marketingâ€™s strategic role in the organization

3Chapter Three

Marketing’s StrategicRole in theOrganization

After studying this chapter, you should be able to:

1 Discuss the three basic levels in an organization and

the types of strategic plans developed at each level.

2 Understand the organizational strategic planning

process and the role of marketing in this process.

3 Describe the key decisions in the development of

corporate strategy.

4 Understand the different general business strategies

and their relationship to business marketing, product

marketing, and international marketing strategies.

5 Realize the importance of relationships and teamwork

in executing strategic plans.

www.honeywell.com

Honeywell International, Inc., is an advancedtechnology and manufacturing company servingcustomers worldwide. The company is organizedaround nine businesses: aerospace, consumerproducts, electronic materials, friction materials,home and building control, industrial control,performance polymers, specialty chemicals, andtransportation and power systems. The firm employsapproximately 120,000 individuals in 95 countries.

The Web site for Honeywell provides a wealth ofinformation. Details about the corporate businesses,as well as about individual products and services,are offered for potential customers. The Web sitealso provides information for investors, instructionsand summaries for members of the media interestedin the company’s background, and information oncareers for students and other potential employees.The in-depth company history describes theevolution of the organization beginning with thefirst thermostat ads run in 1893, to the recent $14billion merger of Honeywell and Allied Signal inDecember 1999.

Honeywell is making extensive use of its Internetsite to enhance the performance of its employees andto improve relationships with its customers.Moreover, its Web-based capabilities are also beingused to strengthen its supply-chain management. Forexample, Honeywell is offering Web-based distancelearning solutions and employee training throughMyPlant.com (http://www.myplant.com). Thisoffering reduces the cost of training systems and theneed for company staff to travel, while makingcontinuing education more available. Honeywell hasalso introduced a Web-based customer resourcedesigned to help homeowners recognize and locatehome solutions, as well as suppliers and installers forimproving home control systems (e.g., heating andcooling controls). Sources: http://www.honeywell.com/about/;

http://biz.yahoo.com/bw/991202/nj_allieds_1.html; Robert P. Mader, “Honeywell

to Merge with Allied Signal,” Contractor, July 1999, p. 46; Geoffrey Colvin,

“Honeywell Packs Its Bags,” Fortune, July 5, 1999, p. 31; Jessica Davis, “Mentors

Corner: Intranet Gives Honeywell Control Over Documents,” InfoWorld, March 15,

1999, p. 56.

Chapter Three Marketing’s Strategic Role in the Organization 51

The complexity of the Honeywell conglomerate illustrates the importance of a well-designed corporate marketing strategy. The firm consists of unique business units,each offering an extensive array of products and services. Strategies and imple-mentation of strategies must be developed and executed at the corporate, business-unit, and product levels. Overall, strategy and long-term planning are guided by thefirm’s vision as stated in their mission statement. At the business level, planning be-gins with an examination of the current situation, including technological changesand competitive effects. From this analysis, both threats and new business oppor-tunities are identified. Decisions to pursue new opportunities are followed by theestablishment of objectives, often stated in terms of market share, sales volume, orprofitability. Subsequently, business and marketing strategies are developed toachieve those objectives. Effective execution of strategy in implementation mustthen occur for objectives to be realized.

Many of the most familiar firms around the world are complex organizationsthat market many different products in many different business areas. Take, for ex-ample, Asea Brown Boveri (ABB), the worldwide heavy-industry giant. The ABBcorporation consists of eight major business segments, 65 business areas, 1,300 in-

dependently incorporated companies, and about 5,000autonomous profit centers.1 Marketing efforts requireplanning and implementation across all the variousbusiness segments, business areas, incorporated com-panies, and profit centers.

