Assignment: Industrial Marketing

By
Mr. Abhishek Kumar Singh [1201]
Mr. Jatin Gohil [1230]
Mr. Saumil Trivedi [1224]

Submitted to:

Dr. Naresh Patel

Head of Department
Centre for Management Studies
Dharmsinh Desai University

Date: 6 December 2011

CHAPTER 4
CRAFTING MARKET STRATEGY
CHAPTER 4: CRAFTING MARKET STRATEGY

Crafting market strategy is the process of studying how to exploit a firm’s

resources to achieve short-term and long-term marketplace success, deciding on
a course of action to pursue, and flexibly updating it as learning occurs during
implementation.

It is more than simply making a plan and following it. It recognizes real world
complexity and the interplay between deliberate strategy, where the firm
decides on a course of action to pursue, and emergent strategy, where
marketplace activities have a pattern to them that the firm recognizes and acts
upon in a coordinated way.

Crafting marketing strategy requires significant participation from many

functional areas besides marketing to decide what market segments and
customer firms to pursue and how to deliver superior value to them.

The firm first understands what resources it has, and how it can best exploit
them in one or more fundamental value-based strategies.

After this we next consider how the firm plans its market strategy. Planning the
market strategy and implementing it provide the firm with gains in deliberate as
well as emergent knowledge. The firm uses this knowledge to update its
business and market strategies. The nature of the changes in the updated
strategies can range from orderly advances to radical changes.

Business Strategy as the Context for Market Strategy

Business strategy refers to the aggregated strategies of single business firm or a
strategic business unit (SBU) in a diversified corporation. According to Michael
Porter, a firm must formulate a business strategy that incorporates either cost
leadership, differentiation or focus in order to achieve a sustainable competitive
advantage and long-term success in its chosen areas or industries. Alternatively,
according to W. Chan Kim and Renée Mauborgne, an organization can achieve
high growth and profits by creating a Blue Ocean Strategy that breaks the
previous value-cost trade off by simultaneously pursuing both differentiation
and low cost.

Product Markets: What markets do we serve with what products? No

company has the luxury of being able to serve every segment of potential
customers. We have to consider how well equipped we are to serve different
groups, relative to the strength of our competition in those segments.

Product market growth strategy

Resources: What level of investment in the product market? Intel spent $2.3
billion on R&D and another $4.5 billion on capital expansion in 1997.

Business strategy provides the context for a dialogue among the following
constituent strategies, with the intent of harmonizing them:

Operational Effectiveness: it means performing similar activities better than

rivals perform them. Firms that unwittingly pursue operational effectiveness as
strategy find themselves in a continual race against competitors to extend the
productivity.

Strategic Positioning: It means performing different activities from rivals or

performing similar activities in different ways.

Sourcing strategy: It specifies what the firm should acquire from others and
what it will produce itself.

Technology strategy: It concerns the design knowledge and process know-how

that transforms inputs to outputs of greater value.

Additional Facets of Strategy for a Stable of Businesses

Organizations that are comprised of multiple businesses—GE, North American
Rockwell, American Express, Grainger, and many others—have at least two
other significant components to their strategy. They need to resolve the problem
of how to allocate resources strategically to the different business units. They
must also manage the mix of businesses to achieve positive outcomes from the
intersecting operations, resources, and markets among the businesses.

Resource Allocation: The assignments of key people, teams, and tasks to

different facilities or plants need to be worked out. Financial resources—both
internally generated funds and external capital— will seldom be sufficient to
meet the requests of every line manager. “Projects” must be sorted and
evaluated on different criteria in the firm: How risky is each of these endeavors?
What return on investment will each yield? Is the venture consistent with the
goals and aspirations of the company? Can the proposals develop new and
relevant skill sets? Does the proposal access new and significant markets?

The Process for Strategies

Exhibit 6–2 depicts three strategic planning models. Although the presentations
differ, all three contain common elements—a process for reflecting on the
purpose of the enterprise, a situation analysis that attends to both environmental
and organizational elements, some more careful consideration of the
competitive forces in specific markets, and the detailed objectives, budgets, and
plans for strategy execution.

