Role of Marketing by johnasfaw


									The Changing Role of Marketing in the Corporation
Author(s): Frederick E. Webster, Jr.
Source: The Journal of Marketing, Vol. 56, No. 4 (Oct., 1992), pp. 1-17
Published by: American Marketing Association
Stable URL:
Accessed: 29/07/2009 16:39

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                Journal of Marketing.
                                        Frederick E. Webster, Jr.

    The              Changing Role of Marketing
                       in the Corporation
New organization forms, including strategic partnerships and networks, are replacing simple market-based
transactions and traditional bureaucratic hierarchical organizations. The historical marketing management
function, based on the microeconomic maximization paradigm, must be critically examined for its rele-
vance to marketing theory and practice in the 1990s. A new conception of marketing will focus on man-
aging strategic partnerships and positioning the firm between vendors and customers in the value chain
with the aim of delivering superior value to customers. Customer relationships will be seen as the key
strategic resource of the business.

 FOR the past two decades, some subtle changes in               The purpose of this article is to outline both the
     the concept and practice of marketing have been        intellectual and the pragmatic roots of changes that are
fundamentally reshaping the field. Many of these            occurring in marketing, especially marketing man-
changes have been initiated by industry, in the form        agement, as a body of knowledge, theory, and prac-
of new organizational types, without explicit concern       tice and to suggest the need for a new paradigm of
for their underlying theoretical explanation or justi-      the marketing function within the firm. First, the origins
fication. On the academic side, prophetic voices have       of the marketing management framework, the gen-
been speaking (Ardt 1979, 1981, 1983; Thorelli 1986;        erally accepted paradigm of the marketing discipline
Van de Ven 1976; Williamson 1975) but seldom heard          for the past three decades, are considered. Then shift-
because, representing several different disciplines, they   ing managerial practice is examined, especially the
did not sing as a chorus. More basically, perhaps, few      dissolution of hierarchical bureaucratic structures in
listeners were ready to hear the message or to do the       favor of networks of buyer-seller relationships and
intellectual work necessary to pull the several themes      strategic alliances. Within those new forms of orga-
together. Like the Peruvian Indians who thought the         nization, the changing role of marketing is discussed
sails of the Spanish invaders on the horizon were some      and a reconceptualization of marketing as a field of
phenomenon of the weather and did nothing to pre-           study and practice is outlined.
pare themselves for attack (Handy 1990), marketers
may ignore some important information in their en-
vironment simply because it is not consistent with their           Marketing as a Social and
past experience.                                                      Economic Process
                                                            It is sobering to recall that the study of marketing did
FrederickWebster, is theE.B.Osborn
                 Jr.,                     of
                                   Professor Marketing
                                                     and    not always have a managerial focus. The early roots
FacultyDirector Executive
             for                 Amos School Business
                       Education, Tuck         of           of marketing as an area of academic study can be found,
Administration,             The
                      College. author      his
                                     thanks Tuck  School    beginning around 1910, in midwestern American land-
colleaguesRohit        Scott      and
              Deshpand6, Neslin, Brian            as
                                          Wansink, well
as threeanonymous reviewers, helpful
                 JM          for     comments drafts
                                               on     of    grant universities, where a strong involvement with
thisarticle.                                                the farm sector created a concern for agricultural mar-
                                                            kets and the processes by which products were brought

Journal of Marketing
Vol. 56 (October 1992), 1-17                                                      The ChangingRole of Marketing 1
 to market and prices determined. The analysis was           ing, promotion, and distribution.Marketingresearch
 centered aroundcommodities and the institutions in-        gained prominence in management practice as a ve-
 volved in moving them from farm, forest, sea, mine,        hicle for aligning the firm's productive capabilities with
 and factory to industrialprocessors, users, and con-       the needs of the marketplace. The articulation of the
 sumers. Within this tradition, three separate schools      marketing concept in the mid to late 1950s posited
 evolved that focused on the commodities themselves,        that marketing was the principal function of the firm
on the marketinginstitutionsthroughwhich products           (along with innovation) because the main purpose of
were brought to market, especially brokers, whole-          any business was to create a satisfied customer (Drucker
salers, and retailersin theirmany forms and variations      1954; Levitt 1960; McKitterick 1957). Profit was not
(Breyer 1934; Duddy and Revzan 1953), and finally           the objective; it was the reward for creating a satisfied
on the functions performed by these institutions            customer.
(McGarry1950; Weld 1917). All of these approaches               The managerial focus was not readily accepted by
tended to be descriptive ratherthan normative, with         everyone in academic circles, nor was the marketing
the functional being the most analytical and leading        concept completely adopted by industry (McNamara
to the developmentof a conceptualframeworkfor the           1972; McGee and Spiro 1988; Webster 1988). In aca-
marketingdiscipline (Bartels 1962; Rathmell 1965).          demia, the functionalists and institutionalists held their
    These early approachesto the study of marketing         ground well into the 1960s, stressing the value of un-
are interesting because of the relative absence of a        derstanding marketing institutions and functions and
managerial orientation. Marketingwas seen as a set          viewing marketing from a broader economic and so-
of social and economic processes ratherthan as a set        cietal perspective. Over the previous 50 years, a sub-
of managerialactivities and responsibilities. The in-       stantial body of theory and empiricalknowledge had
stitutional and functional emphasis began to change         been developed and mature marketing scholars felt
in 1948, when the American MarketingAssociation             compelled to defend and protect it. The argument
(1948, p. 210) defined marketingas:                         against the managerial point of view centered on its
    The performance business activitiesdirectedto-
                   of                                       inability to consider the broadersocial and economic
    ward,andincidentto, the flow of goods andservices       functions and issues associated with marketing, be-
    from producer consumeror user.
                to                                          yond the level of the firm. For example, the Beckman
                                                            and Davidson (1962) text, built around a functionalist
This definition, modified only very slightly in 1960,
                                                            perspective, and the most widely used text in the field
represented an important shift of emphasis. Though it       at the time, was promoted as follows: "Balanced treat-
grew out of the functional view, it defined marketing       ment of the developmentand the presentstatusof our
functions as business activities rather than as social or
                                                            marketing system; Conveys a broad understanding of
economic processes. The managerial approach brought         the complete marketing process, its essential eco-
relevance and realism to the study of marketing, with       nomic functions,and the institutions
an emphasis on problem solving, planning, imple-                                               performingthem;
                                                             Strengthens the social and economic coverage of mar-
mentation, and control in a competitive marketplace.         keting in all its significant implications; Proper em-
                                                             phasis accorded to the managerial viewpoint" (adver-
                                                             tisement, Journal of Marketing, April 1962, p. 130).
         Marketing Management                                It is the last phrase, "proper emphasis," that implies
The managerial approachto the study of marketing             the criticism that the managerial approach, by itself,
evolved in the 1950s and 1960s. Several textbooks            is incomplete.
using a marketing management perspective appeared                 The analytical frameworks of the new managerial
during this period (Alderson 1957; Davis 1961; How-          approach were drawn from economics, behavioral sci-
ard 1957; Kotler 1967; McCarthy 1960). These early          ence, and quantitative methods. The incorporation of
managerial authors defined marketing management as          the behavioral and quantitative sciences gave impor-
a decision-making or problem-solving process and re-        tant legitimacy to marketing as a separate academic
lied on analytical frameworksfrom economics, psy-           discipline. Such frameworks were consistent with the
chology, sociology, and statistics. The first marketing     very strong thrust of the 1960s toward more rigorous
casebook, incorporating a managerial framework by           approaches in management education, encouraged by
definition, had emerged from of the Harvard Business        two very influential foundation studies (Gordon and
School very early (Copeland 1920), but without any          Howell 1959; Pierson 1959). These studies advocated
descriptive material or analytical framework to ac-         education based on a rigorous, analytical approach to
company the cases. Marketingmanagementbecame a              decision making as opposed to a descriptive, institu-
widely accepted business function, growing out of a         tional approach which, it was argued, should be held
more traditionalsales managementapproach,with an            to "an irreducible minimum" (Gordon and Howell
emphasis on product planning and development, pric-         1959, p. 187). The managerial perspective became the

