Part 1 1.1Define Market Driven Strategy
Market- Driven Strategy (MDS) is very essential in formulating business strategy. This approach used is always market-oriented and customer-oriented. Next, understanding what the customers do, understanding the customer‘s behaviors and measuring the interaction among customers. Therefore, the main point is always orienting to the market and customers in every business activity performed. By focusing on the consumer first, companies can gain great advantages that aid in the marketing and sales of their products or services. Developing a market-driven strategy involves aligning internal operations as well as external communications in order to affect every aspect of customer value, and therefore is not a short-term solution. However, when done correctly, a market-driven strategy can provide excellent results and even reduce long-term costs. Focus on benefits, not features. Features are relative to your product or service while benefits relate directly to your customers‘ customers‘ experience. Think of cell phones as an example. The advertisers do not say the phone has a 1540 mAh capacity battery (feature), they say you get up to 480 minutes of talk time (benefit). 1.2.Characteristics of market-driven companies
1. Strategically selecting the market(s) and segments you serve 2. Understanding the problems, challenges and opportunities prospective buyers in your market are dealing with 3. Knowing the trends and future issues prospective buyers in your target market(s) will face in the next 1-3 years 4. Listening to and understanding what your customers are telling you about what‘s really going on in their business, not just what new n ew feature/function enhancements they want 5. Using reliable fact-based research data and industry/market analysis amongst several inputs for making strategic go-to-market decisions 6. Making strategic decisions across all areas of the company for which market(s) you‘re going to serve and the key value propositions your company drives to market 1|Page
7. Always using the ‗outside-in‘ per spective 8. Your solutions genuinely create value for your customers 9. Focusing on where and how your company can excel in selected markets rather than just having a presence in many markets 10. Developing a corporate mindset of being a trusted advisor for customers and prospects rather than just another vendor of stuff and/or services 11. All functional areas in the company are aligned around the same go-to-market strategy 12. Understanding and responding to the buyer‘s process while sales retain control of moving the buyer to a decision 13. Developing long-term customers who want to do business with your company 14. Using a balanced scorecard approach to measure marketing performance across multiple dimensions 15. Marketing is the strategic leader in the company a nd central to the success of the business 1.3.Differences Between Market-driving and Market-driven Companies
Market-driving companies rule the future – they push the envelope of possibility and consistently surprise customers by introducing unique value in exceptional brand new products and services. Market driven companies are doomed to fall increasingly further behind as they react to customer needs that will surely change by the time they deliver the ultimately out of date product. A Current Example
Consider Apple vs. Microsoft. Apple is a market-driving company anticipating trends and taking risk to consistently amaze and surprise customers with delivered value. Microsoft is a marketdriven company missing trends and failing to take risk which forces it to react after dramatic market shifts have already occurred. Invariably, one can predict the fate of Zune vs. iTunes, or understand the relative adoption of Windows mobile vs. the iPhone. It‘s not hard to see which approach is also more cost-effective.
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1.4.Approach Makes Them Different
Market-driven companies perform exhaustive market research to fully understand an existing customer need. They perform multiple validation cycles with heavy documentation of requirements and written detailed specifications of features and benefits. A serially laborious process is then followed through multiple cycles of develop-and-test until a differentiated product or service is identified. For some, static well-defined market segments, perhaps this approach can still work. Procter and Gamble for many products, is a good example of being driven by these static segments. Market-driving companies focus on a vision for the future, unhampered by traditional thinking and industry norms for product development. Market-driving companies are poised to make discontinuous leaps in innovation in terms of customer value (not just incremental capability and technology). These companies also have a mission to build unique value networks and engage in a bigger business ecosystem through technology and business model innovation. Apple‘s iPod with iTunes is a good example of a value network in a business ecosystem. 1.5.Nine(9) Ways to Differentiate
In pondering what it takes, or how one can observe and more deeply characterize one type of company from another, let‘s look at these key differentiators.
