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Chapter 2

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Ryerson University
MKT 702
John Peco

MKT 702 Chapter 2 Value Delivery Process The smart competition must design and deliver offerings for well-defined target markets. The sequence of value creation and delivery can be divided into three phases. 1) Choosing the value Marketing must channel a formulation of segmentation, targeting, positioning, is the essence of strategic marketing. Michael Porter of Harvard has proposed the value chain as a tool for identifying ways to create more customer value The primary activities 1) inbound logistics 2) Operating , or converting materials into final products 3) Outbound logistics or shipping 4) Sales, which includes sales 5) Service. Specialized departments handle the support activities 6) Procurement 7) Technology 8) Human resource management 9) Firm infrastructure Firm’s task is to examine cost and performance in each value-creating activity and look for ways of innovation. The firm should estimate its competitors cost and performances as benchmarks against which to compare its own costs and performance. The firm’s success depends not only on how well each department performs its work, but also on how well the various departmental activities are coordinates to conduct core business processes. Core business processes: 1) The market-sensing process. All the activities involved in gathering market intelligence, disseminating it within the organization, and acting on the information. 2) The new offering-realization process. All the activities involved in researching, developing, and launching new high quality offerings quickly and within budget 3) The customer-acquisition in process. All activities involved in defining target markets and prospecting for new customers 4) The customer relationship management process. 5) The fulfillment management process. MKT 702 Chapter 2 Value Delivery Network (supply chain) – Many companies who have partnered with specific suppliers and distributors to create a superior value supply chain Core competencies – Three characteristics 1) It is a source of competitive advantage in that is makes a significant application in a wide variety of markets 2) It is difficult for competitors to imitate 3) Competitive advantage also accrues to companies that possess distinctive capabilities or excellence in broader business processes. Competitive advantage ultimately derives how well the company has fitted its core competencies and distinctive capabilities into tightly interlocking “activity systems” 1) Redefining the business concept or big idea 2) Reshaping the business scope 3) Repositioning the company’s identity Holistic Marketing 1) Value exploration. How can a company identify new value opportunities 2) Value Creating. How can a company efficiently create more promising new value offerings 3) Value Delivery. How can a company use its capabilities and infrastructure to deliver the new value offerings more efficiently The Central Role of Strategic Planning Successful marketing requires having capabilities such as understanding customer value, creating customer value, delivering customer value, capturing customer value, and sustaining customer value. To ensure that the proper activities are selected and executed, strategic planning is paramount. Strategic planning calls for action in three key areas: 1) The first is managing a company’s a businesses as an investment portfolio. 2) Involves assessing each businesses strength by considering the market’s growth Marketing Plan – The central instrument for directing and coordinating the marketing effort. Strategic Marketing Plan – Lays out the target markets and the value proposition that will be offered. The tactical marketing plan – The marketing tactics, including product features, promotion, merchandising, pricing, sales channels and service MKT 702 Chapter 2 Corporate and Division Strategic Planning 1) Defining the corporate mission 2) Establishing strategic business units 3) Assigning resources to each SBU Defining the Corporate Mission: 1) What is our business 2) Who is our customer 3) What is the value of our customer 4) What will our business be 5) What should our business be Mission Statements – Managers, employees, and (in many cases) customers. A clear, thoughtful mission statement provides employees with a shared sense of purpose, direction, and opportunity. Mission statements area at their best when they are guided by a vision, an almost “ impossible- dream” that provides a direction for the company for the next 10 to 20 years. 1) They focus on a limited number of goals. 2) They stress the company’s major policies and values 3) They define the major competitive spheres within which the company will operate. 4) They take a long-term view: 5) They are as short, memorable, and meaningful as possible. Establishing Strategic Business Units Companies often decline their businesses in terms of products. A target market definition tends to focus on selling a product or service to a current market. A strategic market decision: Large companies normally manage quite different businesses, each requiring its own strategy MKT 702 Chapter 2 1) It is a single business or collection of related businesses that can be planned separately from the rest of the company 2) It has its own set of competitors 3) It has a manager who is responsible for strategic planning and profit performance and who controls most of the factors affecting profit. Assigning Resources to Each SBU Management must decide how to allocate corporate resources to each separate portfolio- planning models to provide ways to make investment decisions. Portfolio Planning models like these have fallen out of favour as oversimplified are subjective. Newer methods rely of shareholder value analysis. These value calculations assess the potential of a business based on growth opportunities from global expansion, repositioning or retargeting, and strategic outsourcing. Assessing Growth Opportunities SBU’s management must decide how to allocate corporate resources to each. If there is a gap between future desired sales and projected sales, corporate management will have to develop or acquire new businesses to fill it. Intensive Growth Corporate management first course of action should be a review of opportunities for improving existing businesses. It considers the strategic growth opportunities for a firm in terms of current and new products and markets. Integrative Growth A business sales and profits may be increased through backward, forward, or horizontal integration within its industry. Horizontal mergers and alliances don’t always work out. The merger between sears and Kmart didn’t solve either retailer’s problems. Diversification Growth Strategic planning is done within the context of the organization. A company’s organization consists of structures, policies, and corporate culture, all of which can become dysfunctional in a rapidly changing business environment. Corporate Culture MKT 702 Chapter 2 Businesspeople would be hard pressed to find words to describe this elusive concept, which some define as the “ the shared experiences, stories, beliefs, and norms that characterize and organization.” A customer-centric culture can affect all aspects of an organization. Sometimes corporate culture develops organically and is transmitted directly from the CEO’s personality and habits to company employees. Marketing Innovation Innovation in marketing is critical. The traditional view is that senior management hammers out of the strategy and hands it down. Senior management seems t under identify younger personalities and insight as communication channels are deterred. Scenario Analysis Develops plausible representations of a firms possible future using assumptions about forces driving the market and different uncertainties. Business Unit Strategic Planning The Business Mission Each business unit needs to define its specific missio
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