c. (Re) position the company’s brand identity.
Value Delivery—What Companies Must Become?
Often requires an investment in infrastructure and capabilities.
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1. Customer relationship management: Who the customers are? respond to different customer
opportunities.
2. Internal resource management: Integrate major business processes within a single family of software
modules. (ERP)
3. Business partnership management: Allow the company to handle complex relationships with its trading
partners.
The Central Role of Strategic Planning
C) The marketing plan is the central instrument for directing and coordinating the marketing effort. The
marketing plan operates on two levels: strategic and tactical.
1. The strategic marketing plan: lays out target markets and the value proposition.
2. The tactical marketing plan: specifies the product, promotion, merchandising, pricing, sales
channels, and service.
Figure 2.4 shows the strategic complete planning, implementation, and control process.
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2. Downsizing or terminating old businesses.
Figure 2.5 illustrates Strategic Planning Gap.
Intensive Growth
Corporate manager’s first course of action should be a review of opportunities for improving existing
businesses.
1. Market-penetration strategy
2. Market-development strategy
3. Product-development strategy
4. Diversification strategy
Integrative Growth
Sales and profits may be increased through:
1. Vertical Integration:
Backward integration (suppliers).
Forward integration (distributors).
2. Horizontal integration (with competitors).
Diversification Growth
1. New products that have technological or marketing synergies with existing product lines.
2. New products unrelated to the current industry.
3. New businesses unrelated.
Downsizing and Divesting Older Businesses
A. Focus on businesses that provide growth opportunities.
B. Weak businesses require a disproportionate amount of managerial time/talent.
Organization and Organizational Culture
A. Organization consists of:
1) Structures.
2) Policies.
a. Culture: “the shared experiences, stories, beliefs, and norms that characterize an organization.”
b. Sometimes corporate culture develops organically and is transmitted by the CEOs personality.
B. Scenario analysis consists of developing reasonable representations of a firm’s possible future that
make different assumptions about forces driving the market and include different uncertainties.
1) What will we do if it happens?
2) Watch for signposts that might confirm or disconfirm the scenarios.
BUSINESS UNIT STRATEGIC PLANNING
Figure 2.7 shows the steps in the business unit strategic-planning process.
Business Mission: Each business unit needs to define its specific mission within the company mission.
SWOT Analysis
The evaluation of a company’s strengths, weaknesses, opportunities, and threats is called SWOT analysis.
External Environment (Opportunity and Threat) Analysis
A business unit must monitor key macroenvironment forces (PEST ND):
And significant microenvironment actors: (Customers, Competitors, Suppliers, Distributors, Dealers).
A major purpose of environmental scanning is to detect new opportunities.
A marketing opportunity is an area of buyer need and interest in which there is a high probability
that a company can profitably satisfy that need.
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George Stalk suggests that winning companies are those that have achieved superior in-company
capabilities, not just core competencies. Stalk calls this capabilities-based competition.
Goal Formulation
SWOT analysis develop specific goals (goal formulation).
Goals: objectives that are specific with respect to magnitude and time.
The firm sets objectives, and then manages by objectives (MBO). For MBOs to work they must meet
four criteria: (SMART)
1. They must be arranged hierarchically, from the most to least important.
2. Objectives should be stated quantitatively whenever possible.
3. Goals should be realistic.
4. Objectives must be consistent.
Strategic Formulation
Every business must design a strategy for achieving its goals, consisting of a marketing strategy, and a
compatible technology strategy, and sourcing strategy.
Porter’s Generic Strategies: Michael Porter has proposed three generic strategies:
1. Overall cost leadership: lowest production and distribution costs.
2. Differentiation: achieving superior performance in an important customer benefit area.
3. Focus: focuses on one or more narrow market segments.
According to Porter, firms pursuing the same strategy to the same target market constitute a strategic group.
Strategic Alliances
Companies are discovering that there is a need for strategic partners if they hope to be effective.
Many strategic alliances take the form of marketing alliances. These fall into four major categories:
1) Product or service alliances.
2) Promotional alliances.
3) Logistics alliances.
4) Pricing collaborations.
To keep strategic alliances thriving, corporations have begun to develop organizational structures for
support and have come to view the ability to form and manage partnerships as core skills (called Partner
Relationship Management, PRM).
Program Formulation and Implementation
A great marketing strategy can be incapacitated by poor implementation.
In implementing strategy: companies must not lose sight of the multiple stakeholders needs.
According to McKinsey, strategy is only one of seven elements in successful business practice.
1) The first three—strategy, structure, and systems are considered the “hardware” of success.
2) The next four—style, skills, staff, and shared values are the “software”
a. Style means that company employees share a common way of thinking and behaving.
b. Skills means that the employees have the skills necessary to carry out the company’s strategy.
c. Staffing: hired able people, trained them well, and assigned them to the right jobs.
d. Shared values: means that the employees share the same guiding values.
Feedback and Control
As it implements its strategy, the firm needs to track the results and monitor new developments.
market environment changes faster than the company’s 7Ss strategic fit erodes.
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