Market-driving
Market-driven
1. Disruptive
1.Reactive
1. Innovative
2.Incremental
2. Dynamic
3.Static
4.Clear
4.Confused
5.Decisive
5.Unsure
6.Competitive
6.Tentative
7.Agile
7.Rigid
8.Values
8.Feature
9.Creative
9.Insignificant 3|Page
Market Driven Vs Marketing Driving
To get a better understanding of these criteria, let‘s explore them in more detail in the comparisons that follow.
Market-driving companies are disruptive to markets surprising customers with value. Market-driven companies are reactive to clear shifts that are late and underwhelming.
Market-driving companies are discontinuously innovative introducing radical efficiency. Market-driven companies are incremental in adding features to automate existing methods.
Market-driving companies bring creative solutions to difficult customer challenges. Market-driven companies bring insignificant responses leaving customer questions unanswered.
Market-driving companies create massive value to delight customers.
Market-driven companies add expected features that fall short of customer expectation set by competition.
Market-driving companies are agile in their ability to pivot both vision and strategy. Market-driven companies are rigid, and unable to modify past decisions even for coursecorrecting good reason. 4|Page
Market-driving companies are recognized as competitive by early activity. Market-driven companies are perceived as tentative, by their late reactivity.
Market-driving companies are decisive in quantifying and taking measured risk. Marketdriven companies are unsure in researching and over-analyzing seemingly irrelevant risk.
Market-driving companies are clear in articulating new business model value to customers in simple terms. Market-driven companies are confused in their positioning and value messages to the market.
Market-driving companies are dynamic in regularly creating new and growing markets. Market-driven companies are static and can only serve existing often declining markets.
PART 2 2.1. How to become Market Driven 2.2.Becoming Market Oriented
A market orientation is a business perspective that placed the customer as the center of a company‘s total operations. This concepts is basically holds the same idea as the ³marketingconcept´. However, for a business to achieve market orientation, it involves the use of superior organizational skills in understanding and satisfying customers. A
market-oriented
organization
always
gathers
information about its customers, competitors, and the markets; analyze it from a total business perspective, decides how to deliver superior customer value, and finally takes actions to provide value to customers. (Characteristics of Market Orientation)
Customer focus
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Customer focus basically stands for understand the customer needs, wants, and responses towards the products delivered. The market-oriented organization understands customers‘ preferences and requirements and effectively deploys the skills and resources of the entire organization to satisfy customers. Becoming customer oriented requires finding out what values buyers want to help them satisfy their purchasing objectives. Buyers‘ decisions are based on the attributes and features of the product that offer the best value for the buyers use situation. The buyers experience in using the product is compared to his or her expectations to determine customer satisfaction. Example: Dell Computers direct contact with its buyers is an important information source for guiding actions to provide superior customer value. The direct, built-to-order process used by Dell avoids the stocking of computers that may not contain state-of-the-art technology. Also, each computer contains the specific features requested by the buyer. Competitors of Dell that market their computers through distributors and retailers have higher costs because price reductions in purchased components (e.g., chips) cannot be utilized for computers in inventory.
Competitor intelligence
A market-oriented organization recognizes the importance of understanding its competition as well as the customer. Failure to identify and respond to competitive threats can create serious consequences for a company. Example: Western Union did not define its competitive area as telecommunications, concentrating instead on telegraph services, and eventually the 100-year-old company was outflanked by fax technology. Had Western Union been market oriented, its management might have better understood the changes taking place, recognized the competitive threat, and developed strategies to counter that threat.
Cross-Functional Coordination: Market-oriented companies are effective in getting all
business functions to work together to provide superior customer value. These 6|Page
organizations are successful in removing the walls between business functions-marketing talks with manufacturing and finance. Cross-functional teamwork guides the entire organization toward providing superior customer value.
Distinctive Capabilities
Identifying an organisation‘s distinctive capabilities is a crucial part of market-driven strategy. Capabilities can be defined as ―complex bundles of skills and accumulated knowledge, exercised through organizational processes, that enable firms to coordinate activities and make use of their assets‖ The Major components of distinctive capabilities are: 1. Organizational Processes 2. Skills and Accumulated Knowledge 3.
Coordination of Activities
4.