2 / Journalof Marketing,
dominant point of view in marketingtexts and jour-          ture, and cultureof large, divisionalized, hierarchical
nals, supportedby managementscience and the be-             organizations.
havioral sciences.
                                                                    The Large, Bureaucratic,
     Marketing as an Optimization                                   HierarchicalOrganization
               Problem                                       When we think of marketingmanagement, we think
 Scholars on the leading edge of marketingresponded          of large, divisionalized,functionalorganizations-the
 with enthusiasmto the call for greateranalyticalrigor.      kind depicted by the boxes and lines of an organiza-
 At the root of most of the new managerialtexts and          tion chart. The large, bureaucratic,hierarchicalor-
 the evolving research literatureof marketingscience         ganization,almost always a corporation legal terms,
 was'the basic microeconomicparadigm, with its em-           was the engine of economic activity in this country
 phasis on profit maximization(Anderson 1982). The           for more than a century (Miles and Snow 1984). It
 basic units of analysis were transactionsin a compet-       was characterized multiple layers of management,
 itive marketand fully integratedfirms controllingvir-       functional specialization, integrated operations, and
 tually all of the factors of production (Ardt 1979;         clear distinctions between line and staff responsibili-
 Thorelli 1986). Markettransactions  connectedthe firm       ties. It had a pyramid shape with increasingly fewer
 with its customersand with other firms (Johnstonand         and more highly paid people from the bottom to the
 Lawrence 1988).                                             top.
      Analysis for marketing management focused on               The larger the firm, the more activities it could
 demand(revenues),costs, and profitability the use
                                             and             undertakeby itself and the fewer it needed to obtain
 of traditionaleconomic analysis to find the point at        by contractingwith firms and individualsoutside the
 which marginalcost equalsmarginal    revenueand profit      organization.The logic of economies of scale equated
 is maximized. Behavioral science models were used           efficiency with size. The epitome of the fully inte-
 primarilyto structureproblem definition, helping the        grated firm was the Ford Motor Company, and most
 marketresearcher define the questionsthatare worth
                    to                                       notably its River Rouge plant, which produceda sin-
 asking  and to identify importantvariables and the re-      gle, standardized product, the Model A. Ford-owned
 lationships among them (Massy and Webster 1964).            lake steamships docked at one end of the plant with
 Statisticalanalysis was used to manipulatethe data to       coal and iron ore (from Ford's own mines) and com-
 test the strengthof the hypothesized relationshipsor        plete automobiles and tractorscame out at the other
 to look for relationshipsin the data that had not been     end. Molten iron from the blast furnaces was carried
hypothesized directly.                                      by ladles directly to molds for parts, bypassing the
     The application of formal, rigorous analytical         costly pig iron step. Waste gases from the blast fur-
techniques to marketingproblemsrequiredspecialists          naces became fuel for the power plant boilers, as did
of various kinds. Marketingdepartments      typically in-   the sawdust and shavings from the body plant. Gases
cluded functional specialists in sales, advertisingand      from the coking ovens providedprocess heat for heat-
promotion, distribution,and marketingresearch, and          treatmentand paint ovens (Ford 1922, p. 151-153).
perhapsmanagersof customerservice, marketingper-            Elsewhere, Ford owned sheep farms for producing
sonnel, and pricing. Early organizationalpioneers of        wool, a rubberplantationin Brazil, and its own rail-
professionalmarketingdepartments      included the con-     road to connect its facilities in the Detroit region
sumer packaged goods companies with brand man-              (Womack, Jones, and Roos 1991, p. 39). Integration
agement systems, such as Procter & Gamble, Col-             requiredlarge size. Large size begat low cost.
gate-Palmolive, General Foods, General Mills, and                Large, hierarchical,integratedcorporatestructures
Gillette. In other companies, the marketing profes-         were the dominant organization form as the mana-
sionals were concentratedat the corporatestaff level        gerial approachto marketingdeveloped in the 1950s
in departmentsof marketresearch and operationsre-           and 1960s, and firms createdmarketingdepartments,
searchor managementscience. Examples of the latter          often as extensions of the old sales department.Such
include GeneralElectric, IBM, and RCA. Large, full-         large organizations moved deliberately, which is to
service advertisingagencies built strong research de-       say slowly, and only aftercarefulanalysis of all avail-
partmentsto supporttheir national advertiseraccount         able data and options for action. The standardmicro-
relationships. Other large firms, such as Anheuser-         economic profit maximizationparadigmof marketing
Busch and GeneralElectric, also enteredinto research        management fit well in this analytical culture. Re-
partnershipswith university-basedconsulting organi-         sponsible marketing management called for careful
zations.                                                    problem definition, followed by the developmentand
     Such specialized and sophisticated professional        evaluationof multipledecisionalternatives,  from which
marketingexpertise fit well into the strategy, struc-       a course of action would ultimatelybe chosen thathad

                                                                                 The ChangingRole of Marketing 3
 the highest probability,based on the analysis, of max-    whose vision was not clouded by the continuityof ex-
 imizing profitability.                                    perience. Global competition resulted in increasingly
     When the world was changing more slowly than          better product performanceat lower cost to the cus-
 it is today, such caution was wise in terms of pre-       tomer. Rapid advances in telecommunications,trans-
 serving valuable assets that had been committed to        portation, and informationprocessing broadenedthe
 clearlydefinedtasks, especiallywhen those assets were     choice set of both industrialbuyers and consumersto
 huge production facilities designed for maximum           the point that a product's country of origin was rel-
 economies of scale in the manufacture highly stan-
                                          of               atively unimportant  and geographicdistance was sel-
 dardizedproducts.The task of the marketingfunction        dom a barrier,especially in areas where non-Ameri-
 was first to develop a thoroughunderstanding the  of      can producers had superior reputationsfor quality,
 marketplace ensurethatthe firmwas producing       goods   service, and value. In most Americanindustries,com-
 and services required and desired by the consumer.        panies had little choice but to reduce costs through
 With an optimal productmix in place, the marketing        reorganizationand restructuring assets, as well as
 function(throughits sales, advertising,promotion,and      through technological improvementsin products and
 distributionsubfunctions)was responsible for gener-       manufacturing  processes.
 ating demandfor these standardized    products,for cre-
 ating consumerpreferencethroughmass and personal
 communications, and for managing the channel of                The OrganizationalResponse
 distribution through which products flowed to the          Duringthe 1980s, new forms of business organization
 consumer. Sound marketing research and analysis            became prominent features of the economic land-
 provided supportfor conducting these activities most       scape. Even before the forces of global competition
 efficientlyandeffectively, for testingalternative
                                                 courses    became clearly visible, there was a trendtowardmore
 of action in each and every area.                          flexible organizationforms, forms that are difficult to
     Marketingas a managementfunction tended to be          capturewith a traditional organizationchart(Miles and
 centralizedat the corporatelevel well into the 1970s.      Snow 1984, 1986; Powell 1990; Thorelli 1986). The
 Marketingorganizationswere often multitiered, with         new organizations emphasized partnershipsbetween
 more experienced senior managersreviewing and co-          firms;multipletypes of ownership partnering
                                                                                              and           within
 ordinatingthe work of junior staff and relating mar-       the organization (divisions, wholly owned subsid-
 keting to other functions of the business, especially      iaries, licensees, franchisees, joint ventures, etc.);
 throughthe budgetingand financialreportingprocess.         teamworkamong membersof the organization,often
Corporatecentralizationallowed the development of           with team members from two or more cooperating
 specialized expertise and affordedeconomies of scale       firms; sharing of responsibility for developing con-
 in the purchaseof marketingservices such as market         verging and overlappingtechnologies; and often less
research, advertising, and sales promotion. It also        emphasis on formal contracting and managerial re-
permittedtighter control of marketingefforts for in-       porting, evaluation, and control systems. The best vi-
dividual brands and of sales efforts across the entire      sual image of these organizationsmay be a wheel in-
nationalmarket.This arrangement       began to change in   stead of a pyramid, where the spokes are "knowledge
the late 1970s and into the 1980s as the concept of        links" between a core organizationat the hub and stra-
the strategic business unit (SBU) gained widespread        tegic partners aroundthe rim (Badaracco1991). These
favor and corporate managements pushed operating           forms were pioneeredin such industriesas heavy con-
decisions, and profit and loss responsibility,out to the   struction, fashion, weapon systems contracting, and
operatingbusiness units. Though marketingbecame a          computers, where markets often span geographic
more decentralizedfunctionin many large companies,         boundaries, technology is complex, productschange
it is not clear that the result was always heightened      quickly, and doing everythingyourself is impossible.
marketingeffectiveness.                                    Such organizationstoday are found in businesses as
     The largerthe organization,the largerthe number       diverse as glass, chemicals, hospital supplies, book
of managers, analysts, and plannerswho were not di-        publishing, and tourism.
rectly involved in making or selling products. The             These confederationsof specialists are called by
burdenof administrativecosts, mostly in the form of        many names including "networks"(Miles and Snow
salaries for these middle layers of management, be-        1986; Thorelli 1986), "value-adding partnerships"
came an increasinghandicapin the competitive races         (Johnston and Lawrence 1988), "alliances" (Ohmae
that shaped up in the global marketplaceof the 1970s       1989), and "shamrocks"    (Handy 1990). All are char-
and 1980s. More and more organizationsfound it nec-        acterizedby flexibility, specialization, and an empha-
essary to downsize and delayer, some through their         sis on relationship management instead of market
own initiative and many more through threatenedor          transactions.They dependon administrative     processes
actual acquisition and restructuringby new owners          but they are not hierarchies(Thorelli 1986); they en-