The Honeywell experience exemplifies a typical suc-cess scenario. First, a small company markets a fewproducts to a well-defined market. Although this sort ofmarketing is not easy, the company directs all its effortstoward the initial products and market. If the firm suc-ceeds and grows, competitors enter with similar prod-ucts. Over time, the company’s opportunities formarketing the same products to the same market de-cline. To continue growing, the firm must develop newstrategies. Typically, it must either market differenttypes of products to its current market, the same prod-ucts to different markets, or new products to new mar-kets. The relatively simple single-business, few-productsfirm becomes a complex multibusiness, multiproductcompany.

The complexities facing Honeywell, ABB, and otherfirms produce many of the key challenges for today’smarketers. In this chapter, we examine the importantrole of marketing in the contemporary multibusiness,multiproduct firm. We classify organizations into cor-porate, business, and functional levels, and discussstrategic planning and strategic decision making ateach level. Our focus is on the role of marketing. Thechapter concludes with a discussion of teamwork in theexecution of strategic plans.

Organizational Levels The corporate level is the highest level in any organi-zation. Corporate managers address issues concerning the overall organization, andtheir decisions and actions affect all other organizational levels. The business levelconsists of units within the overall organization that are generally managed as self-contained businesses. The idea is to break a complex organization into smaller unitsto be operated like independent businesses. This is the level at which competitiontakes place; that is, business units typically compete against competitor businessunits, not corporate levels versus corporate levels. For example, Blockbuster consists

Many corporations have individual business units. ABB, aglobal technology company has multibusiness operations inmany different markets and for a variety of products.

52 Marketing’s Strategic Role in the Organization Chapter Three

of six business units: domestic home video, international home video, domestic mu-sic retailing, international music retailing, new-technology ventures, and other en-tertainment venues.

The functional level includes all the various functional areas within a business unit.Most of the work of a business unit is performed in its different functions. A typicaluniversity provides a good illustration of different organizational levels. The presi-dent, vice presidents, and other central administration positions represent the corpo-rate level. The different colleges within the university, such as the college of businessor college of arts and sciences, can be considered business units. There are also dif-ferent functions performed within each college. The typical functions are teaching, re-search, and administration carried out by faculty, staff, and administrators.

Organizational Strategic Planning Strategic planning formultibusiness, multiproduct organizations typically occurs at each organizationallevel. Strategic plans at higher organizational levels provide direction for strategicplans at lower levels. In a sense, lower-level plans are developed to execute higher-level plans. Because of this relationship, strategic planning must be integrated andconsistent throughout levels.

A study of U.S. and South African firms provides a general description of strate-gic planning.2 These firms reported that the major benefits of strategic planning areimproved performance relative to objectives and a better organizational focus andvision. Most of the firms prepare formal strategic plans at the corporate, business,and product levels, with different functional managers participating in the planningprocess. These include sales managers, product managers, marketing researchers,production managers, and financial managers. Many firms also incorporate cus-tomers into the process. Over 75 percent of the firms in this study said their strate-gic planning was well coordinated.

Types of Strategic PlansThe different types of strategic plans and important strategic decisions are illus-trated in Exhibit 3–1. A corporate strategic plan provides guidance for strategicplanning at all other organizational levels. Important corporate strategy decisionsconcern development of a corporate vision, formulation of corporate objectives, al-location of resources, determination of how to achieve desired growth, and estab-lishment of business units. These decisions determine what type of company thefirm is and wants to become.

A business strategic plan indicates how each business unit in the corporate fam-ily expects to compete effectively in the marketplace, given the vision, objectives,

Exhibit 3–1 Organizational strategic plans

Organization Level Type of Strategic Plan Key Strategic Decisions

Corporate Corporate strategic plan • Corporate vision• Corporate objectives and resource allocation• Corporate growth strategies• Business-unit composition

Business Business strategic plan • Market scope• Competitive advantage

Marketing Marketing strategic plan • Target market approach• Marketing mix approach

Product marketing plan • Specific target market• Specific marketing mix• Execution action plan

