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The previous discussion suggests that the degree of adoption of a market orientation varies not only across firms but also across entire industries. Industries that are in earlier stages of their life cycles, or that benefit from barriers to entry or other factors reducing the intensity of competition, are likely to have relatively fewer market-oriented firms. For instance, in part because of governmental regulations that restricted competition, many service industries – including banks, airlines, physicians, lawyers, accountants, and insurance companies – were slow to adopt the marketing concept. But with the trend toward deregulation and the increasingly intense global competition in such industries, many service organisations are working much harder to understand and satisfy their customers.[8]
In some cases, a firm that achieved success by being in tune with its environment loses touch with its market because managers become reluctant to tamper with strategies and marketing programs that worked in the past. They begin to believe there is one best way to satisfy their customers. Such strategic inertia is dangerous because customers’ needs and competitive offerings change over time. IBM’s traditional focus on large organisational customers, for instance, caused the company to devote too little effort to the much faster-growing segment of small technology start-ups. And its emphasis on computer technology and hardware made it slow to respond to the explosive growth in demand for Internet-based applications and services. Thus, in environments where such changes happen frequently, the strategic planning process needs to be ongoing and adaptive. All the participants, whether from marketing or other functional departments, need to pay constant attention to what is happening with their customers and competitors.



References

  1. ^ Influence of functional units over various business decisions
  2. ^

    Guidelines for marketing oriented organisations
  3. ^
    Differences between production-oriented and market-oriented organisations
  4. ^ ==

    The Influence of Different Stages of Development across Industries and Global Markets

  5. ^ ==

    Strategic Inertia





Details

The essence of strategic planning at all levels is identifying threats to avoid and opportunities to pursue. The primary strategic responsibility of any manager is to look outward continuously to keep the firm or business in step with changes in the environment. Because they occupy positions at the boundary between the firm and its customers, distributors, and competitors, marketing managers are usually most familiar with conditions and trends in the market environment. Consequently, they not only are responsible for developing strategic plans for their own product-market entries, but also are often primary participants and contributors to the planning process at the business and corporate level as well.
The wide-ranging influence of marketing managers on higher-level strategic decisions is clearly shown in a recent survey of managers in 280 US and 234 German business units of firms in the electrical equipment, mechanical machinery, and consumer package goods industries.[2] The study examined perceptions of marketing managers’ influence relative to managers from sales, R&D, operations, and finance on a variety of strategic and tactical decisions within their businesses. Exhibit 2.2 summarises the results.
Exhibit 2.2 Influence of functional units over various business decisions[1]

Decisions
Marketing
Sales
R&D
Operations
Finance
Business strategy decisions




Strategic direction of the business
38
29
11
9
14
Expansion into new
geographic markets
39
45
3
3
10
Choices of strategic
partners
33
38*
7
9
12
New product development
32
23
29
9
7
Major capital expenditures
13
11
13
29
35






Marketing strategy decisions



Advertising messages
65
29
3
1
2
Customer satisfaction
measurement
48
35
5
8
4
Customer satisfaction improvement
40
37*
7
10
6
Distribution strategy
34
52
1
6
6
Customer service and
support
31
47
5
10
7
Pricing
30
41
4
9
16
The number in each cell is the mean of the amount of points given by responding managers to each function, using a constant-sum scale of 100. A t-test was performed to compare column 2 (mean of relative influence of marketing) with columns 3 through 6 (relative influence of sales, R&D, operations and finance).
Statistically significant differences with marketing are indicated by asterisks, where: * p< .05; p< .01.
Source: Christian Homburg, John P. Workman Jr. and Harley Krohmer, ‘Marketing’s Influence Within the Firm,’ Journal of Marketing 63(April 1999), p. 9. Reprinted with permission from the Journal of Marketing, published by the American Marketing Association.

