Chapter 5:

Business Marketing
Planning: Strategic
Perspectives

Prof Dheeraj Sharma

 Chapter Topics
1. Marketing’s strategic role in corporate strategy
development

2. The multifunctional nature of business marketing

decision-making

3. Components of a business model that can be

converted into superior positions of advantage in the
business market

4. A valuable framework for detailing the processes and

systems that drive strategy success
 New Strategies

 New strategies come from new ideas

 New ideas often come from new voices
 To meet both domestic and foreign competition,
B2B firms are recognizing the vital role of
marketing in developing and implementing
successful strategies
Effective Strategies
Effective strategies share a:
A. Responsiveness to market needs
B. Ability to exploit the organizations special
competencies
C. Ability to make valid assumptions about
environmental trends
D. Ability to take advantage of competitive behavior
E. Realistic basis for securing and sustaining a
competitive advantage
 Market-Driven Organizations

Market-driven organizations are:

Centered on customers
Take an outside-in view of strategy
Demonstrate an ability to sense
market trends ahead of their
competitors
Hierarchy of Strategies – 3 parts

Corporate Strategy

Business-Level Strategy

Functional Strategy
Hierarchy of Strategies – Part 1

 Corporate Strategy
– What businesses are we in?
– What are our core competencies?
– How should we allocate resources?
– What businesses should we be in?
 Corporate Strategy
At this level, the role of Marketing is to:
a) Assess market attractiveness and competitive
effectiveness of the firm

b) Promote customer orientation to management

c) Formulate the company’s overall value

proposition that is marketed to the customer,
management and employees
Marketing Strategy to Corporate

An important role for marketing

management is to make the firm
understand the “Customer is King”
and advocate a set of values and
beliefs that put the customer first in
the firm’s decision-making process.
Hierarchy of Strategies – Part 2

 Business-Level Strategy
– How do we compete in a given industry?
– How should we position ourselves against
competitors?
 Business-Level Strategy
The focus is on how firms compete in a
given industry.
Competition is not between large corporations. It
is between individual business units (SBUs) that
compete in specific markets. Each SBU needs to
develops its own business and marketing plans to
answer:
 How can we compete?
 How and what is the most efficient way to get to
the market?
 What are our distinctive skills?
Hierarchy of Strategies – Part 3
Functional Strategy
– How can we allocate resources to
most efficiently and effectively
support business-level strategies?
– How can we use resources to meet
the firm’s objectives within a specific
product market?
The interplay between the three levels of
strategic formulation:
1. Cuts across functional areas
2. Involves issues related to long term
objectives
3. Involves allocating resources across SBUs
and/or product markets
4. Includes decisions about the direction of
corporate strategy, application of
technology and choice of alliance partners
 Strategic Decision
1. Process involves active participation of several
functional groups with differing opinions
about:
a. Appropriateness of certain strategies
b. Corporate goals
2. Altering strategic goals can cause friction
between them.
3. However, strategic decision-making represents
a bargaining process between competing
functional factions.
 The Game
• There are a number of players within an organization
that want to change strategy to further their interests.
• Certain managers feel their functional areas belong to
them (“turf”) and if anyone intrudes by changing the
strategy, they are stepping over their bounds.
• Further, various groups possess different philosophies,
beliefs and incentives resulting in different thought-
worlds.
• Thus, each subculture has a different agenda.

• The bargaining process for arriving at a mutually

agreeable strategic decision between these competing
forces represent “the game.”
Collective Action Perspective of Strategy Formulation Process

16
Corporate Progress Requires a
Meeting of the Minds

 Successful cross-functional connections

occur when turf wars, thought-worlds, and
other various interest groups come together
and develop a workable strategy to deal
with the competitive world.
 In order for this to occur, the marketing
group needs to be sensitive to—and
connect with—these “stakeholders.”
Cross-Functional Connections Explore Interrelationships
between Marketing and Four Business Functions
B2B TOP PERFORMERS

Marketing managers who know how to get the job done

(i.e., facilitate negotiations across functional areas)
possess certain characteristics:
1.Responsive & timely

2.Perspective-taking ability to understand and anticipate

other functional managers’ priorities
3.Open, frequent and high quality communication style

4.Their word is their bond and follow through

5.Able to develop a strong network

19
 Successful marketing managers know
how to integrate functional areas.
They:
1. Understand their capabilities
2. Capitalize on their strengths
3. Facilitate strategies that are responsive
to customer needs

