Social marketing is an umbrella term used to describe how, in different ways marketing
can encourage positive social behavior, and includes critical marketing and green or
All business are considered service businesses using all 7ps of elements.
Co-creation – value is created when company and the customer work together.
Marketing`s role creating demand: 1. Full demand (customer buy all services or
products brought to markets). 2. Overfull demand (more consumers demanding service
or product than can be satisfied).3.Irregular demand(consumers purchases vary on a
seasonal, monthly, weekly, daily or even hourly basis).4.Declining demand(consumers
begin to buy service or product less frequency or not at all).5.Negative demand
(consumers dislike the service or product and may even pay a price to avoid it). 6.
Nonexistent demand (consumers may be unaware of or uninterested in the product or
service).7. Latent demand (consumers may share a strong need that cannot be satisfied
by existing product or service).8. Unwholesome demand (consumers may be attracted
to services or products that have undesirable social consequences).In each case
marketers must identify the underlying causes of the demand state and then determine
a plan of action to shift the demand to a more desirable state.
Each nation`s economy and the global economy in general consist of complex interacting
sets of markets linked through exchange process. This is referred to the network
A network economy is driven by a dynamic and knowledge –rich technology dominant
environment, meaning that the hierarchical stand alone organizations of the twentieth
century have to change into variety of networks such as : 1. Internal networks : are
designed to reduce hierarchy and open firms to their environments. 2.Vertical
environments : maximize the productivity of serially dependent functions by creating
partnerships among independent skill- specialized firms. 3. Intermarket networks :
seek to leverage horizontal synergies across industries. 4. Opportunity networks : are
organized around customer needs and market opportunities and designed to search for
the best solution to them. Marketing outcomes within network economy are
dependendent on and face competition from strategic network of companies rather
than from competition among individual companies.
Key customer markets : customer(consumer purchases are generally made by individual
decision makers or a decision making unit, either for themselves or for others with
whom they have relationships), business(business to business or industrial marketing
focuses on understanding business buying centers and on how business purchase in
different ways to consumers.), global(global companies must decide which countries to
enter, how to enter each, how to adapt their product and service features to each
country, how to price products and services, people and technology across the globe and
within a network companies, how do adapt their communications to fit different
requirements for buying, negotiating, owning, and disposing of products and services,
different cultures, languages legal and political systems and currencies that might
fluctuate in value. Global mentality – think globally, think locally, think globally and
locally simultaneously), non-profit( churches, universities, charities, government
agencies need to understand marketing as much as private, profit making companies).
Marketplace – physical (shop , bank). Marketspace – digital(shop at internet or bank at
internet). Metamarket- cluster of complementary products and services that are
closely related in the minds of costumers, but spread across diverse set of
industries(car metamarket – car manufacturers, new and used car dealers, car
magazines, insurance, service shops).
7Ps. The traditional view is the Kotlerian marketing management view of managing the
marketing mix after selecting target markets and positioning. The marketing manager
has a mix or short and long term marketing decisions to make once the company has
selected the target market. They must also integrate all the marketing mix decisions
together so that the distribution suits the product or that the service process aligns
to the pricing strategy and so on. The 7ps marketing mix represents the company`s
view of the marketing tools available for influencing buyers. From the buyers point of
view, each marketing tool is designed to deliver value for customer. Winning companies
satisfy customer needs and surpass their expectations economically and conveniently
and with effective products and services, priced well, communicated interestingly and
distributed in a timely manner or through a process and with people that create the
right environment, all leading to a brand that customer support. Value is central
marketing concept. We can think of marketing as the identification, creation,
communication, delivery and monitoring customer value. Satisfaction reflects a
person`s judgment of a service or product`s perceived performance in relationships
with their expectations. Marketing planning process consists of analyzing marketing
opportunities, selecting target markets, designing positioning strategies, developing
marketing mix programs to reflect a brand that has loyal customers, and managing the
marketing effort. After identifying market segments, the marketer then decides which
present the greatest opportunity – which are its target markets. For each target
market the firm develops a market offering that it positions in the mind of the target
buyers as delivering some central benefits ( BMW- driving, Volvo –safety – the core
positioning for their products in the eyes of consumer). Companies do best when they
choose their target markets carefully, choose suitable positioning and then use the full
range of the marketing mix variables to develop a brand image and equity. Companies
must always be moving forward with marketing programs, innovating products and
services, and staying in touch with customer needs, seeking new advantages rather than
relying on past strengths.