4 / Journal Marketing,
          of        October
gage in transactionswithin ongoing relationshipsand       the epitome of strategic alliances. Like their parents,
they depend on negotiation, ratherthan market-based       joint venturesare fully integratedfirms with theirown
processes, as a principalbasis for conductingbusiness     capital structures,something that other forms of stra-
and determiningprices, though marketforces almost         tegic alliance lack. Network organizationsare the cor-
always influence and shape negotiation. The purpose       porate structures that result from multiple relation-
of these new organizationforms is to respondquickly       ships, partnerships,and strategic alliances.
and flexibly to accelerating change in technology,            We can now consider how the role of the mar-
competition, and customer preferences.                    keting function changes in the focal firm as we move
                                                          along the continuumfrom transactionsto networkor-
      Types of Relationships and
               Alliances                                  Markets and Transactions
There is no strongconsensus at the presenttime about      The startingpoint of this analysis is a transactionbe-
the terminology and typology for describing the new       tween two economic actors in the competitive mar-
organization forms. However, some important dis-          ketplace. In a pure market form of economic orga-
tinctions among types of relationships and alliances      nization, all activity is conductedas a set of discrete,
are necessary before we can consider the role of mar-     market-basedtransactionsand virtually all necessary
keting withinthem. We can thinkof a continuumfrom         informationis contained in the price of the product
pure transactionsat one end to fully integratedhier-      that is exchanged. The marketing is simply to find
archicalfirms at the otherend (Figure 1). As we move      buyers.
along this continuum, we see that firms use more ad-          In the traditional microeconomic profit-maximi-
ministrativeand bureaucratic   control and less market    zation paradigm, the firm engages in market trans-
controlin the pursuitof economic efficiency. One step     actions as necessary to secure the resources (labor,
away from pure transactionsis repeated transactions       capital, raw materials, etc.) it requires for the pro-
between buyer and seller. The next step is a long-term    duction of the goods and services it sells in the com-
relationship is still adversarial dependsheavily
                                   and                    petitive marketplace. Each transactionis essentially
on marketcontrol. Then comes a real partnership,in        independentof all othertransactions,guided solely by
which each partnerapproachestotal dependence on           the price mechanism of the free, competitive market
the other in a particulararea of activity and mutual      as the firm seeks to buy at the lowest availableprice.
trust replaces the adversarialassumptions. Prices are         In addition to the costs associated with the price
now determinedby negotiation, subject to some mar-        paid, however, there are costs associated with the
ket pressures, rather than by the market itself. The      transactionitself, what Coase (1937, p. 390) called
next step is strategic alliances, which are defined by    the "cost of using the price mechanism."These costs
the formation of a new entity such as a product de-       includethe costs of discoveringwhatthe relevantprices
velopment team, a researchproject, or a manufactur-       are, of negotiatingand contracting,and of monitoring
ing facility, to which both parties commit resources      supplier performance,including quality and quantity
and which serves clear strategicpurposesfor both. Joint   of goods delivered. For Coase, the problem was to
ventures, resultingin the formationof a new firm, are     explain why, given these "marketingcosts" (as he

                                   The Range of Marketing Relationships

                                    2                            3
  TRANSACTIONS            >   REPEATED                    >. LONG-TERM
                              TRANSACTIONS                   RELATIONSHIPS

      4                            5                           6                                  7
 BUYER-SELLER                STRATEGIC                      NETWORK                           VERTICAL
 PARTNERSHIPS              > ALLIANCES                      ORGANIZATIONS                   > INTEGRATION
 (MUTUAL,                    (INC. JOINT
 TOTAL                       VENTURES)

                                                                               TheChanging of Marketing5
                                                                                         Role        /
called them, p. 394, not "transactionscosts," the phrase     loyalty, and repeat purchase. Marketing's role is to
 we use today), the firm did not internalize virtually       guide productdifferentiationand to create preference
 all exchanges of value ratherthan depending on the          and loyalty that will earn higher prices and profits.
 competitive market. Coase proposed that the reason          Direct contact between customersand the marketeris
 is that costs are also associated with internal perfor-     unlikely. The sale is the end result of the marketing
 mance of value-creationactivities, including decreas-       process and, though repeatpurchasesare importantto
 ing returns to the entrepreneurial   function and mis-      the economics of advertisingand sales promotionac-
 allocation of resources to activities in which the firm     tivity, there is no meaningful, ongoing relationship
 is incapable of creating value to the same extent as a      between companyand customer.Even here, however,
 specialist.It is worthnoting that this suggestion,stated    the presenceof brandloyaltyandrepeatpurchase    means
 in an article published in 1937, is very similar to the     we have moved beyond a pure transaction.The ru-
 notion of "distinctive competency" that appearedin          diments of trustand credibilityare present, which can
 the strategy literaturemore than 50 years later (Pra-       be the foundationsof a relationship.Consumerssim-
 halad and Hamel 1990).                                      ply find it easier and more convenient to shop in the
     Pure transactionsare rare, though they mark the         same store and to buy a familiar brand, thus mini-
 beginning of the continuumfor thinking about types          mizing the time and effort needed to obtain and pro-
 of relationships and alliances and provide a useful         cess information about different alternatives. Con-
 startingpoint for theoreticalanalysis. In fact, through-    sumerscan negotiatemore favorabletermsof sale from
 out the 1970s, the marketing literatureemphasized           a vendor who is attractedto the possibility of future
transactionsas a central construct and the basic unit        transactionswith them. Relationships make transac-
of analysisfor the marketing  discipline(Bagozzi 1975).      tions more cost efficient.
 Some authorseven advocated a definition of a trans-             The importance of relationships in marketingis
 action that included any exchange of value between          more clearly seen in industrialmarkets, though it is
two parties, thus broadeningthe concept of marketing        now also better understood in consumer markets as
to include virtuallyall human interaction(Kotler and        resellers have gained increased power and as infor-
Levy 1969). A pure transaction is a one-time ex-            mationtechnologyhas putindividual              in
                                                                                                consumers more
change of value between two parties with no prior or        direct contact with resellers and manufacturers. Inter-
subsequentinteraction.Price, established in the com-        active databases are making relational marketing a
petitive marketplace,contains all of the information        reality for consumergoods. For productssuch as con-
necessary for both parties to conclude the exchange.        sumerdurablegoods, whose benefits are derivedover
In a pure transaction,there is no brandname, no rec-        a long period of time ratherthan being consumed in
ognition of the customer by the seller, no credit ex-       a single use and for which after-sale service is often
tension, no preference, no loyalty, and no differen-        required, there is an ongoing relationship with the
tiation of one producer'soutput from that of another.       customer, though responsibilityfor the relationshipis
     Most transactionsin fact take place in the context     often an issue and a source of conflict between cus-
of ongoing relationshipsbetween marketersand cus-           tomer, reseller, and manufacturer.
tomers. Nonetheless, there has been a long-standing              As an historical footnote, Henry Ford never had
and clear tendency for marketingpractice and theory         any doubt on this question. He wrote, "Whenone of
to focus on the sale, the single event of a transaction,    my cars breaks down I know I am to blame" (Ford
as the objective of marketingactivity and the depen-        1922, p. 67) and "A manufacturer not throughwith
dent variable for analysis. This emphasis on single         his customer when a sale is completed. He has then
transactions fits well with the profit-maximization         only startedwith his customer. In the case of an au-
paradigmand the related analyticaltechniques of op-         tomobile the sale of the machine is only somethingin
timization. There is no need to consider people or so-      the nature of an introduction" (p. 41). Likewise,
cial processes when the units of analysis are products,     L. L. Bean's originalpromiseto his customers80 years
prices, costs, firms, and transactions.                     ago, what he called his Golden Rule, is now held up
                                                            as a standardfor others to follow:
Repeated Transactions-The Precursors of a
Relationship                                                                we
                                                                 Everything sell is backedby a 100%guarantee.
                                                                 We do not want you to have anythingfrom L. L.
One step along the continuum from a pure transaction             Bean thatis not completelysatisfactory.
is the repeated, frequent purchase of branded con-              thing you buy from us at any time for any reasonif
sumer packaged goods and some industrial compo-                  it provesotherwise.
nents, maintenance, and operating supplies. In the              These quotations help to underscore the fact that
marketingof such products,advertisingand sales pro-         relationship marketing is not new in management
motion are key activities and each brand spends ag-         thinking. However, there appears to have been a fairly
gressively to try to win the customer's preference,         long period of time when it was not a top priority for