Resource-Based view of the Firm

The resource based view of the firm sees companies as very different
collections of physical and intangible assets and capabilities. No two companies
are alike because no two companies have had the same set of experiences,
acquired the same assets and skills or built the same organizational cultures.

This view combines and builds upon the internal perspective of the firm,
associated with concepts like core competencies and capabilities, and the
external perspective of the firm, associated with Porter’s five forces framework
of industry analysis and more recent work on market-based assets.

Resources are the building blocks for strategy. To be a source of competitive

advantage a resource must pass five external market tests of its value which are
as follows:

1. Inimitability: this shows how difficult the resource is to copy or the

length of time it will take for a competitor to replicate the resource.
 2. Durability: it shows how long a resource will last in providing value
before it is overtaken by innovation either within the industry of outside
of it.

3. Appropriability: it shows the extent to which other firms or individuals

can capture the value that the resource creates.

4. Substitutability: this is ability of a different resource to provide similar

functionality or performance at the same or lower cost.

5. Competitive superiority: it refers to a market assessment of how a

resource compares to those of the firm’s competitors.

Core Competencies
A core competence is a complex harmonization of individual technologies and
production skills. For example, 3M Company has core competencies in
substrates, coatings and adhesives that it has brought together in distinct ways to
create a number of successful businesses.

Capabilities
A capability is a set of business processes strategically understood. Product
replenishment at Wal-Mart is an example of a capability which closely
coordinates business processes of Wal-Mart and its strategic suppliers to
provide superior inventory turns.

Brands as Resources
A brand is a means of identifying a particular supplier and its market offering as
well as differentiating them from other suppliers and their offerings. It serves as
a shorthand descriptor of the technical, economical, service, and social benefits
that a particular supplier’s market offering delivers to targeted market segments
and customer firms.

Brand equity is a concept that is meant to capture the value of a brand and
refers to how customers regard a brand relative to offerings of others competing
suppliers based on those customers knowledge from experience with and
learning about the brand.
It is reflected in the following kinds of preferential actions or responses of
present or prospective customers:

• Greater willingness to sample or trial the offering

• Reduction in time to close the sale of the offering

• Greater likelihood of purchasing the offering

• Willingness to award a larger share of purchase requirement

• Willingness to pay a higher price

• Greater unwillingness to switch to competitor offerings after price

increases

• Less willingness to sample or trial competitor offerings.

Reliance on Outside Partners for Resources

Firms use collaborative relationships with other firms to gain access to
resources and to leverage their own resources. Firms increasingly rely on the
resources of outside logistics and transportation providers, such as UPS or
FedEx, to realize their business strategies. For example Dell Computers
restructured its order fulfilment process to leverage outside partnerships.

Fundamental value-Based Strategies

At the core of every successful strategy is understanding what targeted market
segments and firms regard as superior value and how to provide it to them. Not
all markets nor firms within them value the same things, though, which means
that a firm may provide superior value in multiple ways.

Product Leadership
Product leadership means offerings customers leading-edge products and
services that consistently enhance the customer’s use or application of the
product, thereby making rivals goods obsolete.
The firm uses its experience and learning to both speed up the realization
process and lower its costs. Hewlett-Packard relies heavily on innovation and
product obsolescence in its business strategy. More than half of its annual sales
come from products introduced within the last two years.

Customer Intimacy
Customer intimacy means segmenting and targeting markets precisely and then
tailoring offerings to match exactly the demands of those niches. A firm that
builds its strategy around customer intimacy recognizes that when it retains
customers over time, it tends to gain more profits from them.

The suppliers firms and its customers might work together to discover how they
can make advantageous changes in requirements as well as processes for doing
business together.

Needs-based positioning, where the firm tailors a set of activities to provide

superior value to targeted market segments and firms, is closely related to
customer intimacy.

For example, a supplier might develop a field engineering staff thoroughly

trained in customer applications that can offer field problem solving assistance
to customers that have limited technical capability in-house.