Once you've developed your marketing strategy, there is a "Seven P Formula" you
should use to continually evaluate and reevaluate your business activities. These seven
are: product, price, promotion, place, packaging, positioning and people. As products,
markets, customers and needs change rapidly, you must continually revisit these seven
Ps to make sure you're on track and achieving the maximum results possible for you in
To begin with, develop the habit of looking at your product as though you were an
outside marketing consultant brought in to help your company decide whether or not
it's in the right business at this time. Ask critical questions such as, "Is your current
product or service, or mix of products and services, appropriate and suitable for the
market and the customers of today?"
Whenever you're having difficulty selling as much of your products or services as you'd
like, you need to develop the habit of assessing your business honestly and asking, "Are
these the right products or services for our customers today?"
Is there any product or service you're offering today that, knowing what you now know,
you would not bring out again today? Compared to your competitors, is your product or
service superior in some significant way to anything else available? If so, what is it? If
not, could you develop an area of superiority? Should you be offering this product or
service at all in the current marketplace?
The second P in the formula is price. Develop the habit of continually examining and
reexamining the prices of the products and services you sell to make sure they're still
appropriate to the realities of the current market. Sometimes you need to lower your
prices. At other times, it may be appropriate to raise your prices. Many companies have
found that the profitability of certain products or services doesn't justify the amount
of effort and resources that go into producing them. By raising their prices, they may
lose a percentage of their customers, but the remaining percentage generates a profit
on every sale. Could this be appropriate for you?
Sometimes you need to change your terms and conditions of sale. Sometimes, by
spreading your price over a series of months or years, you can sell far more than you
are today, and the interest you can charge will more than make up for the delay in cash
receipts. Sometimes you can combine products and services together with special
offers and special promotions. Sometimes you can include free additional items that
cost you very little to produce but make your prices appear far more attractive to your
In business, as in nature, whenever you experience resistance or frustration in any part
of your sales or marketing activities, be open to revisiting that area. Be open to the
possibility that your current pricing structure is not ideal for the current market. Be
open to the need to revise your prices, if necessary, to remain competitive, to survive
and thrive in a fast-changing marketplace.
The third habit in marketing and sales is to think in terms of promotion all the time.
Promotion includes all the ways you tell your customers about your products or services
and how you then market and sell to them.
Small changes in the way you promote and sell your products can lead to dramatic
changes in your results. Even small changes in your advertising can lead immediately to
higher sales. Experienced copywriters can often increase the response rate from
advertising by 500 percent by simply changing the headline on an advertisement.
Large and small companies in every industry continually experiment with different ways
of advertising, promoting, and selling their products and services. And here is the rule:
Whatever method of marketing and sales you're using today will, sooner or later, stop
working. Sometimes it will stop working for reasons you know, and sometimes it will be
for reasons you don't know. In either case, your methods of marketing and sales will
eventually stop working, and you'll have to develop new sales, marketing and advertising
approaches, offerings, and strategies.
The fourth P in the marketing mix is the place where your product or service is actually
sold. Develop the habit of reviewing and reflecting upon the exact location where the
customer meets the salesperson. Sometimes a change in place can lead to a rapid
increase in sales.
You can sell your product in many different places. Some companies use direct selling,
sending their salespeople out to personally meet and talk with the prospect. Some sell
by telemarketing. Some sell through catalogs or mail order. Some sell at trade shows or
in retail establishments. Some sell in joint ventures with other similar products or
services. Some companies use manufacturers' representatives or distributors. Many
companies use a combination of one or more of these methods.
In each case, the entrepreneur must make the right choice about the very best
location or place for the customer to receive essential buying information on the
product or service needed to make a buying decision. What is yours? In what way
should you change it? Where else could you offer your products or services?
The fifth element in the marketing mix is the packaging. Develop the habit of standing
back and looking at every visual element in the packaging of your product or service
through the eyes of a critical prospect. Remember, people form their first impression
about you within the first 30 seconds of seeing you or some element of your company.
Small improvements in the packaging or external appearance of your product or service
can often lead to completely different reactions from your customers.
With regard to the packaging of your company, your product or service, you should
think in terms of everything that the customer sees from the first moment of contact
with your company all the way through the purchasing process.
Packaging refers to the way your product or service appears from the outside.
Packaging also refers to your people and how they dress and groom. It refers to your
offices, your waiting rooms, your brochures, your correspondence and every single
visual element about your company. Everything counts. Everything helps or hurts.
Everything affects your customer's confidence about dealing with you.
When IBM started under the guidance of Thomas J. Watson, Sr., he very early
concluded that fully 99 percent of the visual contact a customer would have with his
company, at least initially, would be represented by IBM salespeople. Because IBM was
selling relatively sophisticated high-tech equipment, Watson knew customers would
have to have a high level of confidence in the credibility of the salesperson. He
therefore instituted a dress and grooming code that became an inflexible set of rules
and regulations within IBM.
As a result, every salesperson was required to look like a professional in every respect.