Exhibit 3–2 General strategic planning process


and growth strategies in the corporate strategic plan. Different businesses withinthe same organization are likely to have different objectives and business strategies.For example, the Hilton Hotels Corp. emphasizes growth of its gambling casinobusiness by expanding throughout the United States and into foreign markets suchas Egypt, Turkey, and Uruguay. Hilton is selling some downscale hotels to concen-trate on ritzy resort hotels. These changes in corporate strategy influence the com-pany’s business strategies and are turning Hilton into more of a gaming than a hotelcompany.3 Each business needs to make decisions concerning the scope of the mar-ket it serves and the types of competitive advantages to emphasize. Decisions inthese areas contribute to a general business strategy.

Each business consists of different functions to be performed, and strategic plansmay be developed for each major function. Thus, many organizations will havemarketing, financial, R&D, manufacturing, and other functional strategic plans. Amarketing strategic plan describes how marketing managers will execute the busi-ness strategic plan. It addresses the general target market and marketing mix ap-proaches.

Each business unit has its own product marketing plans that focus on specifictarget markets and marketing mixes for each product. A product marketing plantypically includes both strategic decisions (what to do) and execution decisions(how to do it).

Pitney Bowes, originally founded as a producer of mailing equipment andpostage meters, is now a multibusiness, multiproduct corporation. The Copier Sys-tems Division, one of the company’s new business units, develops and executes mar-keting and product plans to compete against Xerox, Canon, Minolta, and Konica.The division’s basic business strategy is to target large Fortune 1000 companies andto differentiate its products from the competition on the basis of product qualityand efficiency of distribution. Unlike many newcomers to an industry, Pitney Bowesdoes not claim to offer the lowest prices in the industry.4

It is extremely important that organizations integrate their strategic plans acrossall levels. Coordination of business, marketing, and product plans is especially crit-ical. For example, P&G has a general strategic plan for its detergent business andspecific product plans for the different brands such as Tide and Cheer. Brand man-agers for each of P&G’s detergent products must clear marketing strategies for theirindividual brands through the detergent business marketing manager. Without thiscoordination, P&G would find itself competing more against its own brands (Tideversus Cheer) than against those of other companies (P&G versus Dial and versusUnilever).5

The Strategic Planning ProcessAlthough individual organizations will differ in the way they approach strategicplanning, a general process is illustrated in Exhibit 3–2. This process applies tostrategic planning at every level. We present it as a step-by-step approach to makeit easier to understand strategic planning. In the business world, most organizationsare involved in different stages of the process simultaneously and do not necessar-ily follow such a step-by-step approach.

Examinecurrent

situation

Setobjectives

Developstrategies

Execute

Identifypotentialthreats &

opportunities


EXAMINE THE CURRENT SITUATION First, the managers evaluate the ex-isting situation for the corporate, business, marketing, or product level. They typi-cally analyze historical information to describe current strategies, assess recentperformance, and evaluate the competitive situation. This background informationprovides a benchmark for the remainder of the strategic planning process.

IDENTIFY POTENTIAL THREATS AND OPPORTUNITIES Next, the focuschanges from what has happened to what might happen. Managers identify keytrends in the marketing environment, assess the possible impact of these trends onthe current situation, and classify them as either threats or opportunities. Threatsrepresent potential problems that might adversely affect the current situation; op-portunities represent areas where performance might be improved. Thus, Special-ized Bicycle Components must recognize trends in retailing and changingpreferences among consumers. Similarly, Blockbuster saw new technological devel-opments, like Philips’s Imagination Machine, as opportunities. Managers typicallyrank potential threats and opportunities, addressing the most important ones firstin the next strategic planning stage.

SET OBJECTIVES Managers must now establish specific objectives for the cor-porate, business, marketing, and product levels. Typical objectives involve sales,market share, and profitability. The specific objectives should be based on theanalysis of the current situation and the marketing environment. As we discusslater, objectives at the different organizational levels must be consistent. For exam-ple, the sales objectives for all businesses must be set so that meeting them meansmeeting the corporate level sales objectives.