6 / Journal Marketing,
most companies, and it was not partof the basic con-       the customer's manufacturingprocess. They fought
ceptual structureof the field as an academic disci-        over price. Competitionamong vendors, throughsys-
pline.                                                     tems of competitive bidding around extremely tight
                                                           productspecifications, was the methodby which ven-
  Long-Term Relationships                                  dor greed and opportunismwere controlled. The larg-
  In industrialmarkets, buyer-seller relationshipshave     est share of the business usually went to the vendor
  typically involved relatively long-term contractual      with the lowest price, thoughseveralotherswere given
  commitments,but even here the relationship   was often   smaller shares to keep them involved, to keep pres-
  arm's-length and adversarial, pitting the customer       sure on the low price supplier, and to provide alter-
  against the vendor in a battle focused on low price.     native sources of supply in the event of delivery or
  It was common practice for a buyer to maintaina list     qualityproblems.Incominginspectionwas the key step
  of qualified vendors who would be invited to submit      in quality control and reject rates tended to be high.
  bids for a particularprocurementon a product with
  specifications drawn in a way to attract maximum          Mutual, Total-Dependence Buyer-Seller
  competition (Corey 1978; Spekman 1988).                   Partnerships
      The importanceof managingthese buyer-sellerre-        Global competitorssaw an opportunityin all of this.
  lationships as strategic assets began to be recognized    The Japanesemanufacturers, particular,striving to
  in the marketingliterature the 1980s (Jackson 1985;
                             of                             compete   in the North American marketthousandsof
 Webster 1984). Jacksonproposedthat industrialmar-          miles from home, had learneda valuablelesson: qual-
 keters characterizefirms as either transactionor re-       ity does not just sell better, it also costs less. De-
 lationshipcustomers and scale the commitmentof re-         signing productsfor manufacturability well as per-
 sources accordingly. In these longer term buyer-seller     formance and doing it right the first time costs less
 relationships, prices are an outcome of a negotiation      thandetectingand removingdefects later. Qualityand
 process based on mutual dependence, not determined         low cost depend heavily on a system of strategicpart-
 solely by market forces, and quality, delivery, and        nerships with a small numberof vendors that are in-
 technical support become more important.Competi-           corporatedin the early stages of productdevelopment,
 tive forces in the global marketplace the 1980s forced
                                      of                    a patternof cooperationvirtuallyunknownin the ad-
 many    firms to move significantlyalong the continuum     versarialsourcing systems of the U.S. manufacturers
 from arm's-lengthrelationshipswith vendors and cus-        (Womack, Jones, and Roos 1991). Japanesekanban
 tomers to much strongerpartnerships     characterizedby    or just-in-time systems provided a new model for
 much greater interdependence. In traditionalmanu-          American manufacturers:    reliance on one or a few
 facturing businesses such as those in the automobile       vendors for a particularpart who promise to deliver
 industry,the world was changing so fast that the stan-     100% usable product, usually in quantitiesjust suf-
 dard ways of doing business were passe.                    ficient for one eight-hourproductionshift, on an in-
      In the 1980s, the automobile industrybecame the       credibly tight schedule whereby trucks must arrive
 bellwether for new forms of relationshipwith indus-        within a very few minutes of the programmedtime.
 trial suppliers(Womack, Jones, and Roos 1991), and         Higher quality and lower inventory costs and other
 it is instructive to look briefly at the auto business     relatedcosts resultedfrom total reliance on a network
 specifically. Ford's River Rouge plant was an excep-       of sole-source vendors in a system of total interde-
 tion to the way the industry organizedproduction.Ford     pendence (Frazier, Spekman, and O'Neal 1988).
 got into trouble soon after the plant was opened as            Firms in the American automobile industrystud-
 Alfred Sloan's General Motors began to offer con-         ied their Japanese competitors and attemptedto in-
 sumers a much wider range of models, colors, and          corporatethe lessons learned in their managementof
features, and the Model A fell from favor with cus-        procurementand relationshipswith vendors. The rest
tomers. GM depended heavily on other vendors, in-          of America began to learn from what was happening
cluding its own wholly owned but independent sub-          in the automobile industry, as well as in telecom-
sidiaries such as HarrisonRadiator, AC Spark Plug,         munications, computers, office equipment, and other
andSaginawSteering(Womack,Jones, andRoos 1991,             fields. Americanmarketersbegan to see the necessity
p. 138-139), for almost 70% of the value of produc-        of moving away from a focus on the individualsale,
tion. The automobile manufacturers decades had
                                        for                the transactionas a conquest, and toward an under-
depended on thousands of vendors, with many ven-           standing of the need to develop long-term, mutually
dors for each item, in a system that was fundamen-         supportive relationships with their customers. Many
tally and intentionallyadversarial.Relationshipswere       of America'spremierindustrial  firmssuch as GE, IBM,
short-term.Suppliers were adversariesfor their cus-        DuPont, Monsanto, and Honeywell restructured
tomers, competing for an "unfair"share of the eco-         themselves around the fundamentalconcept of stra-
nomic value created by the use of their products in        tegic customer partnershipswith customers such as