Every element of their clothing-including dark suits, dark ties, white shirts,
conservative hairstyles, shined shoes, clean fingernails-and every other feature gave
off the message of professionalism and competence. One of the highest compliments a
person could receive was, "You look like someone from IBM."
The next P is positioning. You should develop the habit of thinking continually about how
you are positioned in the hearts and minds of your customers. How do people think and
talk about you when you're not present? How do people think and talk about your
company? What positioning do you have in your market, in terms of the specific words
people use when they describe you and your offerings to others?
In the famous book by Al Reis and Jack Trout, Positioning, the authors point out that
how you are seen and thought about by your customers is the critical determinant of
your success in a competitive marketplace. Attribution theory says that most
customers think of you in terms of a single attribute, either positive or negative.
Sometimes it's "service." Sometimes it's "excellence." Sometimes it's "quality
engineering," as with Mercedes Benz. Sometimes it's "the ultimate driving machine," as
with BMW. In every case, how deeply entrenched that attribute is in the minds of your
customers and prospective customers determines how readily they'll buy your product
or service and how much they'll pay.
Develop the habit of thinking about how you could improve your positioning. Begin by
determining the position you'd like to have. If you could create the ideal impression in
the hearts and minds of your customers, what would it be? What would you have to do
in every customer interaction to get your customers to think and talk about in that
specific way? What changes do you need to make in the way interact with customers
today in order to be seen as the very best choice for your customers of tomorrow?
The final P of the marketing mix is people. Develop the habit of thinking in terms of
the people inside and outside of your business who are responsible for every element of
your sales and marketing strategy and activities.
It's amazing how many entrepreneurs and businesspeople will work extremely hard to
think through every element of the marketing strategy and the marketing mix, and
then pay little attention to the fact that every single decision and policy has to be
carried out by a specific person, in a specific way. Your ability to select, recruit, hire
and retain the proper people, with the skills and abilities to do the job you need to have
done, is more important than everything else put together.
In his best-selling book, Good to Great, Jim Collins discovered the most important
factor applied by the best companies was that they first of all "got the right people on
the bus, and the wrong people off the bus." Once these companies had hired the right
people, the second step was to "get the right people in the right seats on the bus."
To be successful in business, you must develop the habit of thinking in terms of exactly
who is going to carry out each task and responsibility. In many cases, it's not possible
to move forward until you can attract and put the right person into the right position.
Many of the best business plans ever developed sit on shelves today because the
[people who created them] could not find the key people who could execute those plans.
Transactional marketing is defined as attracting and satisfying potential buyers by
managing the elements in the marketing mix, and actively manages communication to
buyers in the mass market in order to create discrete, arms` length transactions.
Database marketing – using database technology to create relationships, thus allowing
firms to compete in a manner different from mass transaction marketing. Emerging –
was used to describe the Internet and other interactive technologies to create and
mediate dialogue between the firm and identified customer. Interaction marketing –
face to face interaction between individuals. Network marketing – is “with” customer
but occurs across and among organizations.
Relationship marketing is focus on building long term relationships with consumers
rather than focus on new customers as the growth potential.
Major societal forces: competition, globalization, increase range of information and
communication technologies, industry convergence (industry boundaries are blurring at
an incredible rates as companies re recognizing that new opportunities at the
intersection of two or more industries), retail transformation.
Production philosophy : looks only to the product or service that the company has or
wants to make or provide , rather to a customer need. Concentrates on achieving high
production efficiency, low cost and mass production.
Selling philosophy : focus on making sales rather than understanding the customers.
Marketing philosophy : customer centers, sense and respond philosophy. The marketing
task is not to find the right customers for your products or services, but to design the
right services and products for your customers. The key achieving organizational goals
is being more effective than competitors in creating, managing, delivering and
communicating superior customer value to your chosen target markets.
Page 26 : marketing right and wrong.
The overview of marketing sets out the core marketing tasks necessary for success to
include developing marketing strategies and plans, capturing marketing insights,
choosing target marjets and positioning, creating long term growth through building
strong brands, and then suing marketing mix to connect with customers, shaping market
offerings, delivering and communicating value, implementing the marketing plan and
managing marketing metrics.
Four core features of management :
Planning. Marketing managers must be able to effectively manage the design and
implementation of a customer focused marketing strategic plan for organization.