DEVELOP STRATEGIES Finally, managers develop strategies for achieving theobjectives. These strategies will indicate how the organization will minimize po-tential threats and capitalize on specific opportunities. The strategies developed atthis stage represent what an organization plans to do to meet its objectives, giventhe current situation and expected changes in the marketing environment. A sam-ple product marketing plan is presented in Appendix B at the end of the text.

EXECUTE A clear strategy and well-crafted programs may still fail if executionand implementation efforts are misdirected or inadequate. Effective execution isenhanced when employees share common values and are properly trained and whensufficient resources and staff are provided to support implementation. It is impor-tant to note that both a sense of organizational-wide commitment to the adoptedstrategy and a sense of commitment by those managers responsible for implemen-tation have been shown to be primary determinants of effective execution.6

The Role of MarketingMarketing plays an important role in the strategic planning process for many or-ganizations. Although some marketing positions are represented at the corporatelevel, most are at the functional level within the business units of an organization.As shown in Exhibit 3–3, however, marketing is involved in strategic planning atall organizational levels.

Strategic marketing describes marketing activities that affect corporate, business,and marketing strategic plans. Strategic marketing activities can be classified intothree basic functions. First, marketers help orient everyone in the organization to-ward markets and customers. Thus, they are responsible for helping organizationsexecute a marketing philosophy throughout the strategic planning process.

Second, marketers help gather and analyze information required to examine thecurrent situation, identify trends in the marketing environment, and assess the po-tential impact of these trends. This information and analysis provides input for cor-porate, business, and marketing strategic plans.

Third, marketers are involved in the development of corporate, business, andmarketing strategic plans. Marketing’s influence varies across organizations. For

Exhibit 3–3 Role of marketing in strategic planning


organizations driven by a marketing philosophy, marketing necessarily plays a keyrole in strategic decision making. The trend toward pushing strategic planning re-sponsibility further down the organization is increasing marketing’s clout in an or-ganization’s strategic planning process.7

Marketing management relates to specific product marketing strategies. It differsfrom strategic marketing in its basic orientation. Strategic marketing focuses onbroad strategic decisions at the corporate and business levels. Marketing manage-ment is concerned, by contrast, with specific strategic decisions for individual prod-ucts and the day-to-day activities needed to execute these strategies successfully. Atthe operating level, marketing managers must focus on the four Ps of the market-ing mix: price, product, promotion, and place (distribution).8

The strategic role of marketing and marketing management are now in a pe-riod of considerable change and evolution. These changes are due to a number ofimportant environmental phenomena that are affecting the way many firms dobusiness. To begin, many well-known companies work closely with dedicatedpartners on the supply side (often using single supply partners) and the distribu-tor side of their business, expecting their distributors to play proactive roles in thedevelopment of services and marketing strategy. For example, on the supply side,the modern-day Nike does very little manufacturing of its own and focuses largelyon marketing. In this vein, companies such as this are actually embedded in busi-ness networks, comprising strategic alliances among suppliers, distributors, andthe marketing firm.9

Other influences on marketing include the connected-knowledge economy; glob-alized and consolidated industries; fragmented markets; and demanding customersand consumers. With these changes, new kinds of competitors will emerge, marketswill continue to become homogenized across country boundaries, and mass mar-kets will erode in the face of mass customization. Business customers and individ-ual consumers expect diversity and have multiple means of obtaining products, aswell as learning about company offerings. Some observers foresee a future in which

Role ofmarketing

Strategicmarketing

Marketingmanagement

Marketingphilosophyexecution

Analysis &information

Corporate,business &marketing

strategy decisions

Develop productmarketing plans

Execute productmarketing plans


the Web will enable automated purchasing, anonymous transactions, and the by-passing of most intermediaries.10

The role of marketing within the firm is in transition as well. For example, somescholarly observers have argued that the marketing function will be reduced as thevalues embodied in the firm’s market orientation permeate the firm. That is, a cross-functional dispersion of marketing activities will occur as the firm becomes market-oriented throughout. In a test of this premise, one study of managers across functions(i.e., marketing, human relations, operations, accounting, and finance) within theirfirms revealed that marketing as a separate function still contributes to a firm’s fi-nancial performance, customer-relationship performance, and new-product perfor-mance beyond the performance attributable to the firm’s general marketorientation.11 Therefore, an understanding of the strategic planning process is evenmore important in today’s ever-changing marketplace.