The study found that, on average, marketing and sales executives exerted significantly more influence than managers from other functions on strategic decisions concerning traditional marketing activities, such as advertising messages, pricing, distribution, customer service and support, and measurement and improvement of customer satisfaction. Interestingly, though, the influence of sales executives was perceived to be even greater than that of marketing managers on some of these decisions. One reason – particularly in the industrial goods firms selling electronic equipment and machinery – may be that sales managers have more detailed information about customer needs and desires because they have direct and continuing contact with existing and potential buyers.
More surprisingly, marketing managers were also perceived to wield significantly more influence than managers from other functional areas on cross-functional, business-level strategic decisions. While the views of finance and operations executives carry more weight in approving major capital expenditures, marketing and sales managers exert more influence on decisions concerning the strategic direction of the business unit, expansion into new geographic markets, the selection of strategic business partners, and new product development.
Might the relative influence of the different functions become more similar as firms adopt more integrative organisational forms, such as cross-functional work teams? The study’s results suggest not. Marketing’s influence was not significantly reduced in companies that had instituted cross-functional structures and processes.
But marketing managers may not play as pervasive a strategic role in other cultures as they do in the United States. The study found that marketers’ influence on both tactical and strategic issues was significantly lower in German firms. As one of the study’s authors points out, ‘Germany has traditionally stressed technology and operations more than the softer, customer-oriented aspects central to marketing. So even when the environment changes, a signal to top-level German managers that marketing should be playing a greater role, they are reluctant to give it that role.’[3]

2.1.1 Market-Oriented Management

Even within the United States, however, marketing managers do not play an equally extensive strategic role in every firm because not all firms are equally market-oriented. Not surprisingly, marketers tend to have a greater influence on all levels of strategy in organisations that embrace a market-oriented philosophy of business. More critically, managers in other functional areas of market-oriented firms incorporate more customer and competitor information into their decision-making processes as well.
Market-oriented organisations tend to operate according to the business philosophy known as the marketing concept. As originally stated by General Electric four decades ago, the marketing concept holds that the planning and coordination of all company activities around the primary goal of satisfying customer needs is the most effective means to attain and sustain a competitive advantage and achieve company objectives over time.
Thus, market-oriented firms are characterised by a consistent focus by personnel in all departments and at all levels on customers’ needs and competitive circumstances in the market environment. They are also willing and able to quickly adapt products and functional programs to fit changes in that environment. Such firms pay a great deal of attention to customer research before products are designed and produced. They embrace the concept of market segmentation by adapting product offerings and marketing programs to the special needs of different target markets.
Market-oriented firms also adopt a variety of organisational procedures and structures to improve the responsiveness of their decision making, including using more detailed environmental scanning and continuous, real-time information systems; seeking frequent feedback from and coordinating plans with key customers and major suppliers; encouraging entrepreneurial thinking among lower-level managers; and using interfunctional management teams to analyse issues and initiate strategic actions outside the formal planning process.[4] For example, IBM formed a high-level cross-functional task force to reevaluate its market environment, develop a new strategic focus, and map new avenues toward future growth. The company has also formed alliances with enterprise software developers, such as PeopleSoft and Great Plains Software, to improve its ability to help customers integrate Web technology into their business processes. These and other actions recommended to make an organisation more market-driven and responsive to environmental changes are summarised in Exhibit 2.3.
Exhibit 2.3 Guidelines for market-oriented management[2]


1.
Create customer focus throughout
the business.
9.
Measure and manage customer expectations.
2.
Listen to the customer.
10.
Build customer relationships and
loyalty.
3.
Define and nurture your distinctive competence.
11.
Define the business as a service
business.
4.
Define marketing as market
intelligence.
12.
Commit to continuous improvement and innovation.
5.
Target customers precisely.
13.
Manage culture along with strategy and structure.
6.
Manage for profitability, not sales volume.
14.
Grow with partners and alliances.
7.
Make customer value the guiding star.
15.
Destroy marketing bureaucracy.
8.
Let the customer define quality.


Source: Frederick E. Webster Jr., ‘Executing the New Marketing Concept,’ Marketing Management 3, no. 1 (1994), p. 10.

2.1.2 Does Being Market-Oriented Pay?

Since an organisation’s success over time hinges on its ability to provide benefits of value to its customers – and to do that better than its competitors – it seems likely that market-oriented firms should perform better than others. By paying careful attention to customer needs and competitive threats – and by focusing activities across all functional departments on meeting those needs and threats effectively – organisations should be able to enhance, accelerate, and reduce the volatility and vulnerability of their cash flows.[5] And that should enhance their economic performance and shareholder value. Indeed, profitability is the third leg, together with a customer focus and cross-functional coordination, of the three-legged stool known as the marketing concept.
Sometimes the marketing concept is interpreted as a philosophy of trying to satisfy all customers’ needs regardless of the cost. That would be a prescription for financial disaster. Instead, the marketing concept is consistent with the notion of focusing on only those segments of the customer population that the firm can satisfy both effectively and profitably. Firms might offer less extensive or costly goods and services to unprofitable segments or avoid them. For example, the Buena Vista Winery website (www.buenavistawinery.com) does not accept orders of less than a half case because they are too costly to process and ship.
Substantial evidence supports the idea that being market-oriented pays dividends, at least in a highly developed economy such as the United States. A number of studies involving more than 500 firms or business units across a variety of industries indicate that a market orientation has a significant positive effect on various dimensions of performance, including return on assets, sales growth, and new product success.[6]