”Organizations differ as do animals, it makes no more sense to prescribe one kind of
planning to all organizations, as it does to prescribe one kind of housing for all animals”
Organizing. How to organize marketing department and how to organize other staff and
stakeholders, internal marketing. There must be marketing department to integrate all
departments, processes and activities towards the customer. The following are the
steps that must be taken to ensure that a marketing department exist which can
capitalize on market opportunities : asses the marketing manager`s skill set : does the
marketing manager have the ability to run a department, hire competent staff, set high
standards for marketing planning and implementation and improve marketing staff`s
skills in research, forecasting, analytics , communication and so on? The marketing
manager must also win the respect and confidence of the leaders of other departments
such as finance, operations, purchasing, IT… Building new market skills : there are many
aspects of modern marketing that need to be seen as intrinsic part of the work of the
marketing department. These include technology savvy(patyres) customers, the
increase in globalization, the range of ICT including internet, service marketing,
increasing demand for experiential consumption, integrated marketing communication,
profitability analysis, ability to find needs and fill them. Managing both day to day
Leadership. Aligning the work of different groups of people. In management you need
to ensure that all groups converge to produce the desired results.
Controlling. Monitoring and measuring the outcomes or returns from the marketing mix
activities engaged in by marketing manager.
Apie kiekviena is situ step`u yra parasyta antram chaperi issamiai.
Good table in 47 page : characteristics of companies of the two extremes of marketing
The global marketing manager. Global firms in both product and services, plan, operate
and coordinate their activities worldwide in places such as Europe, North America, Asia.
Marketing managers deciding to go global, must take serious management decisions :
Deciding whether to go abroad.
Internationalization process typically has four stages : once a manager or company has
success at one level- exporting – they may try to foreign investment. 4 stages: 1. No
regular export activities – focus for domestic market. 2. Export via independent
representatives, distributor or agents. 3. Establishment of one or more subsidiaries. 4.
Establishment of production and service facilities abroad – often called foreign direct
Deciding which markets to enter. In deciding to internatiolise the company needs to
define its marketing objectives and policies. How many countries to enter and how fast
to expand. Waterfall approach – gradually entering countries in sequence, sprinkler –
(purkstuvas) entering many countries simultaneously.
Evaluating potential markets. Each nation have its unique features. A country`s
readiness for different products and services, and its attractiveness as a market ,
depend on its economical, political, legal and cultural environments. In general company
prefers to entry countries that : 1. Rank high on market attractiveness, 2. Low in
market risk. 3. Possesses competitive advantage.
Deciding on the marketing mix programme. How much to adapt their marketing strategy
to local conditions. Standardized market mix – standardization of the product and
services, communication, and distribution channel promises lowest costs. Adapted
marketing mix- where the producer or service provide, consistent with the marketing
concept, holds the consumer needs vary and tailors marketing mix programmes to each
ICT (digital marketing) refers to information and communication technologies
influencing, among others:Analysis and
planning›Databases›Communications›Research›Customer relationship management›Self-
Ecommerce – digital technology supporting sales, distribution and customer service
processes. E – procurement – digital technology supporting sourcing, procurement,
tending and other fulfillment processes. E- manufacturing – digital technology
supporting demand and capacity planning, forecasting, and internal supply chai
integration. E business – all activities taking place in the supply chain as well as
company`s internal use of digital technology.
Gaining competitive advantage from using internet : reducing transaction costs (search
costs, contracting costs, monitoring costs, enforcement costs), reducing customer
search costs(time, money, mental resources spent when searching for favorable
product or service). Ubiquitous (allowing 24/7 communications with customers
Influence of internet industry structure. Porter argues that gaining competitive
advantage through internet does not require a radically new approach to business. It
requires building on proven principles of effective strategy. In this respect two
underlying profitability drivers are fundamental : industry structure, which determined
the profitability of the average competitor, sustainable competitive advantage, which
allows a company to outperform the average competitor.
General attractiveness of an industry is determined by five underlying forces of
competition : the intensity of rivalry (varzybos) among existing competitors, the
barriers to entry for new competitors, the threat of substitute products or services,
the bargaining power of suppliers, and the bargaining power of buyers. Page 123 How
the Internet Influences industry structure.
Digitalization & Connectivity ›The flow of digital information requires connectivity ›
Intranets, extranets and the Internet › Mobile networks.
The Internet Explosion ›Key driver of the New Economy.
New Types of Intermediaries> Search engines, comparison sites, e-shopping malls and
auction sites>Social media becomes a new intermediary as well…
Customization ›Information businesses are at the heart of the New Economy ›Has
enhanced marketer’s ability to customize and “customerize” product offerings.
Companies seeking to communicate with brand communities may do so by following one
or more of five approaches : fight (sense of us versus them), role models (someone to
identify with, to be inspired by and to aspire to). Exchange (ranges for gift giving and
knowledge sharing to strategic networks and alliances). Manifestation (builds on the
human need for the traditions, rituals, symbols and icons around which groups
gather).Progression (mean looking forward, constantly striving for development and
Five main perspectives on consumer digital behavior :
1. Theory of planned behavior. A consumer may be prevented form buying online if
he or she perceives the purchase process as too complex or if the consumer
does not possess the resources necessary to perform the considered behavior.