Our discussion of organizational strategic planning provides an overview of dif-ferent types of strategic plans, a general strategic planning process, and marketing’sbasic role in these areas. With this background, we are now ready to examine themajor strategic decisions at the corporate, business, marketing, and product levels.

Corporate Strategy Decisions The key corporate strategy decision areas defined in Exhibit 3–1 are corporate vision, corporate objectives and resourceallocation, corporate growth strategies, and business-unit composition.

Corporate VisionA corporate vision represents the basic values of an organization. The vision spec-ifies what the organization stands for, where it plans to go, and how it plans to getthere. As indicated in Exhibit 3–4, a comprehensive vision should address the or-ganization’s markets, principal products and services, geographic domain, corecompetencies, objectives, basic philosophy, self-concept, and desired public im-age.12 Specialized Bicycle, for example, addressed these issues in its stated vision:“customer satisfaction, quality, innovativeness, teamwork, and profitability.”

The ability to develop vision depends on the company’s understanding of whatshould be enduring and what is subject to change. Companies that enjoy enduringsuccess, such as Hewlett-Packard, 3M, Motorola, and Procter & Gamble, have corevalues and core purposes that remain fixed; but they endlessly adapt their strategiesand practices to a changing world. A company’s core values are the small set ofguiding principles that represent the enduring tenets of an organization. The Dis-ney Company’s emphasis on imagination and wholesomeness reflect its essentialcore values. Core purpose reflects the company’s reason for being or its idealisticmotivation for doing work. Disney’s core purpose is to entertain people; 3M’s is “tosolve problems innovatively” (see Exhibit 3–5).13

Sometimes organizations develop a formal mission statement to communicatethe corporate vision to all interested parties. A mission statement can be an impor-

tant element in the strategic planning process becauseit specifies the boundaries within which business units,marketing, and other functions must operate.

The mission statement for Ben & Jerry’s is threefold:(1) to make and distribute the finest quality all-naturalice cream and related products; (2) to operate the Com-pany on a sound financial basis of profitable growth,increasing value for our shareholders, and creating ca-reer opportunities and financial rewards for our em-ployees; and (3) to operate the company in a way thatactively recognizes the central role that business playsin the structure of society by initiating innovative waysto improve the quality of life of a broad community.14

Exhibit 3–4

Corporate vision components

• Markets

• Products and services

• Geographic domain

• Core competencies

• Organizational objectives

• Organizational philosophy

• Organizational self-concept

• Desired public image


The statement emphasizes the importance of qualityproducts, company performance and employee suc-cess, and the social responsibility aspects of business.

The vision statement for Whirlpool is similar butdoes not mention the role of business in society: “Wecreate the world’s best home appliances that make lifea little easier and more enjoyable for all people. Ourgoal is a Whirlpool product in every home, everywhere.Created by: pride in our work and each other; passionfor creating unmatched customer loyalty for ourbrands; and, performance results that excite and re-ward global investors.”15

One study found that companies with a formal vi-sion outperformed similar companies without a formalvision by more than six to one. Marriott illustrateswhat some companies are doing. After managementdeveloped mission statements for the corporation andhotel division, each of the company’s 250 hotels crafted

its own mission statement. Staff members at each hotel spent three days participat-ing in “visioning” exercises to develop the mission statements.16

Exhibit 3–6 lists questions that a firm’s top managers should continually ask them-selves in efforts to install a corporate vision for effectively competing in the future.