 Successful marketing managers assume

a central role in strategy
implementation.
 21

Inter-Functional Involvement in Marketing Decision Making:

An Illustrative Responsibility Chart
Organizational Function
Decision areas Marketing Manufacturing R&D Logistics Tech. SBU Corp. Level
Services Manager Manager

Product
Design specifications
Performance character.
Reliability

Price
List/Discount

Tech. Services
Customer training

Logistics
Inventory
Customer service level

Sales Force
Training

Advertising
Message development

Channel
Selection

Decision role: R=Responsibility; A=Approval; C=Consult; M=Implement; I=Inform,

X=No Role
Vocabulary
Roles in Strategic Decision Making
Participants in strategic decision making may assume the
following roles:
Responsible (R) - Manager takes initiative, analyzes
situation, develops alternatives, consults with others, make
initial recommendation, & facilitates approval of decision
Approve (A) - Manager accepts or rejects decisions
Consult (C) - Manager offers input
Implement (M) - Manager is accountable for
implementing decision
Inform (I) - Manager is informed of the decision
Marketing Strategy Center (MSC)

 Representatives may assume more than

one role
 Roles evolve during the marketing
strategy development process
 Composition of the MSC is not strictly
prescribed by the organization chart
 MSC share certain parallels with the
buying center
 One challenge for the business marketer is to
minimize interdepartmental conflict.
 Conflicts are motivated by personal and
organizational goals.
 Organizational objectives may be different for
different functional areas. (Example: Various
functional areas are rewarded differently.)
 Managing conflict, promoting cooperation,
developing and coordinating strategy is a
fundamental responsibility for marketing managers.
Strategy Success

For a strategy to succeed:

 Each firm needs to have a business
concept that separates them apart
from their competition.
 There are 4 components:
1. Customer Interface
2. Core Strategy
3. Strategic Resources
4. Value Network
 Refer to Figure 5.2
 Fig. 5.2 – Components of a
Business Model: Bridges to Profits

CUSTOMER INTERFACE CORE STRATEGY STRATEGIC RESOURCES VALUE NETWORK

Fulfillment & Support Business Mission Core Competencies Suppliers

Information & Insight Product/Market Scope Strategic Assets Partners
Relationship Dynamics Basis for Differentiation Core Processes Coalitions
Pricing Structure

EFFICIENT / UNIQUE / FIT / PROFIT BOOSTERS

Major business concept components are tied together by

three important “bridge” elements: customer benefits,
configuration, and company boundaries.
Fulfillment Information
& Support & Insight

1. Customer Interface

Pricing Relationship
Structure Dynamics
1. CUSTOMER INTERFACE

1. Fulfillment & Support – They are the channels a firm uses

to reach and support customers.
2. Information & Insight – Involves the capture of
knowledge from customers and uses it to provide
enhanced value to customers.
3. Relationship Dynamics – Involves the dyadic nature of
the buy/sell relationship in order to understand customer
expectations so it can exceed them, increase the affiliation
and lower competitive influences.
4. Pricing Structure – Employs a pricing policy and structure
that enhances profits but not at the expense of curtailing
business.
 Fig. 5.2 – Components of a
Business Model: Bridges to Profits

CUSTOMER INTERFACE CORE STRATEGY STRATEGIC RESOURCES VALUE NETWORK

Fulfillment & Support Business Mission Core Competencies Suppliers

Information & Insight Product/Market Scope Strategic Assets Partners
Relationship Dynamics Basis for Differentiation Core Processes Coalitions
Pricing Structure

EFFICIENT / UNIQUE / FIT / PROFIT BOOSTERS

Major business concept components are tied together by

three important “bridge” elements: customer benefits,
configuration, and company boundaries.
Core Strategy – Three Elements
The business mission describes overall strategic
objective, sets course direction, and defines
performance criteria to measure progress.

Product/market scope defines where firm

competes.