2. The technology acceptance model was developed to predict technology
acceptance, which can be conceptualized or intended to use of a particular
technology. Two most important variables in explaining attitude towards system-
using intention are perceived ease of use and perceived usefulness.
3. Theory of adoption of innovations. Digital shopping could be regarded as an
innovation, which like other innovation takes time to spread through the social
system. The adoption of innovations depends on various factors that are related
to the innovation itself and the consumer.
4. Channel trade off and transaction costs perspective, an underlying of consumer
online shopping behavior needs to include consideration on how consumer will
make choices relative to available retail alternatives. Often consumer are faced
with trade offs when deciding which retail alternative to use to make a
5. The risk perceived alternative. High level of uncertainty implies higher
transaction cost and therefore would be regarded negatively by consumers
receives support from the perspective. Consumers perceive risk because they
face uncertainty and potentially undesirable outcomes or consequences as a
result of their behavioral decisions.
Digital shopping behavior depends on : perceived complexity, behavior control, social
norm, perceived compatibility, perceived risk, personal and situational factors,
transaction costs and channel trade offs, perceived advantage, usefulness.
Marketing managers use digital marketing to support internal decision making.
- Database, data mining, and modeling customer data. A core marketing
requirement is the use of technology to manage information.
- CMR software. CMR systems are designed to gather information from the
consumer touch points and then link to the internal operations to support better
- Marketing dashboards is an on- screen easy to read summary of key marketing
metrics, it is personalized view of all relevant marketing information needed by
Biometrics is the science of fingerprint and retina recognition.
Digital marketing communication can be understood as communication and interaction
between a company or brand and its customers using digital channels (internet, email,
mobile phones, digital TV..) and information technology.
Value delivering process involves four sequences. The first sequence, discovering the
required value represents the research marketing must do before any marketable value
exists. Marketing practitioners segment the market, select appropriate target market,
and develop offering`s customer-perceived value positioning. The formula
“segmentation, targeting positioning” is the essence of strategic marketing. Once the
business unit has discovered the customer perceived value, the second sequence
involves developing a suitable customer offering. Marketers put together a package of
specific product and service benefits at appropriate levels. The third sequence
concerns successfully delivering the value packages. The final sequence is about
successfully communicating the value offerings to targeted customers.
3V`s approach to marketing : define the value segment or customers, define the value
proposition, define the value network that will deliver the promised service.
Webster views marketing in terms of : 1. Value defining processes such as market
research and company self-analysis. 2. Value developing processes including new product
developing, sourcing strategy and vendor (pardavejas) selection.3. Value delivering
processes such as advertising and managing distribution.
Porter proposed the value chain as a tool for identifying ways to create more customer
perceived value. According to this model, every firm is synthesis of activities
performed to design, produce, market, deliver and support it final market offering. The
value chain identifies nine strategically relevant activities – five primary and four
support- that create value and cost in specific business. The primary activities consists
on inbound and outbound logistics. Inbound logistics refers to bringing materials into
the business operations and converting them into final saleable products and
operations. Outbound logistics include shipping out final products, marketing them and
includes sales and servicing support activities. The support activities –
procurement(pirkimas), technology development, human resource management and firm
infrastructure – are handled in specialized departments. The firm`s infrastructure
covers the costs of general management, planning, finance, accounting, legal and
government affairs. Firms task whether large or small, is to examine its costs and
performance in each value –creating activity and seek ways to make improvements.
Managers should estimate their competitors costs and performances and benchmarks
against which to compare their own cost and performance. Additionally they should go
further and study the best practice as exhibited by the world`s best companies.
The goal of these activities is to offer the customer a level of value that exceeds the
cost of the activities, thereby resulting in a profit margin.
The primary value chain activities are:
Inbound Logistics: the receiving and warehousing of raw materials, and their
distribution to manufacturing as they are required.
Operations: the processes of transforming inputs into finished products and services.
Outbound Logistics: the warehousing and distribution of finished goods.
Marketing & Sales: the identification of customer needs and the generation of sales.
Service: the support of customers after the products and services are sold to them.
These primary activities are supported by:
The infrastructure of the firm: organizational structure, control systems, company
Human resource management: employee recruiting, hiring, training, development, and
Technology development: technologies to support value-creating activities.
Procurement: purchasing inputs such as materials, supplies, and equipment.