The last two questions form the basis for recent views of successful competition;that is, the firm’s comparative advantages and distinctive core competencies are the

Speaking from Experience

Bobbie Oglesby holds a master’s degree inmarketing from the University of SouthCarolina. She was attracted to Microsoftbecause of the opportunity to shape how

technology is developed and used.Advancements in technology, particularly theInternet, are opening up a new world ofopportunities and challenges.

Bobbie OglesbyDirector of Windows Brandingand CommunicationsMicrosoft, Redmond, WA

Exhibit 3–5 Core purpose: A company’s reason for being

3M: To solve problems innovatively.

Cargill: To improve the standard of living around the world.

Fannie Mae: To strengthen the social fabric by continually democratizing homeownership.

Hewlett-Packard: To make technical contributions for the advancement and welfare of humanity.

Lost Arrow Corporation: To be a role model and a tool forsocial change.

Pacific Theatres: To provide a place for people to flourish and to enhance the community.

Mary Kay Cosmetics: To give unlimited opportunity to women.

Source: James C. Collins and Jerry I. Porras, “Building Your Company’s Vision,” Harvard Business Review, September–October, 1996, p. 69.

McKinsey & Company: To help leading corporations andgovernments to be more successful.

Merck: To preserve and improve human life.

Nike: To experience the emotion of competition, winning,and crushing competitors.

Sony: To experience the joy of advancing and applyingtechnology for the benefit of the public.

Telecare Corporation: To help people with mentalimpairments realize their full potential.

Wal-Mart: To give ordinary folk the chance to buy the samethings as rich people.

Walt Disney: To make people happy.

Mission statements provide direction for corporate leadershipand help guide marketing strategy. At Ortho Biotech, a sharedvision helps an increasingly diverse workforce make day-to-daydecisions about what needs to be done.

“Computer technology has become pervasive in businesses and is fundamental toalmost every business process. As a result, the information technology profes-sionals inside businesses have an increasingly complex array of products andservices they must elevate and manage. Recognizing this, we are changing theway we market products at Microsoft from focusing on the individual products tocombining products into specific solution sets. We are moving from an organiza-tion focused on product marketing to teams focused on solution marketing. Bydoing this, we reduce the complexity of the IT managers’ decision process andbetter meet the customer’s needs.”


resources for competitive advantage. Core competency reflects a bundle of skillsthat are possessed by individuals across the organization. The core competency Fed-eral Express possesses in package routing and delivery rests on the integration ofbar technology, wireless communications, and network management. Boeing, theinternational manufacturer of airplanes, lists three core competencies on their website: (1) detailed customer knowledge and focus; (2) large-scale system integration;and (3) lean, efficient design and production systems.17 Competitive advantage de-rived from these core competencies in turn yields superior financial performance.In summary, a successful corporate vision reflects the sequence from core compe-tency to competitive advantage to financial performance.

Corporate Objectives and Resource AllocationThe second major corporate strategy decision area involves setting objectives forthe entire organization and assigning objectives and resources to business units andproducts. Although the corporate vision provides general overall direction for theorganization, corporate objectives specify the achievement of desired levels of per-formance during particular time periods. Corporate objectives are established formany areas, but the most visible tend to be financial objectives. Typical financialobjectives concern sales, sales growth, profits, profit growth, earnings per share, re-turn on investment, and stock price.

Sales and sales growth objectives are often of direct concern to marketers. Al-though sales-related objectives are set at the corporate level, actual sales areachieved by marketing individual products to individual customers. Therefore, cor-porate sales objectives influence marketing activities throughout the organization,as illustrated in Exhibit 3–7.

Suppose the corporate sales growth objective is to increase this year’s sales by 10percent over the previous year’s total. To achieve the desired results, managementmust break down this objective into goals for each business unit and product. If allproducts and business units meet the assigned objectives, the organization willachieve the desired growth.