                                                                                The ChangingRole of Marketing 7
American Airlines, Ford, Milliken, Procter & Gam-           materials, components, or services into the cus-
ble, and the federal government.                            tomers' manufacturing     operations. Others are formed
    Another Japanese institution, the keiretsu, pro-        between potentialcompetitorsin orderto cooperatein
vides yet anothermodel thatis shapingthe new Amer-          the development of related or convergent technolo-
ican organizationallandscape (Gerlach 1987). Kan-           gies, in the developmentof a new productor class of
ban systems depend on the close relationship of             products,or in the development a new market.Some
suppliers and subcontractorswithin the keiretsu. In         alliances are formed between manufacturers        and re-
many respects, the keiretsuare the predecessorsof the       sellers. All strategicalliancesare collaborations  among
networks and alliances now emerging in the Western          partners involving the commitment of capital and
world (not to mention the obvious fact that many al-        managementresources with the objective of enhanc-
liance partnersare, in fact, Japanesefirms). The kei-       ing the partners'competitive positions. Strategic al-
retsu are complex groupingsof firms with interlinked        liances are much closer to the hierarchy end of the
ownership and tradingrelationships.They are neither         transactions(market)-hierarchycontinuum, but they
formal organizationswith clearly defined hierarchical       stop shortof internalizing functionswithinthe firm
structures impersonal,decentralized
           nor                           markets.They       itself. Instead, they create a separateentity to be man-
are boundtogetherin long-termrelationshipsbased on          aged by bureaucratic    and administrative controls.
reciprocity.The tradingpartnersmay hold small own-
                                                            Joint Ventures
ership positions in one another,but primarilyto sym-
bolize the long-term commitment of the relationship         Joint ventures, as the term is used here, are only one
ratherthan strictly for financial gain. A key outcome       kind of strategic alliance, though the terms are often
of this arrangement great stabilityin these long-term
                     is                                     used interchangeably.The unique feature of a joint
relationships. Such stability contributesto a sharing       venture is that a new firm is created, with its own
of information among the companies and promotes             capital structure,as well as the sharing of other re-
aggressive, long-termgrowthpolicies (Gerlach 1987).         sources. Joint venturesare typically establishedto ex-
The experience of Japanese managers with keiretsu           ist in perpetuity, though the founding partnersmay
and similar forms of interfirmcooperationis a major         subsequently change their ownership participation.
reason for their greaterskill and comfort level in the      Other types of strategic alliances, such as a product
managementof strategicalliances in comparisonwith           development project, have a finite life by definition.
American managers(Montgomeryand Weiss 1991).                In fact, this finiteness with its inherent flexibility is
                                                            one of the advantages of strategic alliances in com-
Strategic Alliances                                         parison with more traditionalorganizationforms. In-
In some cases, the partnership   between a supplierand      terestingly, the joint venture soon faces all of the
its customer takes the form of an entirely new ven-         problemsof its parentfirms in terms of creatingmul-
ture, a true strategicalliance. One of the essential fea-                      and
                                                            tiple partnerships alliancesand determining coreits
tures of a true strategic alliance is that it is intended   competenceandits uniquepositioning the valuechain
to move each of the partnerstoward the achievement          between vendors and customers.
of some long-term, strategic, goal. This strategicob-
jective is one distinguishing feature that separates        Networks
strategic alliances from previous forms of interfirm        Networks are the complex, multifacetedorganization
cooperation.Accordingto Devlin and Bleakley (1988,          structures  that result from multiple strategicalliances,
p. 18), "Strategicalliances take place in the context       usually  combined with otherforms of organizationin-
of a company's long-term strategic plan and seek to         cluding divisions, subsidiaries, and value-added re-
improve or dramaticallychange a company's com-              sellers. (Some authorshave mistakenlyused the terms
petitive position." This definition of strategic alli-      "strategic alliances" and "networks" interchange-
ances, with its emphasis on improving a firm's com-         ably.) The alliances are the individualagreementsand
petitive position, supportsthe notion that they are an      collaborations between partners, such as Ford and
importantmarketingphenomenon. Anotherimportant              Mazda in the creationof the new Escort and Explorer
characteristicof strategic alliances is shared objec-       automobilesor GeneralMotors and Toyota in the for-
tives and a commitmentof resources by both parties.         mationof the NUMMIjoint venture. GeneralMotors,
    There are multiple types of strategicalliances; vir-    though still a classic example of a traditional,hier-
tually all are within the theoretical domain of mar-        archical,bureaucratic,    multidivisional
                                                                                                    organization and
keting as they involve partnerships   with customers or     currently  in the throes of a majordownsizing (Taylor
resellers or with real or potential competitorsfor the      1992), is evolving towarda networkorganizationwith
development of new technology, new products, and            multiplejoint-venturepartnersincluding global com-
new markets.Some are new venturesformed between             petitors Toyota, Daewoo, Volvo, Suzuki, and Isuzu,
vendorsand customersto ensurea smooth flow of raw           as well as a host of strategic partnershipswith ven-

8 / Journalof Marketing,
dors. Fordlikewise has a large numberof partnerships         marketplace(Prahaladand Hamel 1990). In fact, one
and alliances and is evolving into a network organi-         of the key core competencies of a network organiza-
zation.                                                      tion may be the ability to design, manage, and control
    The basic characteristic a networkorganization
                              of                             strategic partnershipswith customers, vendors, dis-
is confederation,a loose and flexible coalition guided       tributors,and others.
from a hub where the key functions include devel-                There is an interestingparadoxhere: in the move
opment and managementof the alliances themselves,            toward strategic alliances, even the largest firms be-
coordination of financial resources and technology,          come more focused and specialized in their core ac-
definition and managementof core competence and              tivities.They realizethatthereis an increasingly smaller
strategy, developing relationships   with customers, and     set of activities that represent true distinctive com-
managing information resources that bind the net-            petence on their part. The trick is to avoid trying to
work. In the context of the network organization,            do everything, especially the things they cannot do
marketingis the function responsible for keeping all         well, and to find other firms that also need a partner
of the partnersfocused on the customerand informed           that can do the things the large firm does best. Stra-
about competitorproductofferings and changing cus-           tegic alliances become a primarytool in developing
tomer needs and expectations.                                the firm's core competence and competitive advan-
    James Houghton, Chairman of Coming, Incor-               tage.
porated, for example, describeshis company as a net-             Instead of vertical integrationbeing the preferred
work with alliances as a key part of its structure          model, the network paradigmis built aroundthe as-
(Houghton 1989). At the hub of the wheel (Figure 2)          sumptionthat small is better, thateach partor process
is a set of functional specialities such as contractne-     or function should be the responsibilityof a special-
gotiation, legal services, and financial coordination       ized, independent entity, efficiently organized and
that provide the linkages that bind together technol-       managed,that has world class competence.Across the
ogy, shared values, and sharedresources. The center         board-for all factors of production including parts
is also responsiblefor establishingprioritiesand man-       and subassemblies,services such as transportation     and
aging the linkages that define the network; informa-        maintenance,and professionalmarketingservices such
tion management is a central strategic function and         as marketing   research,some selling functions,and most
informationtechnology has been a key facilitator of         distribution functions-the bias has shifted from
these new organizationalforms. Anotherkey respon-           "make"to "buy,"from ownershipto partnership,        from
sibility of the center is to define, develop, and main-     fixed cost to variablecost, but in the context of stable,
tain the core competencies that are at the heart of the     long-termrelationships.A firm must define ever more
firm's ability to compete successfully in the global        narrowlythose core competencies to which it will de-
                                                            vote scarce resources in orderto develop new knowl-
                                                            edge and skills. For all other areas, it must depend on
                    FIGURE 2
              Network Organizations                         strategicpartnerswho have placed their own focused
                                                            bets in the game of becoming world class competitors.
                                                                IBM is another example of a firm that is rein-
                                                            venting itself as a networkorganization.As one of the
                                                            first steps in this direction, the personalcomputerwas
                                                           designed over a long weekend by an IBM manage-
                                                           ment taskforce gathered informally at a Florida re-
                                                           treat. Actual manufacturingrelied on a network of
                                                           hardwareand software suppliers for all components.
                                                           Besides the design work, IBM's own contributionto
                                                           the manufacturing     process was an assembly plant and
                                                           several minutes of assembly and testing time per ma-
                                                           chine. Gradually,some of the vendorpartnerships       and
                                                           alliances were terminatedas IBM broughtsome man-
                                                           ufacturingactivities back into the firm. Subsequently,
                                                           IBM committeditself to "open architecture,"making
                                                           IBM's technology widely available to all software
                                                           writerswho wantedto develop applicationsprograms,
                                                           in recognition of the fact that not even IBM had the
                                                           resources necessary to do the job of writing software
                                                           for thousandsof distinctapplications     segments. (Some
                                                           observers have argued that open architectureand re-