The firm's margin or profit then depends on its effectiveness in performing these
activities efficiently, so that the amount that the customer is willing to pay for the
products exceeds the cost of the activities in the value chain. It is in these activities
that a firm has the opportunity to generate superior value. A competitive advantage
may be achieved by reconfiguring the value chain to provide lower cost or better
The value chain model is a useful analysis tool for defining a firm's core competencies
and the activities in which it can pursue a competitive advantage as follows:
Cost advantage: by better understanding costs and squeezing them out of the
Differentiation: by focusing on those activities associated with core competencies and
capabilities in order to perform them better than do competitors.
Cost Advantage and the Value Chain
A firm may create a cost advantage either by reducing the cost of individual value
chain activities or by reconfiguring the value chain.
Once the value chain is defined, a cost analysis can be performed by assigning costs to
the value chain activities. The costs obtained from the accounting report may need to
be modified in order to allocate them properly to the value creating activities.
Porter identified 10 cost drivers related to value chain activities:
* Economies of scale
* Capacity utilization
* Linkages among activities
* Interrelationships among business units
* Degree of vertical integration
* Timing of market entry
* Firm's policy of cost or differentiation
* Geographic location
* Institutional factors (regulation, union activity, taxes, etc.)
A firm develops a cost advantage by controlling these drivers better than do the
A cost advantage also can be pursued by reconfiguring the value chain. Reconfiguration
means structural changes such a new production process, new distribution channels, or
a different sales approach. For example, FedEx structurally redefined express freight
service by acquiring its own planes and implementing a hub and spoke system.
Differentiation and the Value Chain.A differentiation advantage can arise from any
part of the value chain. For example, procurement of inputs that are unique and not
widely available to competitors can create differentiation, as can distribution channels
that offer high service levels.
Differentiation stems from uniqueness. A differentiation advantage may be achieved
either by changing individual value chain activities to increase uniqueness in the final
product or by reconfiguring the value chain.
Porter identified several drivers of uniqueness:
* Policies and decisions
* Linkages among activities
* Scale (e.g. better service as a result of large scale)
* Institutional factors
Many of these also serve as cost drivers. Differentiation often results in greater
costs, resulting in tradeoffs between cost and differentiation.
There are several ways in which a firm can reconfigure its value chain in order to
create uniqueness. It can forward integrate in order to perform functions that once
were performed by its customers. It can backward integrate in order to have more
control over its inputs. It may implement new process technologies or utilize new
distribution channels. Ultimately, the firm may need to be creative in order to develop
a novel value chain configuration that increases product differentiation.
Technology and the Value Chain.Because technology is employed to some degree in
every value creating activity, changes in technology can impact competitive advantage
by incrementally changing the activities themselves or by making possible new
configurations of the value chain.
Various technologies are used in both primary value activities and support activities:
* Inbound Logistics Technologies
o Material handling
o Material storage
o Information systems
* Operations Technologies
o Machine tools
o Material handling
o Building design & operation
o Information systems
* Outbound Logistics Technologies
o Material handling
o Information systems
* Marketing & Sales Technologies
o Information systems
* Service Technologies
o Information systems
Note that many of these technologies are used across the value chain. For example,
information systems are seen in every activity. Similar technologies are used in support
activities. In addition, technologies related to training, computer-aided design, and
software development frequently are employed in support activities.
To the extent that these technologies affect cost drivers or uniqueness, they can lead
to a competitive advantage.
Linkages Between Value Chain Activities
Value chain activities are not isolated from one another. Rather, one value chain activity
often affects the cost or performance of other ones. Linkages may exist between
primary activities and also between primary and support activities.
Consider the case in which the design of a product is changed in order to reduce
manufacturing costs. Suppose that inadvertantly the new product design results in
increased service costs; the cost reduction could be less than anticipated and even
worse, there could be a net cost increase.
Sometimes however, the firm may be able to reduce cost in one activity and
consequently enjoy a cost reduction in another, such as when a design change
simultaneously reduces manufacturing costs and improves reliability so that the service
costs also are reduced. Through such improvements the firm has the potential to
develop a competitive advantage.
Analyzing Business Unit Interrelationships.Interrelationships among business units
form the basis for a horizontal strategy. Such business unit interrelationships can be
identified by a value chain analysis.
Tangible interrelationships offer direct opportunities to create a synergy among
business units. For example, if multiple business units require a particular raw material,
the procurement of that material can be shared among the business units. This sharing
of the procurement activity can result in cost reduction. Such interrelationships may
exist simultaneously in multiple value chain activities.
Unfortunately, attempts to achieve synergy from the interrelationships among
different business units often fall short of expectations due to unanticipated
drawbacks. The cost of coordination, the cost of reduced flexibility, and organizational
practicalities should be analyzed when devising a strategy to reap the benefits of the
Outsourcing Value Chain Activities
A firm may specialize in one or more value chain activities and outsource the rest. The
extent to which a firm performs upstream and downstream activities is described by
its degree of vertical integration.