In Exhibit 3–7, 10 percent of the desired sales growth is assigned to Business 1,8 percent to Business 2, and 12 percent to Business 3. The sales growth objectivesfor each business unit are then further assigned to the specific products marketedby each business. Again, the sales growth objectives are not equally divided acrossproducts, because the various products have different opportunities for increasingsales. But if each product achieves the desired sales increase, the business unit willmeet its sales growth objective. And, if each business unit does so, the organizationwill meet its 10 percent objective.

This hierarchy of objectives represents the organization’s sales growth plan.Now, corporate resources are allocated to the business units and business-unit re-sources are allocated to products. Business 1 receives more corporate resources than

Exhibit 3–6 Questions leading to an effective corporate vision

1. Which customers will you be serving in the future?

2. Through which channels will you reach customers in the future?

3. Who will be your competitors in the future?

4. Where will your margins come from in the future?

5. In what end-product markets will you participate in the future?

6. What will be the basis for your competitive advantage in the future?

7. What skills or capabilities will make you unique in the future?

Source: Gary Hamel and C. K. Prahalad, Competing for the Future (Boston: Harvard Business School Press, 1994),p. 18.


some other business units, and Product B re-ceives more of the resources from Business 1than the other two products it markets. Themore sales growth required from a businessunit or product, the more resources it typicallyneeds to achieve the desired increases.

Corporate objectives and resource alloca-tion affect marketers in two basic ways. First,marketers are involved in setting the objectivesfor different organizational levels. Althoughthe amount of marketing participation variesacross firms, setting realistic objectives re-quires the market information and analysisthat marketers can provide. Assessments oftrends in the size and growth rates of marketsand the potential actions of competitors are in-puts for setting objectives and allocating re-sources.

Second, corporate objectives and resourceallocation decisions provide guidance for thedevelopment and implementation of businessand marketing strategies. For example, themarketing managers for Products B and C inBusiness 1 have different objectives and receivedifferent levels of resources to achieve them.

Therefore, they are likely to develop and implement different marketing strategiesfor their products.

Although growth and new-customer generation are traditionally important,companies are increasingly framing objectives in terms of customer relationshipsand customer retention. Frequently cited corporate objectives based on relation-ships with customers are (1) retain most profitable customers, (2) increase sales vol-ume from existing customers, and (3) protect core customers from competition.

Corporate Growth StrategiesCorporate growth strategies describe the general approach for achieving corporategrowth objectives. The basic strategic alternatives involve limiting corporate oper-ations to the same products and markets or expanding into new ones. Exhibit 3–8presents four general options.

A market penetration strategy represents a decision to achieve corporate growthobjectives with existing products within existing markets. The organization needs

to persuade current customers to purchasemore of its product or to capture new cus-tomers. This typically necessitates an aggres-sive marketing strategy, which meansincreasing marketing communications, imple-menting sales promotion programs, loweringprices, or taking other actions intended to gen-erate more business.

A market expansion strategy entails market-ing existing products to new markets. The newmarkets might be different market segments inthe same geographic area or the same targetmarket in different geographic areas. SpecializedBicycle Components for example, has expandedinto new markets by obtaining expanded distri-bution through new retail outlets.18

Exhibit 3–7

Hierarchy of sales growth objectives

Corporate sales growth objective10%

Business 3objective

12%

Business 2objective

8%

Business 1objective

10%

Product Aobjective

10%

Product Bobjective

13%

Product Cobjective

7%

Exhibit 3–8

Strategic options for corporate growth

Products

Same New

Market penetration

Market expansion Diversification

Product expansion

New

Sam

eM

arke

ts

Sources: Shelby D. Hunt and Robert M. Morgan, “The Comparative AdvantageTheory of Competition,” Journal of Marketing, April 1995, pp. 1–15; and Gary Hameland C. K. Prahalad, Competing for the Future (Boston: Harvard Business SchoolPress, 1994), p. 223.