Supplier’s share of the customer’s business is a critical measure for gauging

the success of a customer intimacy strategy. Gaining a deep understanding of
customer’s requirements and preferences takes greater time and other resources.
This effort is worthwhile only when the supplier receives a large share of their
business.

Operational Excellence
It means providing customers with reliable products or services at competitive
prices and delivered with minimal difficulty or inconvenience. Operational
excellence means performing similar activities better than the firm’s
competitors.
Dell computer is an example of a firm that has pursued operational excellence.
By selling to customers directly, building to order rather than to inventory and
creating a disciplined, extremely low cost culture Dell has been able to undercut
Compaq and other PC makers in price yet provide high-quality products and
service.

Strategy Making
How firms should develop a strategy is a topic of keen interest to senior
management, business market managers & strategy thinkers.

Conventional view of strategy making is that senior management charts a

course of action where the fit between the firm’s resources and the requirements
of markets it elects to serve is best

But strategy thinkers advocate this view of strategy making as radical change.

Who makes strategy?

The conventional view is that top management makes strategy. But other firms
claim to use a top-down, bottom-up process for strategy making where the more
financially driven view of senior management informs and is informed by the
view of lower management, which is closer to and more knowledgeable about
the marketplace.

Recent management practice research has found that middle managers play
critical roles in strategy making and in successful implementation.

The four primary findings of this research were:

1) Middle managers often have value-adding entrepreneurial ideas that they

are able and willing to realize- if only they can get a hearing.

2) They are far better than most senior executives are at leveraging the
informal networks at a company that make substantive, lasting change
possible.

3) They stay attuned to employees’ moods and emotional needs, thereby

ensuring that change initiative’s momentum is maintained.
 4) They manage the tension between continuity and change-they keep the
organization from falling into extreme inertia, on the one hand, or
extreme chaos, on the other.

Defining purpose
The cornerstone of strategy making is defining the purpose of the firm. A firm
may express its purpose in a mission statement or vision statement, which sets
out a broader charter for the course of action that the firm will pursue.

Hamel & Prahalad advocated that a firm define its purpose in a statement of
strategic intent, which express “a desired leadership position and establishes the
criterion the organization will use to chart its progress”

Many strategy thinkers contend that strategic intent can produce an obsessive
focus on a competitor that makes firm myopic to other strategic options for
profitable growth

The firm improves its chances of having a meaningful and motivating definition
of purpose by having broad cross-section of employees participate in its
creation and having senior management discuss the meaning of the purpose in
dialogues with groups of employees through the firm. As part of these
dialogues, senior management should sincerely solicit employees, thoughts on
how the firm can realize its purpose.

Strategy as Orderly Advances Punctuated by Radical Change

Reacting to firms that pursue operational effectiveness as strategy, Hamel
proposed the metaphor of “strategy as revolution.” In this notion of strategy,
firms pursue strategies that represent radical change in their industries. These
revolutionary strategies break the established rules of competition within an
industry.

This concept of strategy as revolution builds upon Hamel and Prahalad’s earlier
concept of “strategy as stretch and leverage.” Firms that embrace this concept
establish a strategic intent that is extraordinary ambitious and that the firm
cannot accomplish with conventional thinking. This situation spurs managers to
creatively pursue ways to leverage their limited resources to attain the firm’s
strategic intent.

Hamel & Prahalad outline five basic ways in which a firm can leverage its
resources.

1) In can concentrate its resources through astutely pursuing ins strategic

intent over time and focusing at any given time to accomplish more with
limited resources

2) It can accumulate resources through superior extracting of learning from

its experiences and “borrowing” the resources of alliance partners

3) A firm can complement resources, blending its resources in superior way.

4) It can conserve resources in ways such as recycling them, coopting other

firms to pursue a common objectives and shielding them from direct
confrontations with entrenched competitors

The firm can recover resources by quickly generating revenue from them or
otherwise making them available for redeployment

Planning Market Strategy In Business Markets

Planning provides a way for the firm to build its institutional learning, “which is
the process whereby management teams change their shared mental models of
their company, their markets 8 their competitors”

Firms employ many different planning process and formats in their strategic
planning efforts. The particular planning process and plan format are not what is
important, though; it is the thinking that goes into the plan and the learning that
results. We organize our presentation of planning market strategy in business
markets around three fundamental questions:

• What do we know?