Basis for differentiation captures essence of how

firm competes differently than its rivals do.
 Differentiation of Products and Services

 A business is differentiated when its value-

adding activities are perceived as superior and
profitable.
 Value-added features need to motivate
customers to pay a higher premium than the
cost of superior performance.
 Provide superior performance through:
 Speed
 Responsiveness to complex orders
 Customized to solve customer problems

 Provide superior quality by:

 Reducing customer costs
 Improving performance

 Offer innovative product features that employ

new technologies
 Fig. 5.2 – Components of a
Business Model: Bridges to Profits

CUSTOMER INTERFACE CORE STRATEGY STRATEGIC RESOURCES VALUE NETWORK

Fulfillment & Support Business Mission Core Competencies Suppliers

Information & Insight Product/Market Scope Strategic Assets Partners
Relationship Dynamics Basis for Differentiation Core Processes Coalitions
Pricing Structure

EFFICIENT / UNIQUE / FIT / PROFIT BOOSTERS

Major business concept components are tied together by

three important “bridge” elements: customer benefits,
configuration, and company boundaries.
 Competitive Advantage
 Employing superior strategic resources and
skills can gain a competitive advantage.
 Core competencies are set of skills, systems,
and technologies that create uniquely high
value for customers.
 Strategic assets are more tangible
requirements for advantage; includes brands,
customer data, distribution coverage, patents.
 Core processes are methodologies and
routines that companies use to transform
competencies, assets, and other inputs into
value for customers.
 Fig. 5.2 – Components of a
Business Model: Bridges to Profits

CUSTOMER INTERFACE CORE STRATEGY STRATEGIC RESOURCES VALUE NETWORK

Fulfillment & Support Business Mission Core Competencies Suppliers

Information & Insight Product/Market Scope Strategic Assets Partners
Relationship Dynamics Basis for Differentiation Core Processes Coalitions
Pricing Structure

EFFICIENT / UNIQUE / FIT / PROFIT BOOSTERS

Major business concept components are tied together by

three important “bridge” elements: customer benefits,
configuration, and company boundaries.
 Value Network
A value network includes those who complement and
enrich the organization.
Do we have good relations with suppliers, partners,
vendors and other supporters?
Can we partner with others in such a way that we can
use their assets as if they were our own?
Example: Using Bluedart as shipping service
 Competitive positioning is about being
different and competing in a distinct way
by using a unique mix of customer
values.
 Michael Porter states there are six
fundamentals principles that a company
should employ for establishing and
maintaining a distinct strategic position.
Michael Porter Asks: What is Strategic Positioning?
Michael Porter & Strategic Positioning
 Right goal: Superior long term ROI instead of
performance goals (i.e., % share market)
 Create and deliver a good customer value proposition
 Create a distinctive value chain by offering or
performing similar features but in a different way
 Accept trade-offs: You can’t be everything to everyone,
therefore give up some things and reinforce others that
enhance the distinctions
 Emphasize those element that facilitate the strategic “fit”
and reinforce them
 Continuity of direction means to define a distinctive
value proposition and build strong customer relations by
staying consistent to that plan
 Building the Strategic Plan

 Companies need to do many things well.

 However, underperformance is caused by a breakdown

between strategy and operations.

 Kaplan & Norton contend that successful strategic

execution involves two rules:
a. Understand the Management cycle that links
strategy and operations, and
b. Know what tools to apply at each stage of the cycle.
The Management System This system allows
management to plan,
coordinate and monitor
the links between
strategy and operations.
The Management System
 Involves 5 stages:
1. Strategy development
2. Translate strategy into objectives
3. Design key processes
4. Monitor performance
5. Adapt the strategy

 2 Key tools for successful strategy implementation are:

1. Balanced Scorecard
2. Strategy Map
 Balanced Scorecard

 Developed by Kaplan and Norton.

 We know measures are central to any
strategy.
 The Balanced Scorecard is a comprehensive
system for converting a company’s vision
and strategy into a tightly connected set of
performance measures.
Balanced Scorecard

Examines the performance of a business

unit from four perspectives:
1.Financial

2.Customer

3.Internal Business

4.Learning and growth

The Balanced Scorecard - Translating Strategy Into
Operational Terms
1. Financial Perspective
Cause-and-Effect Relationships
Long-Term
Shareholder Defines the chain of logic by which
Productivit
Value Revenue
Growth
intangible assets will be
y
transformed to tangible value.

2. Customer Perspective

Product/Service Attributes Relationship Image

Customer Value Proposition
Clarifies conditions that create
Price Quality Time Function Partnership Brand
value for the customer.

3. Internal Process Perspective Value-Creating Processes

Manage Defines processes that transform
Manage
Operations
Manage
Customers
Manage
Innovation
Regulatory
and Social
intangible assets into customer
Processes and financial outcomes.

Clustering Assets and Activities

4. Learning and Growth Perspective
Defines intangible assets to be
aligned and integrated to create
Human Information Organization
Capital + Capital + Capital value.
 Cause & Effect Relationship defines the logic
that transforms intangible assets into
tangible assets.