A thorough value chain analysis can illuminate the business system to facilitate
outsourcing decisions. To decide which activities to outsource, managers must
understand the firm's strengths and weaknesses in each activity, both in terms of cost
and ability to differentiate. Managers may consider the following when selecting
activities to outsource:
Whether the activity can be performed cheaper or better by suppliers.
Whether the activity is one of the firm's core competencies from which stems a
cost advantage or product differentiation.
The risk of performing the activity in-house. If the activity relies on fast-changing
technology or the product is sold in a rapidly-changing market, it may be advantageous
to outsource the activity in order to maintain flexibility and avoid the risk of investing
in specialized assets.
Whether the outsourcing of an activity can result in business process improvements
such as reduced lead time, higher flexibility, reduced inventory, etc.
Core business processes :
- Market sensing process : all activities in gathering market intelligence,
disseminating it within the organization, and acting on the information.
- New offering realisation process : all the activities in researching, developing
and launching new high quality offerings quickly and within the budget.
- Customer acquisition process : all the activities in defining target markets and
prospecting for new customers.
- Customer relationship management process : all the activities in building deeper
understanding, relationships and offerings for individual customers.
- Fulfilment management process : all the activities in receiving and approving
orders, shipping the goods on time and collective payments.
Core competency has three major characteristics : 1. It is a source of competitive
advantage in that it makes a significal contribution to customer perceived value.2. it
has application in a wide variety of markets.3. it is difficult for competitors to imitate.
Becoming vigilant (budrus) organization : learning from the past, evaluating the present,
envisioning the future.
Holistic marketing orientation can also help to capture customer perceived value.
Holistic marketing sees it as integrating the value exploration, value creation, and value
delivery activities with the purpose of building long term, mutually satisfying
relationships and co-prosperity among key stakeholders(suinteresuotu saliu). Holistic
marketer achieve profitable growth by expanding customer`s share, building customer
loyalty and capturing customer lifetime value.
Holistic marketing framework is designed to address three key management questions :
1. Value exploration : how can company identify new value opportunities? By
understanding customer cognitive space, company`s competence space,
collaborators resource space.
2. Value creation : how can a company efficiency create more promising new value
offerings? By identifying new customer benefits from customer`s viewpoint,
utilizing core competencies from its business domains, selecting and managing
business partners from its collaborative networks.
3. How can a company use its capabilities and infrastructure to deliver the new
value offerings more efficiently? By making substantial investments in
infrastructure and capabilities. Must think about customer relationship
management, internal resource management and business partnership
Successful marketing thus requires companies to have capabilities such as
understanding customer perceived value, creating customer perceived value, delivering
customer perceived value, capturing customer perceived value, and sustaining customer
perceived value. Focus on customer and respond quickly to changing customer`s needs.
To ensure that they select and execute the right activities, marketers must give
priority to strategic planning in three areas : managing a company`s business as an
investment portfolio, assessing each business strength by considering the market`s
growth rate and the company`s position and fit in that market, and establishing the
Marketing plan is the central instrument for directing and coordinating the marketing
effort. The strategic marketing plan lay out the target markets and the customer
perceived value offerings the firm will offer, based on analysis of the best market
opportunities. Tactical marketing plan specifies the marketing tactics, including product
features, promotion, merchandising, pricing, sale channels and service.
ASSESING GROWTH OPPORTUNITIES.
Assessing growth opportunities includes planning new businesses and downsizing and
terminating older business. 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.
The figure illustrates strategic planning cap for a major manufacturer of blank
compact disks. The lowest curve projects the expected sales over next five years from
the current business portfolio. The highest curve describes desired sales over the
same period. Evidently, the company wants to grow much faster than its current
business will permit. How can it fill strategic planning ?First option is to identify
opportunities to achieve further growth within current business (intensive
opportunities). The second is to identify opportunities to build or acquire business that
are related to current business (integrative opportunities). The third option is to
identify opportunities to add attractive business unrelated to current business
Intensive growth. First course of action should be a review of opportunities form
improving existing business. One useful framework for detecting new intensive growth
opportunities is call a “product-market” expansion grid.
The company first considers whether it could gain more market share with its current
productions in their current markets. Net it considers whether it can find or develop
new markets for its current products. The it considers whether it can develop new
products of potential interest to its current market with product development
strategy. Later the firm also review opportunities to develop new products for new
markets in diversification strategy.
Integrative growth. A business can increase sales and profits through backward,
forward, or horizontal integration within its industry.(integrative opportunities –build
or acquire business that are related to current business), pwz nusipirkti savo suppliers
ir gauti daugiau kontroles, arba kaip pepsi nusipirko snacksu kompanija.
