The Marketing Implications of
Corporate and Business
Strategies
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What Is Marketing’s Role in Formulating
and Implementing Strategies?
 The primary strategic responsibility of any manager is
to look outward continuously to keep the firm or
business in step with changes in the environment
 Marketing managers are primary participants and
contributors to the planning process at the business
and corporate level
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Market-Oriented Management
 Marketing concept: Holds that the planning and
coordination of all company activities around the
primary goal of satisfying customer needs is the most
effective means to attain and sustain a competitive
advantage and achieve company objectives over time
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Exhibit 2.2 - Guidelines for MarketOriented Management
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Does Being Market-Oriented Pay?
 An organization’s success over time hinges on its
ability to provide benefits of value to its customers and
to do that better than its competitors
 Organizations should be able to enhance, accelerate,
and reduce the volatility and vulnerability of their
cash flows:
 By paying careful attention to customer needs and
competitive threats
 By focusing activities across all functional departments
on meeting those needs and threats effectively
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Factors That Mediate Marketing’s
Strategic Role
 Competitive conditions may enable a company to be
successful in the short run without being particularly
sensitive to customer desires
 Different levels of economic development across
industries or countries may favor different business
philosophies
 Firms can suffer from strategic inertia
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Exhibit 2.3 - Differences between ProductionOriented and Market-Oriented Organizations
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Three Levels of Strategy: Similar
Components, but Different Issues
 Strategy: A fundamental pattern of present and
planned objectives, resource deployments, and
interactions of an organization with markets,
competitors, and other environmental factors
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Three Levels of Strategy: Similar
Components, but Different Issues
 The components of strategy
 Scope
 Goals and objectives
 Resource deployments
 Identification of a sustainable competitive advantage
 Synergy
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Three Levels of Strategy: Similar
Components, but Different Issues
 The hierarchy of strategies
 Corporate strategy
 Business-level strategy
 Functional strategies
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Exhibit 2.5 - Key Components of Corporate,
Business, and Marketing Strategies
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Exhibit 2.5 - Key Components of Corporate,
Business, and Marketing Strategies
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Corporate Scope—Defining the Firm’s
Mission
 A good mission statement guides an organization’s
managers as to which market opportunities to pursue
and which fall outside the firm’s strategic domain
 Market influences on the corporate mission
 Criteria for defining the corporate mission
 Social values and ethical principles

Ethics: Concerned with the development of moral standards
by which actions and situations can be judged
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Exhibit 2.6 - Characteristics of Effective
Corporate Mission Statements
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Corporate Objectives
 A performance dimension or attribute sought
 A measure or index for evaluating progress
 A target or hurdle level to be achieved
 A time frame within which the target is to be
accomplished
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Exhibit 2.8 - Common Performance Criteria and Measures
That Specify Corporate, Business-Unit, and Marketing
Objectives
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Exhibit 2.8 - Common Performance Criteria and Measures
That Specify Corporate, Business-Unit, and Marketing
Objectives
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Corporate Objectives
 The marketing implications of corporate objectives:
Most organizations pursue multiple objectives
 Trying to achieve many objectives at once leads to
conflicts and trade-offs
 Managers can reconcile conflicting goals by prioritizing
them
 Another approach is to state one of the conflicting goals
as a constraint or hurdle
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Corporate Sources of Competitive
Advantage
 A sustainable competitive advantage at the corporate
level is based on company resources - resources that
other firms do not have, that take a long time to
develop, and that are hard to acquire
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Corporate Growth Strategies
 A firm can go in two major directions in seeking future
growth
 Expansion of its current businesses and activities
 Diversification into new businesses, either through
internal business development or acquisition
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Exhibit 2.9 - Alternative Corporate
Growth Strategies
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Corporate Growth Strategies
 Expansion by increasing penetration of current
product-markets
 Expansion by developing new products for current
customers
 Expansion by selling existing products to new
segments or countries
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Corporate Growth Strategies
 Expansion by diversifying:
 Vertical integration


Forward vertical integration occurs when a firm moves
downstream in terms of the product flow
Backward integration occurs when a firm moves upstream by
acquiring a supplier
 Related (or concentric) diversification
 Unrelated (or conglomerate) diversification
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Allocating Corporate Resources
 To exploit the advantages of diversification
 Corporate managers must make intelligent decisions
about how to allocate financial and human resources
across the firm’s various businesses and productmarkets
 Two sets of analytical tools have proven useful in
making such decisions
 Portfolio models
 Value-based planning
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Portfolio Models
 Enable managers to classify and review their current
and prospective businesses by viewing them as
portfolios of investment opportunities and then
evaluating each business’s competitive strength and
the attractiveness of the markets it serves
 The Boston Consulting Group’s (BCG) growth-share
matrix
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Exhibit 2.10 - BCG’s Market Growth
Relative Share Matrix
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Exhibit 2.11 - Cash Flows across
Businesses in The BCG Portfolio Model
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Limitations of the Growth-Share
Matrix
 Market growth rate is an inadequate descriptor of
overall industry attractiveness
 Relative market share is inadequate as a description of
overall competitive strength
 The outcomes are highly sensitive to variations in how
growth and share are measured
 It provides little guidance on how best to implement
investment strategies for each business
 It assumes that all business units are independent of
one another except for the flow of cash
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Value-Based Planning
 A resource allocation tool that attempts to address
such questions by assessing the shareholder value a
given strategy is likely to create
 Economic value added: The amount of return a
strategy or operating program generates in excess of the
cost of capital
 Discounted cash flow model
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Exhibit 2.12 - Factors Affecting the
Creation of Shareholder Value
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Value-Based Planning
 Some limitations of value-based planning
 It is not a substitute for strategic planning
 Good forecasts that are critical to the validity of valuebased planning are difficult to make

There are natural human tendencies to overvalue the financial
projections associated with some strategy alternatives and to
undervalue others
 Value-based planning can only evaluate alternatives, but
it cannot create them
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Sources of Synergy
 Knowledge-based synergies
 Performance enhancement through transfer of
competencies, knowledge, or customer-related
intangibles from other units within the firm
 Corporate identity and the corporate brand
 Corporate identity flows from the communications,
impressions, and personality projected by an
organization
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The Marketing Implications of
Business-unit Strategy Decisions
 Strategic business units: Components of a firm
engaged in multiple industries or businesses
 Steps in developing business-level strategies
 Deciding how to divide into SBUs
 Managers must recommend:




The unit’s objectives
The scope of its target customers and offerings
Which broad competitive strategy to pursue
How resources should be allocated
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How Should Strategic Business Units
Be Designed?
 Characteristics of strategic business units
 A homogeneous set of markets to serve with a limited
number of related technologies
 A unique set of product-markets
 Control over those factors necessary for successful
performance
 Responsibility for their own profitability
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How Should Strategic Business Units
Be Designed?
 Dimensions that define the scope and mission of the
entire corporation also define individual SBUs
 Technical compatibility
 Similarity in the customer needs
 Similarity in the personal characteristics
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The Business Unit’s Objectives
 Corporate objectives typically broken down into
subobjectives for each SBU
 Breaking down an SBU’s objectives into
subobjectives for each of its productmarket entries
is often a major part of developing business-level
strategy
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The Business Unit’s Competitive
Strategy
 Decisions about an SBU’s scope
 Allocating resources within the business unit
 Gaining a competitive advantage
 Marketing resources and competitive advantage
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Exhibit 2.13 - Three Competitive Strategies and the Traits and
Competencies of Businesses That Implement Them
Effectively
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