 Consideration is give to:

1. Productivity
2. Long-term shareholder value
3. Revenue growth
 Balanced Scorecard seeks to match financial
objectives with business units’ growth and
other life cycle stages.
 Growth stage:
◦ Operation: This stage is where the company needs
to commit resources for new product or service.
◦ Financial objectives:
 Know sales growth rate by segment
 Know % of revenue from new product, services and
customers
 Sustain Stage:
◦ Operation: This stage represents majority of
business where the strategy is to maintain and
grow slowly.

◦ Financial objectives:
 Focus on share of target customers and account
 Know customer and product line profitability
 Harvest Stage:
◦ Mature SBUs or products
 Operations: Provide only enough investment to
maintain product equipment and capabilities.

 Financial Objectives:
 Goal is payback
 Know customer and product-line profitability
The Balanced Scorecard - Translating Strategy Into
Operational Terms
1. Financial Perspective
Cause-and-Effect Relationships
Long-Term
Shareholder Defines the chain of logic by which
Productivit
Value Revenue
Growth
intangible assets will be
y
transformed to tangible value.

2. Customer Perspective

Product/Service Attributes Relationship Image

Customer Value Proposition
Clarifies conditions that create
Price Quality Time Function Partnership Brand
value for the customer.

3. Internal Process Perspective Value-Creating Processes

Manage Defines processes that transform
Manage
Operations
Manage
Customers
Manage
Innovation
Regulatory
and Social
intangible assets into customer
Processes and financial outcomes.

Clustering Assets and Activities

4. Learning and Growth Perspective
Defines intangible assets to be
aligned and integrated to create
Human Information Organization
Capital + Capital + Capital value.
2. CUSTOMER PERSPECTIVE
 Clarifies conditions that create customer
value

 Take into consideration:

1. Product/Service attributes (price, quality, time &
function)
2. Relationships (partnerships)
3. Image (brand)
 2. CUSTOMER PERSPECTIVE: CORE MEASURES

Market Share Proportion of business in a particular market by:

a.% share of market
b.Total number of customers
c.Rupees spent or unit volume sold

Customer Acquisition Tracks in absolute or relative terms rate at which SBU attracts
and/or wins new customers
Customer Retention Tracks in absolute or relative terms rate at which SBU retains
new customers
Customer Satisfaction Matches the satisfaction level of customers on specific
performance criteria such as quality, service, delivery, reliability,
etc.
Customer Profitability Assesses the net profit on each customer, or a segment, after
deducting unique expenses allocated to support that customer or
52
segment
3. Internal Process Perspective
 This highlights the value-creating processes
that define the other processes that will
transform intangible assets into tangible
assets.
 It considers:
1. Operations management
2. Customer management
3. Innovation management
4. Regulatory & social processes management
 3. Aligning Internal Business Processes
Key Value Propositions & Customer Strategy The Focus of Internal Business Processes

Operations Management Customer Relationship Management Innovation Management

Low Total Cost Strategy Highly Efficient Operating Ease of Customer Access Seek Process Innovations
Processes Superb Post-Sales Service Gain Scale Economies
Efficient, Timely Distribution

Product Leadership Flexible Manufacturing Capture Customer Ideas for Disciplined, High-Performance
Strategy Processes New Offering Product Development
Rapid Introduction of Educate Customers about Complex First-to-Market
New Products New Products/Services

Complete Customer Deliver Broad Product/ Create Customized Solutions Identify New Opportunities
Solutions Strategy Service Line for Customers to Serve Customers
Create Network of Suppliers Build Strong Customer Anticipate Future Customer
for Extended Product/ Relationships Needs
Service Capabilities Develop Customer Knowledge
Lock-in Provide Capacity for Create Awareness Develop and Enhance
Strategies Proprietary Product/ Influence Switching Costs of Proprietary Product
Service Existing and Potential Increase Breadth/
Reliable Access and Customers Applications of
Standard
Ease of Use

Source: Adapted from Robert S. Kaplan and David P. Norton, Strategy Maps: Converting Intangible Assets into Tangible Outcomes (Boston: Harvard
Business School Publishing Corporation, 2004), pp. 322-344.
The Balanced Scorecard - Translating Strategy Into
Operational Terms
1. Financial Perspective
Cause-and-Effect Relationships
Long-Term
Shareholder Defines the chain of logic by which
Productivit
Value Revenue
Growth
intangible assets will be
y
transformed to tangible value.

