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Topic 1 Market-Driven Strategy Dr. Ehsanul Huda Chowdhury Part-time Faculty, IBA

Topic 1 Market-Driven Strategy Dr. Ehsanul Huda Chowdhury Part-time Faculty, IBA. MARKET-DRIVEN STRATEGY. All business strategy decisions should start with a clear understanding of markets, customers, and competitors.

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Topic 1 Market-Driven Strategy Dr. Ehsanul Huda Chowdhury Part-time Faculty, IBA

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  1. Topic 1Market-Driven StrategyDr. Ehsanul Huda ChowdhuryPart-time Faculty, IBA

  2. MARKET-DRIVEN STRATEGY • All business strategy decisions should start with a clear understanding of markets, customers, and competitors. • The market and the customers that form the market should be the starting pint in shaping business strategy.

  3. Characteristics of a Market-Driven Strategy Becoming Market- Oriented Determining Distinctive Capabilities Achieving Superior Performance Customer Value/ Capabilities Match

  4. Characteristics of Market Orientation • Customer Focus What are the customer’s value requirements? • Competitor Intelligence Importance of understanding the competition as well as the customer • Cross-Functional Coordination Remove the walls between business functions • Performance Consequences Market orientation leads to superior organizational performances

  5. DISTINCTIVE CAPABILITIES “Capabilities are complex bundles of skills and accumulated knowledge, exercised through organizational processes, that enable firms to coordinate activities and make use of their assets.” George S. Day, Journal of Marketing, October 1994, p.38.

  6. Southwest Airline’s Distinctive Capabilities Organizational Processes Southwest uses a point-to-point route system rather than the hub-and-spoke design used by many airlines. The airline offers services to 57 cities in 29 states, with an average trip about 500 miles. The carrier’s value proposition consists of low fares and limited services (no meals). Nonetheless, major emphasis throughout the organization is placed on building a loyal customer base. Operating costs are kept low by using only Boeing 737 aircraft, minimizing the time span from landing to departure, and developing strong customer loyalty. The company continues to grow by expanding its point-to-point route network. Skills and Accumulated Knowledge The airline has developed impressive skills in operating its business model at very low cost levels. Accumulated knowledge has guided management in improving the business design over time. Coordination of Activities Coordination of activities across business functions is facilitated by the point-to-point business model. The high aircraft utilization, simplification of functions, and limited passenger services enable the airline to manage the activities very efficiently and to provide on-time point-to-point services offered on a frequent basis. Assets Southwest’s key assets are very low operating costs, loyal customer base, and high employee esprit de corps

  7. Identifying Distinctive Capabilities Desirable Capabilities Applicable to Multiple Competition Situations Superior to the Competition Difficult to Duplicate Source: George S. Day, Journal of Marketing, October 1994, 49.

  8. Matching Customer Value and Distinctive Capabilities Value Requirements Distinctive Capabilities

  9. CREATING VALUE FOR CUSTOMERS Customer Value: • Value for buyers consists of the benefits less the costs resulting from the purchase of products. • Superior value: positive net benefits • Creating Value: • “Customer value is the outcome of a process that begins with a business strategy anchored in a deep understanding of customer needs.” Source: C. K. Troy, The Conference Board Inc., 1996, 5.

  10. Creating Value for Customers Customer Value Benefits Costs

  11. Monetary costs Time Psychic and physic costs Product Services Employees Image Value Composition Benefits Value (gain/loss) Costs (sacrifices)

  12. BECOMING MARKET DRIVEN Market Sensing Capabilities MARKET-DRIVEN STRATEGIES Customer Linking Capabilities

  13. Market Driven Initiatives Market Sensing Capabilities • Effective processes for learning about markets • Sensing: • Collected information needs to be shared across functions and interpreted to determine proper actions. Customer Linking Capabilities • Create and maintain close customer relationships

  14. CHALLENGES OF A NEW ERA FOR STRATEGIC MARKETING • Strategic marketing faces unprecedented challenges and opportunities: Turbulent markets Intense competition Disruptive innovations Escalating customer demands • Ethical Challenges • Societal and Global Change • Social Responsiveness of Organizations

  15. END

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