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Corporate Strategy Decisions and Corporate Strategy Decisions and Their Marketing ImplicationTheir Marketing Implication
Chapter 2Chapter 2
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Ryanair : Low Prices, High Profits
Competitive Strategy1.The firm owns rather than leases its airplanes2.Concentrates its flight to and from regional airports
The expenses of customer comfort and convenience1.Customer have to find their way to and from small airport far from the big cities.2.They have to carry their own bags3.No meals, drinks and other services4.Not much room to strecth out and relax
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Ryanair : Low Prices, High Profits
The firm’s growth objectives was to double in size to over 84 million passengers by 2012.
Some expert doubt that the segment of travelers willing to sacrifice comfort and convenience for low fares is sufficiently large
Some customer may see those low fares as a low value.
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Corporate Strategy Components
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Corporate Scope – Defining The Firm’s Mission
A clearly stated mission can help instill a shared sense of direction, relevance and achievement among employees, as well as a positive image of the firm among customers, investors, and other stakeholders.
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Corporate Scope – Defining The Firm’s Mission
To provide a useful sense of direction, a corporate mission statement should clearly define the organization’s strategic scope :
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PepsiCo Mission
Old mission : Focus on Marketing superior quality food and beverage product for households and consumers dining out.
New mission : Focus on response to a changing global competitive environment, PepsiCo narrowed its scope to focus primarily on package foods and beverages distributed through supermarket and convenience store channels.
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PepsiCo Mission
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Market Influences on the Corporate Missionorganization mission should :
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Criteria for Defining the Corporate Missionex : Penn Central Misssion
Broad Specific
FunctionalBased on customer needs
PhysicalBased on existing product or technology
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Social Values and Ethical Principles
Sustainibility : meeting humanity’s needs without harming future generations. CEO Patrick Cescau : “You can’t ignore the impact your company has on the community and the environment.” In the future, it will be the only way to do business”
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Social Values and Ethical Principles
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Social Values and Ethical Principles
Thus, crafting mission statements that specify explicit social values, goals and programs is becoming a more important part of corporate strategic planning.
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Social Values and Ethical Principles
Ethics is concerned with the development of moral standards by which actions and situations can be judged.
Our product is far superior to Brand X
(white lies)
Actions that may result potential harm of some kind to an individual, group and organization.Ethical standards attempt to anticipate and avoid social problems
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Why Are Ethics Important?The Marketing Implications of Ethical Standards
Unethical practises can damage the trust between a firm and its suppliers or customers, disrupting the development of long-term exchange relationships and resulting in the likely loss of sales and profits over time.
• A survey of 59 top marketing and sales executive attempts to influence a potential customer by giving gifts of kickbacks.
• 2/3 of the executives considered bribes and unethical• 88% felt that by giving gift or kickback might put their firms at a competitive
adavantage
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Corporate Objectives
“For one who has no objective, nothing is relevant” ~ Confucius
Corporate objectives must be spesific and measurable :1. A performance dimension or attribute sought2. A measure or index for evaluating progress3. A target level to be achieved4. A time frame within which the target is to be
accomplished
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Common Performance Criteria and Measures That Specify Corporate, Business-Unit, and Marketing Objectives
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Common Performance Criteria and Measures That Specify Corporate, Business-Unit, and Marketing Objectives
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Enhancing Shareholder Value : The Ultimate Objective
Organization’s ultimate objective should be to increase its shareholders’ economic returns. Management must balance the interest of various corporate constitucies.
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Enhancing Shareholder Value : The Ultimate Objective
People willingly invest in a firm only when they expect a better return on their funds.
Management’s primary objective should be to pursue capital investments, acquisitions, and business strategies that will produce sufficient future cash flow to return positive value to shareholders.
Economic value added or market value added (MVA)Combining its debt and the market value of its stock, then substracting the capital that has been invested in the
company. Show how much wealth the company has created.
Economic value added or market value added (MVA)Combining its debt and the market value of its stock, then substracting the capital that has been invested in the
company. Show how much wealth the company has created.
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The Marketing Implications of Corporate Objectives
Most organizations pursue multiple objectives. Study of the stated objectives of 82 large corporations.• 89% had explicit profitability objectives :
• 82% reported growth objective• 66% had specific market-share goals• 60% mentioned social responsibility, employee walfare and customer
service objectives• 54% of the companies had R&D / new product development goals
Break them down into subobjectives, reconcile conflicting goals by prioritizing them.