2. Customer Perspective

Product/Service Attributes Relationship Image

Customer Value Proposition
Clarifies conditions that create
Price Quality Time Function Partnership Brand
value for the customer.

3. Internal Process Perspective Value-Creating Processes

Manage Defines processes that transform
Manage
Operations
Manage
Customers
Manage
Innovation
Regulatory
and Social
intangible assets into customer
Processes and financial outcomes.

Clustering Assets and Activities

4. Learning and Growth Perspective
Defines intangible assets to be
aligned and integrated to create
Human Information Organization
Capital + Capital + Capital value.
4. Learning & Growth
 Intangible assets must be aligned to long term
strategy to achieve long term growth.
 Intangible assets represent “the capabilities of
the company’s employees to satisfy customer
needs.”
 They include:
 Human capital

 Information capital

 Organization capital
 4. Learning & Growth (continued)
To implement strategy, the organization needs:
1. Human Capital: Availability of employees
with skills & talent
2. Information Capital: Availability of
information systems and infrastructure
3. Organization Capital: The culture,
leadership, incentives and teamwork
 Benefit of the Balanced Scorecard

 The Balanced Scorecard helps align the

firms tangible and intangible assets with
the organization’s strategic goals.

 See next frame:

– 3. Aligning Internal Business Processes
 3. Aligning Internal Business Processes
Key Value Propositions & Customer Strategy The Focus of Internal Business Processes

Operations Management Customer Relationship Management Innovation Management

Low Total Cost Strategy Highly Efficient Operating Ease of Customer Access Seek Process Innovations
Processes Superb Post-Sales Service Gain Scale Economies
Efficient, Timely Distribution

Product Leadership Flexible Manufacturing Capture Customer Ideas for Disciplined, High-Performance
Strategy Processes New Offering Product Development
Rapid Introduction of Educate Customers about Complex First-to-Market
New Products New Products/Services

Complete Customer Deliver Broad Product/ Create Customized Solutions Identify New Opportunities
Solutions Strategy Service Line for Customers to Serve Customers
Create Network of Suppliers Build Strong Customer Anticipate Future Customer
for Extended Product/ Relationships Needs
Service Capabilities Develop Customer Knowledge
Lock-in Provide Capacity for Create Awareness Develop and Enhance
Strategies Proprietary Product/ Influence Switching Costs of Proprietary Product
Service Existing and Potential Increase Breadth/
Reliable Access and Customers Applications of Standard
Ease of Use

Source: Adapted from Robert S. Kaplan and David P. Norton, Strategy Maps: Converting Intangible Assets into Tangible Outcomes (Boston: Harvard
Business School Publishing Corporation, 2004), pp. 322-344.
Strategy Map
The cause & effect components of the Balanced
Scorecard template is transformed into visual
model called the “strategy map.”

The strategy map allows the company to describe

and illustrate its:
Objectives, initiatives & targets
Measurements used to assess performance
Linkages which are the foundation of the strategic
direction
Strategy Map
The next frame illustrates a firm’s strategic map for
pursuing a product leadership strategy.
To start the company emphasize:
 Productivity strategy
&
 Revenue Growth strategy

Refer to Strategy Map Template

 Balanced Scorecard
Strategy Map Template: Product Leadership
Long-Term Shareholder Value
Financial
Perspective Productivity Strategy Revenue Growth Strategy

Manage Total Life-Cycle Revenues from Gross Margins:

Product Costs New Products New Products

“Products and Services That Expand Existing Performance Boundaries into the Highly Desirable”
Customer
Perspective
High-Performance Products: Smaller,
Faster, Lighter, Cooler, More New Customer
First to market Segments
Accurate, More Storage, Brighter…

Operations Management Customer Management Innovation Regulatory and Social

Rapid Educate Disciplined, Minimize

Flexible Product Liability
Introduction Customers about High-Performance
Robust And
of New Complex New Product
Internal Processes
Products Products/Services Development Environmental
Perspective Impact

Supply In-line Product

Experimentation Capture Customer
Capacity Development Contribute to
and Ideas for New
for Rapid Improvement Time: From Idea Communities
Products/Services
Growth to Market

“Find, Motivate, Grow, and Retain the Best Talent”

A Capable, Motivated and Technologically Enabled Workforce
Learning and Human Capital Information Capital Organization Capital
Growth
Perspective Computer-Aided
Deep Creative, Versatile Virtual Product Design and
Functional Employees: Cross- Prototyping and Manufacturing
Creativity,
Expertise functional Teamwork Simulation (CAD/CAM) Innovation