Assets
For example: Zara‘s new- product development process, which illustrates the retailer‘s distinctive capabilities, where the new-product development applies the skills of their design team and benefits from the team‘s accumulated knowledge; the coordination of activities across business functions during new-product development is facilitated by information and technology (the product designs take into account the manufacturing requirements as well as offering high fashion products). The asset is the strong brand image possessed by Zara which helps the launching of the new product. 2.3. Creating Value for Customers
Customer Value is ―the outcome of a process that begins with a business strategy anchored in a deep understanding of customer needs‖ The creation of customer value is an important challenge for the managers, since it is an ongoing competitive challenge in maintaining successful marketdriven strategies Being able to overcome these challenge, the organization is believed to be able to successfully deliver the customer value; hence fulfilled their goals. Superior customer value occurs when the buyer has a very positive use experience compared to his/her expectations as well as the value offerings of competitors. 7|Page
Furthermore, it was stated that the values could be product differentiation, lower prices than competing brands, or a combination of lower cost and differentiation. Through the deep understanding of this concept, ability to implement and manage all the elements, as well as the constant management and updates of the strategy, it is believed that the organization will able to achieve it goals. 2.4.Market – Driven compa nies focuses on Six C’s
When developing marketing and communications plans and tactics, applying the "Six C's" of market driven companies is a key to the success of programs for all business to business companies. Advertising, public relations, email marketing, branding strategy, trade shows, and internet marketing strategies will be more effective if the needs of the customer and market segment are researched and understood, both by the business and the agency. This knowledge drives the creation and implementation of the most successful marketing programs. There are significant contrasts between a market driven company and an inside out approach to business, much as there are contrasts between an agency that is market driven (external focus) or creatively driven (internal focus). Many business and agency managers are internally focused and could achieve a better understanding of their customers and markets by implementing the "Six C's" approach. 1.Customer Segment:
To be market driven, thinking and actions begin with an understanding of customer market segments, their requirements, and unmet and emerging needs. 2.Competition:
Market driven B2B companies study the products, services and performance of their competitors to determine their strengths and weaknesses 3.Capabilities: Market driven organizations actively evaluate their technologies and capabilities
in light of changing market conditions. They quickly adapt (before their competitors) products and services to meet the needs of the target market segments.
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4.Cost: To be market driven companies must constantly strive to improve costs and efficiency
and increase value to their customers and shareholders 5.Continual Improvement:
By constantly learning and seeking to improve in all operational areas, market driven companies improve customer value, response time, productivity and also th eir own profitability 6.Cross-Functional Teams:
Utilizing cross functional teams with responsibility to implement business plans leads to better decisions, response, and service to the target markets Part 3
3.1.Real life example of Rahimafrooz Batteries Limited (RBL) initiating Market- driven strategies
Market- driven strategies plays a pivotal role in determining the success of organizational performance. In context market orientation, RBL consider the following things:
RBL‘s business objectives are driven by customer satisfaction.
RBL monitor their level of commitment and orientation to serve customers‘ needs.
Their strategy for competitive advantage is based on understanding of customer needs.
RBL measure customer satisfaction systematically and frequently.
RBL responds to competitive actions that threaten them. 9|Page
RBL target customers and customer groups where they have, or can develop a competitive advantage.
The top management of RBL regularly discusses compe titors‘ strengths and strategies.
They communicate information about their successful and unsuccessful customer experiences across all business functions.
All of RBL business functions are integrated in serving the needs of their target markets.
All of their managers understand how everyone in the company can contribute to creating customer value.