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The Marketing Implications of Corporate Objectives
Two marketing managers responsible for different products may face very different goals and expectations even though they work for the same organizations
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The Marketing Implications of Corporate Objectives
Customer-focused-objectivesSuch as satisfaction, retention, and loyalty are being given greater importance
Customer-focused-objectivesSuch as satisfaction, retention, and loyalty are being given greater importance
Given the huge profit implications of a customer’s lifetime value.Given the huge profit implications of a customer’s lifetime value.
Satiesfied, loyal customer of one product can be leveraged to provide synergies for other company product or services.Satiesfied, loyal customer of one product can be leveraged to provide synergies for other company product or services.
Customer satisfaction and loyalty are influenced by factors other than the product itself or the activities of the marketing department.Customer satisfaction and loyalty are influenced by factors other than the product itself or the activities of the marketing department.
A study found : 80% customers’ satisfaction scores were accounted for by nonproduct factors, such as ordering processing, delivery, and postsale servicesA study found : 80% customers’ satisfaction scores were accounted for by nonproduct factors, such as ordering processing, delivery, and postsale services
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Gaining A Competitive AdvantageThere are many ways a company might attempt to gain a competitive advantage over
competitors within the scope that other firm do not have. But, the fact that a company possesses resources that its competitors do not have is not sufficient to guarantee superior perfromance.
The trick is to convert one or more of the company's unique resources into something of value to customers
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Corporate Growth StrategiesA firm can go in two major directions in seeking future growth: expansion of its current
businesses and activities of diversification into new businesses.
Current products New products
Current markets
New markets
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Expansion by Increasing Penetration of Current Product-Markets
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Expansion by Developing New Products for Current Customers
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Expansion by Selling Existing Products to New Segments or Countries
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Expansion by Diversifying
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Expansion by Diversifying through Organizational Relationship or Networks
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Portfolio ModelsBCG’s Market Growth Relative Share Matrix
Relative market share
Stars Question marks
Cash cows Dogs
Market growth rate (in constant dollar)
High
Low1 0,110
10%
6655
99
77
1144 22
8813131010
1211
It analyzes the impact of investing resources in different business on the corporation’s future earnings and cashflow. Circle = representing uni’s sales volume
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Cashflow across Business in the BCG Porfolio Model
Broad Specific
Relative market share
Stars Question marks
Cash cows Dogs
Cashflows
Gro
wth
ra
te (
ca
sh
us
e)
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Alternative Portfolio Models
11 22 33
22 33 33
11 11 22
High Medium Low
High
Medium
Low
Industry attractiveness
Bu
sin
ess’
s co
mp
etit
ive
po
siti
on
1. Invest/grow2. Selective investment/maintain position3. Harvest/divest
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Value-Based PlanningDiscounted Cash Flow Model (Alfred Rappaport and The Alcar Group, Inc.)
Crating shareholder
value
Crating shareholder
value
Shareholder return•Dividen•Capital gains
Shareholder return•Dividen•Capital gains
Cashflow from operations
Cashflow from operations Discount rateDiscount rate DebtDebt
Value growth duration
Value growth duration
• Sales growth• Operating
Profit margin• Income tax rate
• Sales growth• Operating
Profit margin• Income tax rate
• Working capital investment
• Fixed capital investment
• Working capital investment
• Fixed capital investment
• Cost of capital• Cost of capital
OperatingOperating InvestmentInvestment FinancingFinancing
Corporate Objective
Valuation components
Value drivers
Management decisions
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Knowledge-Based Synergies
The performance of one business can be enhanced by the transfer of competencies, knowledge, or customer-related intangibles – such as brand-name recognition and reputation – from other units within the firm.
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Corporate Identity and the Corporate Brand as a Source of Synergy
Corprate identity can help a firm stand out from its competitors and give it a sustainable advantage in the market.
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Corporate Branding StrategyWhen Does a Strong Corporate Brand Make Sense
Essentially, a firm might pursue on of three options concerning the corporate brand :
Study based on interviews with managers in 11 Fortune 500 Companies :
A firm is more likely to emphasize a strong corporate brand that might be leveraged to encourage customers to buy product from the firm.1. The corporate brand1. The corporate brand
2. A dual branding strategy2. A dual branding strategy
3. A unique brand and identity3. A unique brand and identity
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Synergy from Shared ResourcesInherent in sharing operational resources, facilities, and functions across business units.
Produce product in a common plant or use a single salesforce to contact common customers.
Frito-Lay attempted to enter the packaged cookie market with its Grandma’s line of soft cookies.
Ex : 1. An oil company acquisitions an insurance company2. An food packaging company acquisitions an fast-food company
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Thanks For ListeningThanks For Listening21 Februari21 Februari 201 20133