• What do we want to accomplish?

• How will we do it?

What do we know?
To construct a market strategy, managers must distinguish between what they
know, what they believe and what they want to believe.

To answer what do we know, the management team should review recent

performance, gather essential market information and when there is
considerable uncertainty, construct scenarios

What Do We Want to Accomplish?

Targeting

Targeting refers to selecting particular market segment and customer firm that
the supplier firm will focus its resources on serving.

To define a target market for your business plan, you should research the
potential buying audience for your product. This could range from millions of
people if you are starting an online business, to a few thousand individuals if
you are opening a retail store in a small town.

If you are catering to the consumer market, narrow your potential customer base
to a defined demographic group. By doing so, your business will not only be
more attractive to investors, but you will have a much easier time compiling
sales and marketing plan. Study your product or service and determine the most
likely consumer. Define the age range, gender, marital status, and income level
of the individual most likely to be your customer. Explain the motivations for
purchasing your product or service. Is it a necessity or luxury? What value does
this product bring? It's best not to assume or guess. Use surveys, questionnaires,
or secondary research to gather your demographic data.

Once you have defined the target market:

- Explain the purchase habits of this demographic group.

- Show how your company will impact those purchase habits.
 - Explain the motivation behind this demographic group and how you
will help them meet their needs.
- Project future changes in this market.
- Indicate how you will meet their changing needs.

Base your future projections on research and details from your findings. Make
projections based on past buying habits, the average purchase amount, and other
factors, such as your ability to make the products or services available. The
more you know about this target market, the more confidence you will have in
your sales projections.

The same need to identify your target audience (business-to-consumer market)

will also hold true if you are serving a business market (business-to-business
market). You need to determine which companies will benefit from your
products or services. Will you meet the needs of a specific industry or several
industries? Large or small businesses? Public or privately owned businesses?
Define exactly the types of businesses that will buy your product or services and
target them through your marketing efforts. Determine how you will reach your
target market, i.e. online, by referral, by cold-calling.

Setting Goals and Objective

A goal is a long-range aim for a specific period. It must be specific and realistic.
Long-range goals set through strategic planning are translated into activities that
will ensure reaching the goal through operational planning.

An objective is a specific step, a milestone, which enables you to accomplish a

goal. Setting objectives involves a continuous process of research and decision-
making. Knowledge of yourself and your unit is a vital starting point in setting
objectives.

Setting right objectives is critical for effective performance management. Such

objectives as higher profits, shareholder value, customer satisfaction may be
admirable, but they don't tell managers what to do. "They fail to specify
priorities and focus. Such objectives don't map the journey ahead - the
discovery of better value and solutions for the customer."
The objectives must be:

- be focused on a result, not an activity

- be consistent
- be specific
- be measurable
- be related to time
- be attainable

Some firms use balanced scorecard, which assesses customer, financial, internal
business process and learning and growth performance as to accomplish this.

Positioning in Business Markets

Positioning is a perceptual location. It's where your product or service fits into
the marketplace. Effective positioning puts you first in line in the minds of
potential customers.

As individuals, we continually position ourselves. The responsible older sibling,

the class clown, a number cruncher, a super genius are all examples of
positioning. These identifiers help us define ourselves and distinguish our
abilities as unique and different from other people.

Positioning is a powerful tool that allows you to create an image. And image is
the outward representation of being who you want to be, doing what you want
to do, and having what you want to have. Positioning yourself can lead to
personal fulfillment. Being positioned by someone else restricts your choices
and limits your opportunities.