Rahimafrooz Batteries Limited (RBL) pursues a model which drives them t o be market-driven. This model is illustrated below:
Rahimafrooz Batteries Limited (RBL) put organization-wide intelligence management and responsiveness to it at the heat of the construct and form of specific culture which includes distinctive management practices, organizational infrastructure, systems, human resources and technology support as organizational entities (leverages) enabling implementation. Market orientation is specifically often understood as the all-encompassing strategic orientation that raises the probability of market performance of RBL which encompass customer, competitor, intra-functional, profit, distributor and environmental orientation. We understand 10 | P a g e
customer focus as a focus on customer needs; providing and continuously improving perceived value, quality and satisfaction within a long-term time horizon with a view to achieving superior market performance. RBL follows a model consists of six dimensions representing key organizational leverages through which customer focus is implemented. Market (customer) orientation is therefore not a separate dimension, but is reflected in all organizational leverages. The first dimension of the model is strategic deployment. Discrete strategic leverage is important organization-wide orientation of RBL because it concerns top management factors (barriers), the strategy building process and necessary resources. RBL considers strategic deployment as a first leverage. Through this leverage, market orientation should be manifested as a visible senior management commitment, as the presence of it in the RBL‘s mission, as alignment with business strategy and as provision of adequate resources. The second dimension of the model is internal integration leverage. RBL focus focus on internal environment and intra-functional coordination. Under this dimension, RBL coordinated utilization of company (capital and human) resources and full departmental alignment and balancing internal orientation with external. Internal integration leverage is implemented in RBL through activities leading to efficient and satisfied employees such as training, internal communications, empowering, motivating, rewarding, but also through internal quality management and efficient inter-departmental cooperation. The third dimension of the model is market knowledge management. RBL emphasis on information handling (analysis, generating, disseminating) and additional activities like interpretation and use of marketing knowledge. RBL more focused on learning as a form of information generating where all important information for marketing decisions and also balanced metrics of market performance. As the fourth dimension of the model, an organizational infrastructur. In RBL, different organizational elements and systems such as organizational structure, centralization, information technology and communication systemsm play important factors of market orientation. The fifth distinctive dimension of the model is customer interface design. AS a market oriented organization, RBL always close contacts with customers.They believes that the importance of the 11 | P a g e
interaction with the customers also lies in the fact that a customer‘s value is largely produced during their interaction with employees, other customers and organizational systems. Therefore, frontline communication and interaction points with customers should be managed as a coherent whole. As market orientation is concerned with sources of customer value, customer interface design should therefore be one of its key leverages. Customer interface is a relatively independent organizational entity and it requires distinctive management emphasis and operationalized as the extent of customization, fulfillment of expectations, management of emotional, social, technological and environmental elements of interaction, but also through long term, relationship impacting activities. Finally, organizational culture is the sixth dimension of the success of RBL. Organizational culture is an important factor of driving RBL as an market-driven organization in this field which encompasses tangible elements such as behaviours and artifacts, and intangible elements, such as values, beliefs and norms. Customer orientation as a set of beliefs which puts customer interests first. RBL focuses greatly on customer needs information which are more deeply rooted values and beliefs that are likely to support customer focus and permeate the RBL. 3.2.To be Market-driven, RBL has to be market oriented 3.2.1.CUSTOMER FOCUS
RBL are focusing on customers. Getting closer to the customer, Rahimafrooz associates directly with distributors, retailers and also buyers to know what drives customer satisfaction, identify customer needs, and use those needs to target markets where the business can achieve a sustainable and significant competitive advantage in this field. RBL understands customers‘ preferences and requirement and offering superior value products.