Diversification growth. Diversification growth makes sense when good opportunities
exist outside the present business – the industry is highly attractive and the company
has the right mix of business strengths to be successful . concentric strategy –when
company seeks to develop new producs that have technological or marketing synergies
with existing product lines, though a new products themselves may appeal to different
group of customers. Horizontal strategy – new products could appeal to current
customers, even though the new products are technically unrelated to its current
product line. A conglomerate strategy – no relationships to its current technology,
products or markets.
Company`s culture is very hard to change. Yet adapting the culture is often the key to
successfully implementing new strategy. Corporate culture – shared experiences,
stories, beliefs, norms that characterize organization. Sometimes corporate culture
develops organically and is transmitted directly from CEO personality and habits to
the company`s employees.
Innovation in marketing is critical.Senior manager should identify and encourage fresh
ideas from three groups that tend to be under-represented in strategy making :
employees with youthful perspectives, employees who are far removed from company
headquarters, employees who are new in the industry. Each group is capable of
challenging company orthoxy and stimulating new ideas.
Key strategies for managing change in organization :
1. Avoid the innovative title. Pick a name for innovation team that wont alienate co-
2. Use the buddy system : find a like-minded collaborator within organization.
3. Set the metrics in advance. Establish different set of funding, testing and
performance criteria for incremental, experimental and potentially disruptive
4. Aim for quick hits first. Start with easily implemented ideas that will work to
demonstrate that thinks can get done, before quickly switching to bigger
5. Get data back up your gut feelings. Use testing to get feedback and improve the
Page 98 the 12 dimensions for business innovation.
BUSINESS UNIT STRATEGIC PLANING
Business mission. Each business unit need to define its specific mission within the
broader company mission.
SWOT analysis. To overall evaluation of company`s strengths, weaknesses,
opportunities and threats. It is a way of monitoring the external and internal marketing
A market opportunity is an area of buyer need and interest that a company has a high
probability of profitably satisfying. Three main sources of market opportunities : to
supply something that is in short supply, supply existing product or service in a new or
superior way, uncover possible product or service improvements. Market opportunity
analysis to determine attractiveness and probability of success.
Environmental threat is a challenge posed by an unfavourable trend or development
that would lean, in the absence of defensive marketing action, or lower or profit.
Strengths/ weaknesses analysis. Each business needs to evaluate its internal strengths
and weaknesses. Check list for performing strengths and weaknesses analysis page 104.
It is crucial to assess interdepartmental working relationships as part of the internal
Once the company has performed SWOT analysis it can proceed to develop specific
goals for the planning period. The stage of process is called goal formulation. Goals are
specific with respect to magnitude and time. Goals must be arranged hierarchically
from the most to the least important. Objectives should be quantitative whenever
possible. Goals should be realistic. Objectives must be consistent.
Goals indicate what a business units wants to achieve, strategy is a game plan for
Porter`s generic strategies. Three generic strategies : cost leadership,
differentiation and focus.
Cost leadership :firms pursuing this strategy works hard to achieve the lowest
production and distribution costs to they can price lower than their competitors and
win large market share. The problem within this strategy is that other firms will usually
compete with still lower costs and hurt the firm that bases its whole future on cost
Differentiation : the business concentrates on uniquely achieving superior performance
in an important customer benefit area valued by a large part of market. Thus the firm
seeking quality leadership. For example, must make products with the best components,
put then together expertly, inspect them carefully and effectively communicate their
Focus : the business focuses on one or more narrow market segments. The firm gets to
know these segments intimately and pursues either cost or differentiation within the
Porter draws a distinction between operational effectiveness and strategy.
Competitors can quickly copy the operationally effective company using benchmarking
and other tools, thus diminishing the advantage of operational effectiveness. Porter
defines strategy as “ the creation of a unique and valuable position involving a different
set of activities”. A company can claim that it has a strategy when it “performs
different activities from rivals or performs similar activities in different ways”.
Many strategic alliances take the form of marketing alliances. These fall into four
major categories : product or service alliances, promotion alliances, logistic alliances,
Programme formulation and implementation. Activity based cost accounting can helpt
to determine whether each marketing programme is likely to produce sufficient results
to justify its costs.
7 s to successful business practice : strategy, structure, systems, style, skills, staff,
shared values. Style- company employees share common way thing and behaving (IBM
employees are very professional in their customer dealings), skill- employees have skills
needed to carry out the company`s strategy. Staffing means that the company has
hired able people, trained them well and assigned to the right jobs. Shared values
means that employees share the same corporate culture values. When these elements
are present companies are usually more successful at strategy implementation.
Feedback and control.
Marketing plan : executive summary and table of contents, situation analysis, marketing
strategy, financial projections, implementation controls.