                                                                                 TheChanging of Marketing9
                                                                                           Role        /
liance on outside vendors meant that IBM itself no            corporate level. Just as the distinction between the firm
longer had any distinctive competitive advantage of           and its market environment (both suppliers and cus-
its own.) Most recently, IBM has announced a major            tomers) becomes blurred in network organizations built
strategic alliance with Apple Computer and a sub-             around long-term strategic partnerships, so do tradi-
stantial downsizing and restructuringinto a set of more       tional functional boundaries within the firm become
autonomous, independent businesses (Carey and Coy             less distinct.
1991). A key strategic issue for IBM management is                To consider the new role of marketing within the
to define the set of skills and resources that represent      evolving corporation, we must recognize that mar-
the distinctive competencies of IBM per se and a set          keting really operates at three distinct levels, reflect-
of technical and strategic challenges and opportunities       ing three levels of strategy. These can be defined as
that require the scope and scale of an IBM.                   the corporate, business or SBU, and functional or op-
    To sum up, there is a clear evolution away from           erating levels (Boyd and Walker 1990; Hofer and
arm's-length transactions and traditional hierarchical,       Schendel 1978). Much of the confusion over the years
bureaucratic forms of organization toward more flex-          about a definition of marketing and an understanding
ible types of partnerships, alliances, and networks.          of the marketing concept can be traced to a failure to
Within these new types of organizations, traditional          make these distinctions (Houston 1986; McGee and
ways of organizing the marketing function and of              Spiro 1988; McNamara 1972: Shapiro 1988). One of
thinking about the purpose of marketing activity must         the results of the movement toward new organiza-
be reexamined, with focus on long-term customer re-           tional forms will be to make these distinct roles more
lationships, partnerships, and strategic alliances.          explicit.
                                                                  In addition to the three levels of strategy, we can
                                                              identify three distinct dimensions of marketing-mar-
      Redefining Marketing's Role                            keting as culture, marketing as strategy, and market-
 From an academic or theoretical perspective, the rel-       ing as tactics. Though each marketing dimension is
 atively narrow conceptualization of marketing as a          found at each level of strategy, the emphasis accorded
 profit-maximization problem, focused on market              the separate dimensions of marketing varies with the
 transactions or a series of transactions, seems increas-    level of strategy and the level within the hierarchy of
 ingly out of touch with an emphasis on long-term cus-       the organization.
 tomer relationships and the formation and manage-                Marketing as culture, a basic set of values and be-
 ment of strategic alliances. The intellectual core of       liefs about the central importance of the customer that
 marketing management needs to be expanded beyond            guide the organization (as articulated by the marketing
 the conceptual framework of microeconomics in order         concept), is primarily the responsibility of the cor-
 to address more fully the set of organizational and         porate and SBU-level managers. Marketing as strat-
 strategic issues inherent in relationships and alliances.   egy is the emphasis at the SBU level, where the focus
 In focusing on relationships-though we are still talk-      is on market segmentation, targeting, and positioning
 ing about buying and selling, the fundamental activ-        in defining how the firm is to compete in its chosen
 ities of interest to marketing-we are now consider-         businesses. At the operating level, marketing man-
 ing phenomena that have traditionally been the subject      agers must focus on marketing tactics, the "4Ps" of
 of study by psychologists, organizational behavior-         product, price, promotion, and place/distribution, the
 ists, political economists, and sociologists. The focus     elements of the marketing mix. Each level of strategy,
 shifts from products and firms as units of analysis to      and each dimension of marketing, must be developed
people, organizations, and the social processes that         in the context of the preceding level. As we move
bind actors together in ongoing relationships.               down the levels of strategy, we move from strategy
      In the following sections, the changing role of        formulation to strategy implementation.
marketing within the organization is examined more
closely. Then suggestions are made for how the con-          At the Corporate Level: Market Structure
ceptual base of marketing must be expanded. Finally,         Analysis, Customer Orientation and Advocacy,
some implications for management action are dis-             and Positioning the Firm in the Value Chain
cussed and suggestions are made for the research areas       At the corporate level, the strategic problem is to de-
that should be given highest priority if marketing's         fine what business the company is in and to determine
knowledge and theory base is to address the most im-         the mission, scope, shape, and structure of the firm.
portant issues facing managers and organizations.            Increasingly, firms are paying specific attention to the
     In the new organization environment, the market-        question of firm scope and shape, as seen in the de-
ing function as we know it is undergoing radical trans-      cision to enter into strategic alliances. In other words,
formation and, in some cases, has disappeared alto-          the question of whether to depend on markets, long-
gether as a distinct management function at the              term relationships, strategic alliances, or integrated

10 / Journalof Marketing,
 multifunctionalhierarchy is seen to require specific       procurement responsibilities, recognizing the trans-
  managementanalysis andjudgment. The first orderof         ferability of these skills.
 business in the strategicpuzzle, then, is to determine
 the firm's position in the value chain: What will it       At the Business (SBU) Level: Market
 buy? What will it make? What will it sell? These de-       Segmentation and Targeting, Positioning the
 cisions require careful assessment of the firm's dis-      Product, and Deciding When and How to
  tinctive competencies (Prahaladand Hamel 1990) and        Partner
  a decision to focus on the things the firm does best.       At the business unit or SBU level, the key strategy
  As mentioned previously, this is the question raised        question is how to compete in the firm's chosen busi-
  theoretically in 1937 by Ronald Coase, whose work           nesses. This level of competitivestrategyis developed
 received the Nobel Prize in Economics in 1991: When          by managersin the individualbusiness units. Business
  Shouldthe firm depend on outside suppliersand when          strategyis based on a more detailed and careful anal-
  should it perform activities and functions internally?      ysis of customers and competitors and of the firm's
 Today's analysispermitsconsideration a much more
                                          of                  resources and skills for competing in specific market
 flexible set of organizationforms-relationships and          segments (Day and Wensley 1988). The key out-
 alliances of various kinds.                                  comes of this planning process are market segmen-
      At this level of strategy, the role of marketingis      tation, markettargeting, and positioning in the target
 threefold:(1) to assess marketattractivenessby ana-          segments. A trend of the last decade was to delegate
 lyzing customer needs and requirementsand compet-            more of the strategicplanningprocess from corporate
 itive offerings in the marketspotentially available to      headquartersout to the individual business units,
 the firm, and to assess its potentialcompetitive effec-     helpingto clarify the distinctionbetweencorporate   and
 tiveness, (2) to promotecustomerorientationby being         business-level strategy.These planningactivities were
 a strong advocate for the customer's point of view          historically associated with marketingstrategy at the
 versus that of other constituenciesin managementde-         corporatelevel in hierarchicalorganizations.Clearly,
 cision making, as called for by the marketingconcept        in network organizations, these responsibilities de-
 (Anderson1982), and (3) to develop the firm's overall       volve to the business unit level. In fact, at the SBU
 value proposition (as a reflection of its distinctive       level, the distinctionbetween marketingand strategic
 competence, in terms reflecting customer needs and          planning can become blurred; in some firms these
                                                             functions are likely to be performedby the same peo-
 wants) and to articulate it to the marketplace and
 throughoutthe organization.A major function of the          ple.
 statement of mission, distinctive competence, and                In network organizations, marketingmanagersat
 overall value proposition is to make clear what the         the business unit level also have a new responsibility
 firm will not do, as well as what it will do as stated      for deciding which marketingfunctions and activities
                                                             are to be purchased in the market, which are to be
 by corporate objectives and goals. At the corporate
 level, marketingmanagershave a critical role to play        performedby strategic partners,and which are to be
 as advocates, for the customerand for a set of values       performedinternally.This responsibility  applies to the
                                                             whole range of professional services (marketingre-
 and beliefs that put the customer first in the firm's
decision making, and to communicatethe value prop-           search, telemarketing, advertising, sales promotion,
osition as part of that culture throughoutthe organi-        package design, etc.) as well as to suppliers of raw
zation both internallyand in its multiple relationships      materials, components, and subassemblies and to re-
                                                             sellers. When is a vendor merely a vendor and when
and alliances.                                               is it a strategic partnercommitted to a mutually de-
     In network organizations, the marketingfunction
has a unique role that is different from its role in tra-   pendent long-termrelationshipin delivering solutions
                                                            to customerproblems?Similarquestionsmust be asked
ditional hierarchical structures-to help design and         about channel members. In a customer-oriented      com-
negotiate the strategic partnershipswith vendors and        pany, committed to the marketingconcept at the cor-
technology partnersthrough which the firm deploys           porate level, marketingmanagementat the business
its distinctive competence to serve particularmarket        unit level has a critical role in guiding the analysis
opportunities.Thus, marketingmay be involved in re-         that leads to answers to these questions. In all cases,
lationships with vendors at least as much as, if not        the answer will be that which enables the business to
more than, relationshipswith customersas partof the         deliver superiorvalue to customersin comparison     with
process of delivering superiorvalue to customers. Ne-       its competitors. It is the unique characteristicof net-
gotiating skills traditionallyassociated with managing      work organizationsthat these questions are asked and
major customer accounts may be equally valuable in          that the organization form-transaction versus rela-
managing vendor relationships. Some firms are al-           tionshipsversus hierarchy-remains flexible, depend-
ready moving managersbetween sales/marketing and            ing on what the market requires. In this sense, net-