2.1.3 Factors That Mediate Marketing’s Strategic Role

Despite the evidence that a market-orientation boosts performance, many companies around the world are not very focused on their customers or competitors. Among the reasons firms are not always in close touch with their market environments are these:

  • Competitive conditions may enable a company to be successful in the short run without being particularly sensitive to customer desires.
  • Different levels of economic development across industries or countries may favour different business philosophies.
  • Firms can suffer from strategic inertia – the automatic continuation of strategies successful in the past, even though current market conditions are changing.

2.1.3.1 Competitive Factors Affecting a Firm’s Market Orientation

The competitive conditions some firms face enable them to be successful in the short term without paying much attention to their customers, suppliers, distributors, or other organisations in their market environment. Early entrants into newly emerging industries, particularly industries based on new technologies, are especially likely to be internally focused and not very market-oriented. This is because there are likely to be relatively few strong competitors during the formative years of a new industry, customer demand for the new product is likely to grow rapidly and outstrip available supply, and production problems and resource constraints tend to represent more immediate threats to the survival of such new businesses.
Businesses facing such market and competitive conditions are often product-oriented or production-oriented. They focus most of their attention and resources on such functions as product and process engineering, production, and finance in order to acquire and manage the resources necessary to keep pace with growing demand. The business is primarily concerned with producing more of what it wants to make, and marketing generally plays a secondary role in formulating and implementing strategy. Other functional differences between production-oriented and market-oriented firms are summarised in Exhibit 2.4.
Exhibit 2.4 Differences between production-oriented and market-oriented organisations [3]


Business activity or function

Production orientation

Marketing orientation
Product
offering

Company sells what it can make; primary focus on functional
performance and cost.

Company makes what it can sell; primary focus on customers’ needs and market opportunities.
Product line

Narrow.

Broad.
Pricing

Based on production and
distribution costs.

Based on perceived benefits provided.
Research

Technical research; focus on product improvement and cost cutting in the production
process.

Market research; focus on identifying new opportunities and applying new technology to satisfy customer needs.
Packaging

Protection for the product;
minimise costs.

Designed for customer convenience; a promotional tool.
Credit

A necessary evil; minimise bad debt losses.

A customer service; a tool to attract customers.
Promotion

Emphasis on product features, quality and price.

Emphasis on product benefits and ability to satisfy customers’ needs or solve problems.
As industries grow, they become more competitive. New entrants are attracted and existing producers attempt to differentiate themselves through improved products and more-efficient production processes. As a result, industry capacity often grows faster than demand and the environment shifts from a seller’s market to a buyer’s market. Firms often respond to such changes with aggressive promotional activities – such as hiring more salespeople, increasing advertising budgets, or offering frequent price promotions – to maintain market share and hold down unit costs.
Unfortunately, this kind of sales-oriented response to increasing competition still focuses on selling what the firm wants to make rather than on customer needs. Worse, competitors can easily match such aggressive sales tactics. Simply spending more on selling efforts usually does not create a sustainable competitive advantage.
As industries mature, sales volume levels off and technological differences among brands tend to disappear as manufacturers copy the best features of each other’s products. Consequently, a firm must seek new market segments or steal share from competitors by offering lower prices, superior services, or intangible benefits other firms cannot match. At this stage, managers can most readily appreciate the benefits of a market orientation, and marketers are often given a bigger role in developing competitive strategies.[7]

==2.1.3.2 The Influence of Different Stages of Development across Industries and Global Markets [4]