RBL develops a centralized Customer Feedback & Query (CFQ) CELL. ―Total commitment to customer satisfaction‖ is one of their values. Listening to what customers say in a continual systematic way is a key tool to comprehend their needs and requirements and to satisfy them achieving excellence in th eir products and services accordingly. All individuals of Rahimafrooz Group interact with customers and members of the public everyday and do hear, receive, or learn about their comments, complaints, views, etc on the products, services, and dealings of the company. A systematic and organized way of managing these feedbacks and queries will surely strengthen their total commitment to customer satisfaction. 12 | P a g e
3.2.2.Customer Satisfaction and RBL
Rahimafrooz Batteries Limited is customer-driven firms who are constantly monitoring and analyzing customer satisfaction. A key objective is identifying the product/service attributes that influence customer satisfaction. Rahimafrooz Batteries Limited successfully competed with others global competitors in Asia by designing durable and quality batteries to meet specific users' requirements. Rahimafrooz targets specific customer groups. The company is very service oriented and quick to respond to customer needs. Understanding customer satisfaction Rahimafrooz engage in accurate tracking of the needs and wants of all participants in the entire distribution chain, including suppliers, manufacturers, middlemen, and end users. All members of the Rahimafrooz‘s distribution network is striving to satisfy the individual or organization that ultimately consumes the product or service. Teamwork is playing the significant in Rahimafrooz to meeting buyers' needs. For this, RBL is measuring of customer satisfaction regularly to know buyer needs or preferences and identifying whether changing or not. An important part of the monitoring task is identifying buyers' future needs. Within the organization, marketing professionals of Rahimafrooz are evaluating the changing requirements of end users and channel members. For these they involve all personnel in contact with customers to evaluate activities. And also for improving customer satisfaction include the product/service delivery system, performance of the product/service, the image of the company/product/brand, customers' perceived price-value relationship of the product/service, employees' level of performance, and study of competitors' advantages and weaknesses. 3.2.3.INFORMATION ACQUISITION
We consider RBL as a market-oriented compan y because it completely understands its markets and the people buy its products or services. Gaining these-
RBL is gathering proactive information and analysis and they have a wealth of information is available in company records, information systems, and employees. A key part of information acquisition, RBL is learning from ex perience where they encourage open-minded inquiry, widespread information dissemination, and the use of mutually informed managers‘ visions about the current market and how it is likely to change in the future. Rahimafrooz has commissioned a third party research firm to survey Rahimafrooz customers of all SBUs, and products and services, to provide them key learning on how to further strengthen their customer service. They make a GITC team who are working tirelessly to put in place a Customer Relationship Management (CRM) system to help them get closer to their customers for both acquisition and retention programs.
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3.2.4.COMPETITOR INTELLIGENCE
A market-oriented organization RBL recognizes the importance of understanding its competition as well as the customer.
The key questions of RBL management are which competitors, and what technologies, and whether target customers perceive them as alternate satisfiers. RBL believe superior value requires that the seller identify and und erstand the principal competitors‘ short-term strengths and weaknesses and long term capabilities and strategies which make the RBL market leader in the market.
3.2.5.CROSS-FUNCTIONAL COORDINATION
RBL is getting all business functions effectively to work together to provide superior customer value. They are successful in removing the walls between business functions — marketing talks with manufacturing and finance.
RBL build a Cross-functional teamwork guides the entire organization toward providing superior customer value. RBL are focusing on improving internal e fficiencies. RBL has set in motion the process of assessing their current business processes using an "Integrated Business Planning" model called MRPII. This is expected to coordinate and bring continuous improvement and alignment between sales, marketing, manufacturing, business planning, forecasting, financial planning, and HR planning. RBL pursues an approach named THE DEEP DIVING APPROACH which continually swimming around looking for new clients, customers, solutions, best practices, they could work within the group and gradually built it up. RBL can choose to build up a Rahimafrooz Group wide community of like-minded marketing individuals. By continually benchmarking and evaluating themselves, RBL create a group of intensely committed and steadfast m arketers.