                                                                                TheChanging of Marketing11
                                                                                          Role        /
work organizations are by definition "market-driven"          business affairs in the global marketplace and it re-
and represent a maturation of the marketing concept.          quires reconceptualization of the role of the marketing
                                                              function within the organization. In the traditionalview,
At the Operating Level: The Marketing Mix                     the firm was a distinct entity whose borders were de-
and Managing Customer and Reseller                            fined by an organization chart, which clearly delin-
Relationships                                                 eated the boundary between the firm and the external
At the operating or tactical level, we are back on the        environment. The external environment consisted of
more familiar ground of the marketing mix-deci-               markets, in which firms engaged in transactions with
sions about products, pricing, promotion, and distri-         vendors for the resources needed to conduct their af-
bution that implement the business strategy. This is          fairs and with customers who purchased their products
the level of strategy normally called "functional strat-      and services. The fundamental difference in the new
egy," and in our case "marketing strategy," as distinct       economic order is that this clear distinction between
from corporate and business strategies. It, too, is the      firms and markets, between the company and its ex-
responsibility of business-level managers, but at the         ternal environment, has disappeared (Badaracco 1991).
operating level it is delegated to functional specialists,    It is highly significant, for example, that the manage-
the marketing managers. This is where the tools of            ment of General Electric Company, the sixth largest
management science and the optimization paradigm              American firm in terms of sales and assets, and the
apply, as the business attempts to allocate its finan-        country's leading exporter after Boeing, has articu-
cial, human, and production resources to markets,             lated a vision of GE as "a boundary-less company"
customers, and products in the most productive fash-          for the 1990s. According to the 1990 GE Annual Re-
ion. But even here, marketing is taking on a new form,       port:
in both consumer goods and industrial products and               In a boundary-less company, suppliers aren't "out-
services companies, as market forces compel com-                 siders." They are drawn closer and become trusted
panies to do a more thorough job of responding to                partners in the total business process. Customers are
customer needs and developing long-term customer                 seen for what they are-the lifeblood of a company.
                                                                 Customers' vision of their needs and the company's
relationships.                                                   view become identical, and every effort of every man
    Regis McKenna, a popular marketing consultant                and woman in the company is focused on satisfying
and writer, has described well the new requirements              those needs.
for the marketing function (at both the SBU and op-              In a boundary-less company, internal functions begin
erating levels) in a recent Harvard Business Review              to blur. Engineering doesn't design a productand then
article (McKenna 1991, p. 148):                                  "hand if off" to manufacturing. They form a team,
                                                                 along with marketing and sales, finance, and the rest.
    The marketer must be the integrator, both inter-             Customer service? It's not somebody's job. It's
    nally-synthesizing     technological capability with         everybody's job.
    market needs-and externally-bringing the cus-
    tomer into the company as a participant in the de-           Clearly, evolving organization forms, emphasiz-
    velopment and adaptation of goods and services. It       ing flexibility in responding to changing customer
    is a fundamental shift in the role and purpose of mar-
                                                             needs, create new definitions of marketing's role and
    keting: from manipulation of the customer to genuine
    customer involvement; from telling and selling to        responsibilities. We have examined how these new re-
    communicating and sharing knowledge; from last-in-       sponsibilities differ at the corporate, business, and op-
    line function to corporate-credibility champion ....     erating levels. In each instance, the new emphasis on
    The relationships are the key, the basis of customer     long-term relationships and ongoing assessment of
    choice and company adaptation. After all, what is a      which functions and activities to purchase, to perform
    successful brand but a special relationship? And who
                                                             internally, or to engage in with a strategic partner cre-
    better than a company's marketing people to create,
                                                             ates new dimensions to the marketing task. These new
    sustain, and interpret the relationship between the
    company, its suppliers, and its customers?               responsibilities and tasks cannot be well understood
                                                             by using only the traditional profit-maximizing opti-
    For firms like Corning and IBM that are redefin-         mization framework that has been the core of mar-
ing themselves as networks of strategic alliances, the       keting theory for the past four decades.
key activities in the core organization have to do with
strategy, coordination, and relationship management.
These activities are essentially knowledge-based and               The Need for an Expanded
involve the management of information. CEOs man-                    Conceptual Framework
age "the central cores of worldwide webs of product          The marketer must manage three sets of relation-
and knowledge links" (Badaracco 1991, p. 148).               ships-with customers, with suppliers, and with re-
    To summarize, there is a clear evolution toward          sellers. In both industrial buyer-seller relationships and
entirely new forms of organization for conducting            in manufacturer-reseller relationships, we are talking

12 / Journalof Marketing,
about interorganizational relationships. In the micro-      lution, and group processes related to such activities
 economic paradigm, the units of analysis are prod-         as new productdevelopmentthat are partof managing
 ucts, prices, firms, and transactions.In the new world     marketingpartnerships.At the intersectionof the or-
 of marketingmanagement,we must also look at peo-           ganizationalbehavior, economics, and strategicman-
 ple, processes, and organizations.                         agement disciplines, there is an effort to develop a
     Marketing scholars face two mandates for the           resource-basedtheory of the firm, one that moves be-
  1990s. The first is to develop an expanded view of        yond traditionalemphases of the microeconomicpar-
 the marketingfunction within the firm, one that spe-       adigm. This integrativeapproachhas potential to ad-
 cifically addresses the role of marketingin firms that     dress the issues of developing distinctive competence
 go to marketthroughmultiple partnerships that is
                                              and           and defining the firm's position in the value chain,
 sensitive to the multiple levels of strategy within the    finding those sources of competitive advantage that
 organization.The second is to develop a base of em-        are knowledge-basedand "costly to copy" and there-
 piricalresearchthat broadensour understanding the of       fore the raison d'e^tre the firm (Conner 1991; Grant
 forces leading to the development of long-term cus-        1991). Customerknowledge and a cultureof customer
 tomer relationships, strategic partnershipswith ven-       orientation are two importantexamples of such re-
 dors, alliances for the codevelopmentof technologies,      sources.
 and the issues involved in creating, managing, and             The focus of the political economy and organi-
 dissolving these partnerships  over time. Whereas the      zational behavior models seems to be more appropri-
 historicalmarketingmanagementmodel has depended            ate for a strategic view of the marketing function as
 most heavily on economics, statistics, mathematics,         distinct from the sales or demand stimulation func-
 psychology, and social psychology,the broadened    view     tion, for which the microeconomic paradigmis still
 of the marketingfunctioncalls for work that spans the       more fitting. Whereas the microeconomicmodel cen-
 disciplines of political economy, organizationalpsy-        ters on consumersand transactions,the political econ-
 chology, legal analysis, political science (govern-         omy and organizational behavior models are more
 ment), and culturalanthropology.                            useful in analyzing relationshipswith industrialcus-
     In contrastto the microeconomicparadigmand its          tomers, suppliers,joint venturepartners,resellers,and
 emphasis on prices, the political economy paradigm          other stakeholders(Anderson 1982). It should help us
 is bettersuited to understanding  these firm-to-firmre-     to understand  betterthe changingrole of marketingin
 lationships. This is the argumentfirst presentedby Jo-      the corporation.The conceptual foundationsof mar-
 han Ardt in articles published in 1979, 1981, and           keting must be enriched, blending economics, polit-
 1983. The political economy paradigmlooks at mar-           ical science, and organizationalbehavior as well as
 keting organizations as social systems-"dynamic,            appropriateframeworks from legal analysis, sociol-
 adapting, and internallydifferentiated.Importantdi-         ogy, anthropology,and social psychology to enhance
mensions of marketing behavior are authority and             our understanding the processes of negotiation, co-
control patterns, distributionsof power, conflict and        ordination,and cooperationthat define marketingre-
conflict management,and externaland internaldeter-           lationships. Just as we know that most marketing
minantsof institutionalchange" (Arndt 1983, p. 52).          transactionstake place in the context of longer term
Political economy has obvious potentialto help us un-        relationships, so we need models that focus on the
derstandthe role of marketingin managing relation-           relationshipsthemselves, not just on the market ex-
ships with other organizationsand in developing sup-        changes thatare the subjectof the microeconomicpar-
port within the firm for activities necessaryto respond     adigm.
to the changing marketplace.The political economy                Theory developmentmust be accompaniedby ag-
model has recently been applied most aggressively in        gressive programs of empirical research for under-
the study of channel conflict (Dwyer, Schurr,and Oh         standing strategic marketingrelationshipsmore com-
1987; Frazier 1983), but it offers solid potential for                         of
                                                            pletely. Programs clinical and surveyresearchshould
better understanding all types of relationshipsand
                       of                                   be guided by strong theoretical frameworksfrom al-
alliancesin marketing   (Day and Klein 1987). It is cited   lied social science disciplines. Top priorityshould be
here as evidence of the availabilityof alternativecon-      given to analysis of the forces and factors that cause
ceptualizationsof the functions of marketingto move         firms to move along the continuumfrom transactions
the field beyond its historicallynarrowfocus on trans-      to long-term relationshipsto strategic alliances and,
actions and prices based on the traditionalmicroeco-        perhaps, back again.
nomic paradigm.                                                  Some studies have shown modest success rates for
    The field of organizationalbehavior also offers         strategic alliances, especially those that involve part-
many opportunities for productive partnershipsfor           ners of differentnationalitiesand cultures(Bleeke and
marketingscholars who want to addresssuch areas as          Ernst 1991; Harrigan1986). Marketersin collabora-
negotiation, coalitions, team-building, conflict reso-      tion with scholars in the field of culturalanthropology