The previous discussion suggests that the degree of adoption of a market orientation varies not only across firms but also across entire industries. Industries that are in earlier stages of their life cycles, or that benefit from barriers to entry or other factors reducing the intensity of competition, are likely to have relatively fewer market-oriented firms. For instance, in part because of governmental regulations that restricted competition, many service industries – including banks, airlines, physicians, lawyers, accountants, and insurance companies – were slow to adopt the marketing concept. But with the trend toward deregulation and the increasingly intense global competition in such industries, many service organisations are working much harder to understand and satisfy their customers.[8]


Given that entire economies are in different stages of development around the world, the popularity – and even the appropriateness – of different business philosophies may also vary across countries. A production orientation was the dominant business philosophy in the United States, for instance, during the industrialisation that occurred from the mid-1800s through World War I.[9] Similarly, a primary focus on developing product and production technology may still be appropriate in developing nations that are in the midst of industrialisation.


International differences in business philosophies can cause some problems for the globalisation of a firm’s strategic marketing programs, but it can create some opportunities as well, especially for alliances or joint ventures. Consider, for example, General Electric’s joint venture with the Mexican appliance manufacturer Organisation Mabe. The arrangement benefits GE by providing direct access to Mexico’s rapidly growing market for household appliances and its low-cost supply of labor. But it also benefits Mabe – and the Mexican economy – by giving the firm access to cutting-edge R&D and production technology and the capital necessary to take advantage of its newfound know-how.[10]


==2.1.3.3 Strategic Inertia[5]

In some cases, a firm that achieved success by being in tune with its environment loses touch with its market because managers become reluctant to tamper with strategies and marketing programs that worked in the past. They begin to believe there is one best way to satisfy their customers. Such strategic inertia is dangerous because customers’ needs and competitive offerings change over time. IBM’s traditional focus on large organisational customers, for instance, caused the company to devote too little effort to the much faster-growing segment of small technology start-ups. And its emphasis on computer technology and hardware made it slow to respond to the explosive growth in demand for Internet-based applications and services. Thus, in environments where such changes happen frequently, the strategic planning process needs to be ongoing and adaptive. All the participants, whether from marketing or other functional departments, need to pay constant attention to what is happening with their customers and competitors.









==


Tags
  1. client contact systems
  2. collector bias
  3. competitive advantage
  4. competitive intelligence
  5. computerised reorder system
  6. consumer behaviour
  7. data sources
  8. evidence based forecast
  9. experienced user
  10. internal records
  11. just in time
  12. logistical alliance
  13. market potential
  14. market segmentation
  15. market segments
  16. marketing program
  17. marketing research
  18. mass market
  19. mass market strategy
  20. michelin; us west;
  21. micro segmentation
  22. middleman
  23. modified rebuy
  24. multi-functional sales teams
  25. multilevel selling
  26. multiple buying
  27. multiple level relationships
  28. mutual trust
  29. narrow market segment
  30. narrow niche
  31. nationalisation of producers
  32. nerve center
  33. new task buy
  34. nine west group
  35. observation;direct observation' tanzania mobile;
  36. on-time delivery
  37. opportunity; research
  38. order handling
  39. organisation market
  40. organization marketing behaviour
  41. organizational behaviour
  42. organizational customers
  43. organizational demand
  44. organizational market
  45. organizational purchasing behaviour
  46. organizational purchasing process
  47. paperless exchange
  48. parity pricing
  49. personal selling
  50. personal use
  51. political risk
  52. potential market; penetrated market
  53. pre-delivery inspection
  54. pre-sale service
  55. prestige buyer
  56. pretender
  57. primary data
  58. procurement costs
  59. purchasing criteria
  60. qualitative data
  61. qualitative research
  62. quality assurance
  63. quality standards
  64. quantitative data
  65. quantitative research
  66. research objectives
  67. retention programme
  68. routine purchase
  69. sales forecast
  70. semantic differentiation scale
  71. sequence of information
  72. shared costs
  73. short term contracts
  74. social construction
  75. status oriented consumers
  76. stock availability
  77. straight rebuy
  78. supplier bargaining power
  79. supplier performance
  80. supplier reputation
  81. survey
  82. tabulation errors
  83. tanzania mobile
  84. target customers
  85. target market
  86. target marketing
  87. technical experts;
  88. test markets
  89. transaction cost
  90. trend forecasting
  91. trusting patron
  92. underlying consumer demand
  93. unethical demands
  94. unstated but implicit assumptions
  95. users
  96. value analysis
  97. value shopper
  98. vertical integration
  99. visceral thing that cannot be trained
  100. wild guess
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