That's why it's so important for entrepreneurs to transform their passion into a
market position. If you don't define your product or service, a competitor will do
it for you. Your position in the market place evolves from the defining
characteristics of your product. The primary elements of positioning are:

Pricing. Is your product a luxury item, somewhere in the middle, or cheap,

cheap, cheap.
Quality. Total quality is a much used and abused phrase. But is your product
well produced? What controls are in place to assure consistency? Do you back
your quality claim with customer-friendly guarantees, warranties, and return
policies?

Service. Do you offer the added value of customer service and support? Is your
product customized and personalized?

Distribution. How do customers obtain your product? The channel or

distribution is part of positioning.

Packaging. Packaging makes a strong statement. Make sure it's delivering the
message you intend.

A value proposition is an offer that describes the quantifiable benefits that

individuals or organizations making an offer promise to deliver. Its
development is based on a review and analysis of the
benefits, costs and value that an organization can deliver to its customers,
prospective customers, and other constituent groups within and outside the
organization. It is also a positioning of value,
where Value = Benefits / Cost (cost includes risk)

Two key components of a successful value proposition:

Although most involved in sales recognize they need to make a value

proposition in order to close a sale too often they leave the value out of the
proposition. Here are two key components of a successful value proposition:

First, there has to be value in your eyes. Make sure you look at the total price
and the components of your product or service to make sure there price is fair
for what you are offering. Remember that value is typically independent for
retail. That is because retail is tangible and value is perceived.

A national mall-based pizza store is able to get customers to pay extra for value
meals by simply creating the feeling they are getting a good deal. They
regularly charge more for value meals than the total would be if the items were
ordered individually.

This example is only offered as an illustration of the perception of the value, not
as an actual way to provide value. Overcharging eventually catches up and
harms one's reputation. Value should be something you, as an expert in your
field, can readily identify as truly exceptional.

Second, there needs to be value in the customer's eyes. Make sure the
customer sees the value in your offering. This means you need to empathize
with them, recalling what the customer has told you about their problems and
feelings. If your customer needs to clearly perceive the value they are likely to
stop considering other options for their money.

Building Brand in Business Markets

Guidelines:

- Adopt a corporate/family brand strategy and create a well defined brand

hierarchy

- Link non-product-related imagery associations

- Employ a full range of marketing communications options

- Leverage equity of other companies that are customers

- Segment market carefully and develop tailored branding and marketing

programs

What factors are important in building brand value?

Professor David Jobber identifies seven main factors in building successful

brands, as illustrated in the diagram below:

Quality
Quality is a vital ingredient of a good brand. Remember the “core benefits” –
the things consumers expect. These must be delivered well, consistently. The
branded washing machine that leaks, or the training shoe that often falls apart
when wet will never develop brand equity.

Research confirms that, statistically, higher quality brands achieve a higher

market share and higher profitability that their inferior competitors.

Positioning

Positioning is about the position a brand occupies in a market in the minds of

consumers. Strong brands have a clear, often unique position in the target
market.

Positioning can be achieved through several means, including brand name,

image, service standards, product guarantees, packaging and the way in which it
is delivered. In fact, successful positioning usually requires a combination of
these things.

Repositioning

Repositioning occurs when a brand tries to change its market position to reflect
a change in consumer’s tastes. This is often required when a brand has become
tired, perhaps because its original market has matured or has gone into decline.

The repositioning of the Lucozade brand from a sweet drink for children to a
leading sports drink is one example. Another would be the changing styles of
entertainers with above-average longevity such as Kylie Minogue and Cliff
Richard.

Communications

Communications also play a key role in building a successful brand. We

suggested that brand positioning is essentially about customer perceptions –
with the objective to build a clearly defined position in the minds of the target
audience.

All elements of the promotional mix need to be used to develop and sustain
customer perceptions. Initially, the challenge is to build awareness, then to
develop the brand personality and reinforce the perception.
First-mover advantage

Business strategists often talk about first-mover advantage. In terms of brand

development, by “first-mover” they mean that it is possible for the first
successful brand in a market to create a clear positioning in the minds of target
customers before the competition enters the market. There is plenty of evidence
to support this.