                                                                                TheChanging of Marketing
                                                                                         Role         / 13
could productivelyturntheirattentionto analyzingthe        ical point: in network organizations,it is the ongoing
differences in values, beliefs, decision making, in-       relationshipwith a set of customersthatrepresentsthe
formation processing, and teamwork, among other            most importantbusiness asset. Marketingas a distinct
 variables, that must be managedto achieve success in      management function will be responsible for being
transnational   partnerships(Montgomery 1991; Mont-        expert on the customer and keeping the rest of the
gomery and Weiss 1991; Webster and Deshpande               network organization informed about the customer.
 1990).                                                    At the corporateand business unit levels, marketing
     More careful analysis is needed of the forces re-     may merge with strategic planning or, more gener-
 shaping the marketingfunction at both the corporate       ally, the strategy development function, with shared
 and the SBU levels. In collaborationwith organiza-        responsibility for informationmanagement, environ-
 tional behaviorresearchers,marketersneed to get into      mental scanning, and coordinationof the networkac-
companies and examine the multiple new forms mar-          tivities.
keting is taking. What is the relationship between              There has been a shift from a transactionsto a re-
 marketingand the strategic planning function? How          lationship focus. Customersbecome partnersand the
do marketing and purchasing work together in de-            firm must make long-termcommitmentsto maintain-
signing and managing strategic vendor partnerships?         ing those relationshipswith quality, service, and in-
What issues arise in blending these functions?              novation (Anderson and Narus 1991). Given the in-
     In consumer goods marketing,researchis needed          creasedimportance long-term,strategicrelationships
to understandthe factors that lead consumers to seek        with both customers and vendors, organizationsmust
out and value ongoing relationshipswith brands,man-         place increasedemphasis on relationshipmanagement
ufacturers, and resellers of various kinds. What are        skills. As these skills reside in people, ratherthan or-
the factors that consumers find attractivein dealing        ganization structuresor roles or tasks, key marketing
with directmarketers?   How can marketers develop and       personnel who have these skills will become increas-
managethese long-termrelationships,   given the power       ingly valuableas businessassets (Thorelli1986). These
of databases and interactive marketing?What is the          skills may define the core competence of some or-
marketing potential inherent in such new develop-           ganizations as links between their vendors and cus-
ments as the Prodigy networkand other extensions of         tomers in the value chain. This common focus on cus-
informationtechnology into the household?How will           tomer value and relationshipmanagementmay result
customer expectations about their relationships with        in much stronger coordination of the procurement,
marketersbe shaped by these new capabilities?               sales, and marketingfunctions in a manneranalogous
    A successful programof researchwill develop and         to the merchandisingfunction in retailingfirms. Such
refine models of the marketingfunction, incorporat-        coordinationwould be consistent with the two major
ing concepts and propositions from multiple behav-         trends of elimination of boundariesbetween manage-
ioral and organizationalscience disciplines. The net        ment functions within organizationsand a blurringof
result will be a much richer understandingof those         the boundaries between the firm and its market en-
activities we call marketingand have defined as a dis-     vironment. In a world of strategic partnerships,it is
tinct field of inquiry. Marketingis more than an eco-      not uncommonfor a partnerto be simultaneouslycus-
nomic optimizationproblem;it is a centralcomponent         tomer, competitor, and vendor, as well as partner.
of the guidance system of the firm and we need to          Consequently, it is difficult to keep the traditional
understandits functioning in much richer detail, es-       management functions distinct in dealing with stra-
pecially within the complicated structuresof network       tegic partners.
organizations.                                                  Marketingcan no longer be the sole responsibility
                                                           of a few specialists. Rather,everyone in the firm must
                                                           be charged with responsibilityfor understanding      cus-
                  Conclusions                              tomers and contributingto developing and delivering
Marketingis responsible for more than the sale, and        value for them (Webster 1988). It must be part of
its responsibilitiesdiffer dependingon the level of or-    everyone's job description and part of the organiza-
ganizationand strategy.It is the managementfunction        tion culture. Organization   culture, focused on the cus-
responsible for making sure that every aspect of the       tomer, will be increasinglyseen as a key strategicre-
business is focused on delivering superior value to        sourcedefining the networkorganization'suniqueness
customers in the competitive marketplace.The busi-         and coordinating its several parts toward common
ness is increasinglylikely to be a networkof strategic     mission and objectives (Conner 1991; Fiol 1991).
partnershipsamong designers, technology providers,              Firms that are unable to achieve this focus on the
manufacturers,distributors,and informationspecial-         customer will either disappearor become highly spe-
ists. The business will be defined by its customers,       cialized players, taking strategic direction from oth-
not its productsor factories or offices. This is a crit-   ers, in a network organization. Customer focus may

14 / Journal Marketing,
           of        October
require increasingly large investments in information             data-processing systems that afford seamless integra-
and information technology, giving some advantage                 tion of manufacturing, distribution, and marketing ac-
to firms large enough to make pre-emptive invest-                 tivities throughout the network. Consumer marketers
ments in these areas.                                             continue to shift resources toward the trade and away
    Impersonal, mass communications, especially me-               from the consumer per se, and traditional selling func-
dia advertising, are becoming less effective, whereas             tions for the field sales organization are evolving
personal, targeted, special purpose communications                toward a broader definition of responsibilities for
have become more important. This change is reflected              relationship management, assisted by interactive
in the decline of the traditional advertising business-           information management capability.
                                                                       The implementation of market-driven strategy will
independent advertising agencies developing ads and
                                                                  require skills in designing, developing, managing, and
placing them in broadcast and print media. In their
                                                                  controlling strategic alliances with partners of all kinds,
place have emerged global communication compa-                    and keeping them all focused on the ever-changing
nies, international networks of specialists and inte-             customer in the global marketplace. The core firm will
grated marketing communications mega-agencies                     be defined by its end-use markets and its knowledge
working with their multinational clients on specific              base, as well as its technical competence, not by its
projects.                                                         factories and its office buildings. Customer focus,
    Distributors must be treated as strategic partners            market segmentation, targeting, and positioning, as-
(Anderson and Narus 1990), linked to the manufac-                 sisted by information technology, will be the flexible
turing firm with sophisticated telecommunications and             bonds that hold the whole thing together.

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