3.2.6.Core Competence
Core competencies are the most significant value-creating skills within the corporation and key areas of expertise which are distinctive to the company and critical to the company's long term growth. RBL's core competencies are they are offering better quality and durable batteries than competitors in the Bangladesh and also other countries like India. 3.2.7.Sustainable Competitive Advantage
Sustainable competitive advantage allows the maintenance and improvement of the enterprise's competitive position in the market. It is an advantage that enables business to survive against its competition over a long period of time. The opportunity for Rahimafrooz to sustain its competitive advantage is determined by its capabilities of two kinds – distinctive capabilities and 14 | P a g e
reproducible capabilities - and their unique combination to create superior customer value. They are focusing on strengthening our core business. New investments in core businesses include RBL's expansion of capacity. RBL is investing in expansion of its nationwide distribution network. To make UBC (used battery collection) a success, greater teamwork is working among the concerned SBUs and the dealers/distributors which give a competitive advantage. RBL are focusing on improving financial management. For this, they introduced the Balanced Scorecard to measure financial performance and ascertain optimal mechanisms for a group procurement policy, potentially leading to centralized procurement. The Rahimafrooz Financial Leadership Team (FLT) is attempting to cut operating costs by 20% against budget with the same top line target by eliminating unnecessary expenses. RBL are focusing on improving internal efficiencies. They have set in motion the process of assessing their current business processes using an "Integrated Business Planning" model called MRPII. This is expected to coordinate and bring continuous improvement and alignment between sales, marketing, manufacturing, business planning, forecasting, financial planning, and HR planning. Recently, RBL kicked off the group-wide QMS process to build process focus both at RBL and at all SBUs. Various IT system enhancements are being planned by GITC. 3.2.8.DISTINCTIVE CAPABILITIES
The ‗resource- based view of the firm‘ has seen an increased emphasis on competing on ‗capabilities‘, both tangible and intangible. ‗Capabilities‘ have been defined as: complex bundles of skills and collective learning, exercised through organizational processes that ensure superior coordination of functional activities. Distinctive capabilities are the basis of company‘s competitive advantage. According to the new resource-based view of the company, sustainable competitive advantage is achieved by continuously developing existing and creating new resources and capabilities in response to rapidly changing market conditions. Among these resources and capabilities, knowledge represents the most important value-creating asset. Distinctive capabilities of RBL are:
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Part 4
4.1.The Payoff for being market-driven
Why is it important to be market-driven? The superior abilities of the market driven firm lead to bottom-line benefits from improved performance. Although managers have been exhorted to ‗stay close to customers,‘ and ‗put the customer at the top of the organization chart‘ for at least 40 years, this advice had to be taken on faith until recently. Now, a growing body of research has found that market driven firms usually are more profitable than their rivals, a conclusion that has been sustained with a variety of measures and methods. Although these studies have not been able to trace the precise reasons why a market orientation enhances profitability, clues from other sources indicate the benefits of a market orientation are the result of: Superior cost and investment efficiency:
Not all customers are equally attractive, and loyal customers are considerably more profitable than others. A market-driven firm is better able to identify and keep its profitable accounts, and understands the pay-off from its marketing investments. Employee satisfaction:
Satisfied employees are both a cause and consequence of customer satisfaction. They are also more committed and enthusiastic about the firm, more productive, and because they are more loyal, the costs of recruiting, selecting, and training are lower. The cost of employee turnover is also lower – not only the direct costs of hiring the replacement, but the indirect costs of lower productivity as replacements learn their jobs and broken relationships are repaired. Price premium:
A market orientation contributes to a more powerful value proposition, which translates into greater value that usually is rewarded with a price premium. Revenue growth:
Here the evidence is not so conclusive, but we expect that a superior ability to anticipate changing market requirements and target innovation efforts more effectively should have topline benefits.
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Competitive preemption:
With highly satisfied customers, the firm has erected switching barriers that competitors cannot easily breach. These could be psychological (the customer is comfortable in the relationship and resists changing) or economic (there is a large perceived cost or risk to making a switch).
Constant Improvement
A market orientation helps drive constant improvement in company processes and systems because it promotes a "culture of experimentation." Compan y leaders and functional departments perpetually explore opportunities to improve upon product and service offerings to adapt to current and future needs of customers.
These bottom-line benefits are derived from a set of inherent advantages market-driven firms have over more internally focused rivals. These advantages, are drawn from a superior ability to understand markets and a superior ability to attract and retain customers. The market-driven organization is better able understand markets by sensing emerging opportunities, anticipating competitor‘s moves and making fact-based decisions. It is also better able to keep customers by delivering superior value, encouraging loyalty and leveraging its market investments.
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Reference
1. 2. 3. 4. 5.
http://www.slideshare.net/raju07a/imperatives-for-market-driven-strategy http://www.iibd.com/news/?action=viewone&newsid=19 http://marleymarketing.blogspot.com/2008/11/market-driven-strategy-market-driven.html http://www.adityabirla.com/Media/From-market-driven-to-market-driving http://marketing.infocat.com/2009/02/marketing-in-market-driven-company.html
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