Think of some leading consumer product brands like Gillette, Coca Cola and
Sellotape that, in many ways, defined the markets they operate in and continue
to lead. However, being first into a market does not necessarily guarantee long-
term success. Competitors – drawn to the high growth and profit potential
demonstrated by the “market-mover” – will enter the market and copy the best
elements of the leader’s brand (a good example is the way that Body Shop
developed the “ethical” personal care market but were soon facing stiff
competition from the major high street cosmetics retailers.

Long-term perspective

This leads onto another important factor in brand-building: the need to invest in
the brand over the long-term. Building customer awareness, communicating the
brand’s message and creating customer loyalty takes time. This means that
management must “invest” in a brand, perhaps at the expense of short-term
profitability.

Internal marketing

Finally, management should ensure that the brand is marketed “internally” as

well as externally. By this we mean that the whole business should understand
the brand values and positioning. This is particularly important in service
businesses where a critical part of the brand value is the type and quality of
service that a customer receives.

Think of the brands that you value in the restaurant, hotel and retail sectors. It is
likely that your favourite brands invest heavily in staff training so that the face-
to-face contact that you have with the brand helps secure your loyalty.
How Will We Do It?

Develop an Action Plan

Action plan translates the market strategy into the coordinated activities and
specific resources the firm will use to attain what it want to accomplish.

No matter what form you use, or what format you choose for your action plans,
the process is the same:

1—Define your goal clearly and make sure it can be measured. 2—List the
action steps you will take to reach the goal. 3—Write down how you will
measure your progress. 4—Set target dates for the actions 5—Log your results.

Action Steps are the key to the entire Action Plan. This is where you list the
details of what you will do. It can be tricky sometimes because you just might
not know what you need to do to get from here to there. The Action Plan
process will help you learn how. It forces you to examine your thinking and
make sure you are focused.

One of the easiest ways to begin writing Action Steps is to think backwards
from the goal. Visualize what your world will look like once you get there.
Now, imagine the path that you took. What happened right before you achieved
your goal? What happened before then? And so on, all the way back to the
present time.

Each Action Step is a mini-goal in itself and there will be next steps involved in
most of them. You can create mini Action Plans for each step that requires
multiple actions, or you can just keep up with your efforts on your original plan.

The next step in creating the Action Plan is to determine measurable results for
each step. The beauty of using action plans is that they are flexible and can
change with you. As long as you keep writing down your goals and
measurements, setting deadlines and tracking your results, you will make
definite strides toward your goals.

An added bonus is that you learn to think differently. You learn to think in
terms of actions required on your part to succeed instead of just wishing things
were different. You'll learn to evaluate your desires for their practicality. And,
you will learn how to overcome obstacles by breaking them down into small
achievable steps that you can do.

Marketing and Sales Programs

A sales and marketing program is a set of connected activities that consumes

resources to produce results in pursuits of some objective.

Sales and marketing programs consists of external elements “wrapped around”

four internal elements.

External elements: Objective, Measures of feedback

Internal elements: actions to be taken, responsibilities to be defined, timing,

Budget.

Take Stock of Implementation Skills

Four behavioural skills of managers are fundamental in implementation:

interacting, allocating, monitoring, and organizing.

Interaction skills capture how a manager works together with others, uses
influence strategies, and negotiations.

Allocation skills refer to manager’s expertise in budgeting time, people and

money.

Monitoring skills are a manager’s ability to stay informed on what matters and
to recognize when to intervene in ongoing activities.

Organizing skills capture a manager’s proficiency at drawing upon or when

needed circumventing, the formal organizational structure to bring together the
resources to accomplish a market task.

Learning and Adapting

One way the firms can excel at learning and adapting is to gain early feedback,
either before or just after implementing parts of the market strategy.

A customer advisory panel, where the firm brings together a group of its
leading edge and key customers to provide reactions, advice and counsel,
provides a valuable mechanism for learning and adaption.

Pilot programs are a valuable way of learning by doing. The firm should design
them so that to the extent possible they are limited to scale and scope.

Thank You

Prepared by:Abhishek Singh, Jatin Gohil & Saumil Trivedi