A product expansion strategy calls for marketing new products to the same mar-ket. The organization wants to generate more business from the existing customerbase. Nike is not about to abandon athletic footwear, a business it dominates world-wide with more than $4 billion in revenues. However, footwear is a mature busi-ness, and Nike is embarking on an expansion strategy to transform itself into aglobal sports and fitness company.19 As part of this expansion, Nike plans to offer82 new stock keeping units (SKUs) in footwear for the committed golfer. These ad-ditions will be headlined by 50 Tiger Woods signature models. The expansion intogolf products will be accompanied by “Nike Golf” operating as a separate companydivision with their own unique logo.20

More and more companies are looking to new products for profitability andaway from downsizing and cost cutting. However, the focus is on product expan-sion ideas with the least risk and the greatest potential margins.

A diversification strategy requires the firm to expand into new products and newmarkets. This is the riskiest growth strategy, because the organization cannot builddirectly on its strengths in its current markets or with its current products. Thereare, however, varying degrees of diversification. Unrelated diversification meansthat the new products and markets have nothing in common with existing opera-tions. Related diversification occurs when the new products and markets havesomething in common with existing operations. Blockbuster’s move into music re-tailing has some relationship to video rentals since both are retailing operations inthe electronic entertainment business.

A sound corporate growth strategy is important to an organization’s long-termperformance. Many firms employ several growth strategies simultaneously. How-ever, other firms pursue one basic corporate growth strategy. Tootsie Roll Indus-tries, for example, has remained in the candy business for 97 years. The companyproduces 37 million Tootsie Rolls and 16 million Tootsie Pops annually from fac-tories in the United States and Mexico City. Although the company emphasizesmarket penetration, it has purchased 17 different candy brands to generate somegrowth from new products.21

Bobbie Oglesby comments on new strategies with which to grow business:“Microsoft is a strong believer and practitioner of strategic planning. Each year,Microsoft’s chairman and president set key objectives for the company thatultimately drive all business and marketing plans for the year. In addition, wealso create a three-year plan to ensure we are anticipating the right products andinfrastructure for the future.”

Business-Unit CompositionIn pursuing its corporate growth strategy, an organization may operate in anumber of different product and market areas. It does so through business unitsdesigned to implement specific business strategies. A strategic business unit(SBU) focuses on “a single product or brand, a line of products, or mix of re-lated products that meets a common market need or a group of related needs,and the unit’s management is responsible for all (or most) of the basic businessfunctions.”22

SBUs are sometimes separate businesses from a legal standpoint. For example,Sears at one time consisted of Dean Witter Reynolds (investments), ColdwellBanker (real estate), Allstate Insurance, and the basic retailing business, Sears Mer-chandise Group. In other cases, corporate management establishes SBUs to facili-tate planning and control operations. Additionally, they can change these SBUdesignations when conditions warrant. For example, Digital Equipment once or-ganized itself into 150 SBUs. With recent cost cutting, however, management con-solidated the 150 into 9 SBUs that focus on specific industries. Now, managementlooks at the company as if operating in only 9 separate businesses, rather than theprevious 150.23

ThinkingCritically

Consider a set ofstrategic businessunits for a corporation.

• What factorsinfluence marketgrowth rate andmarket attractive-ness for theseSBUs?

• What businessstrengths andweaknesses mightbe most importantin the evaluation ofSBUs for a manu-facturer of surgicalproducts for use byhospitals?


Changing a firm’s business composition is not unusual these days.Corporate downsizing often causes a firm to exit from some businessareas. Sears, for example, sold all or parts of its investment, real es-tate, and insurance businesses to concentrate on its retail business.24

Whether the corporate decision is to increase or decrease the numberof SBUs, once a given business composition is established, separatestrategies are developed for each business unit.

Marketing strategy is the emphasis at the SBU level, where the fo-cus is on market segmentation, targeting, and positioning (topicscovered in detail in Chapter 7) in defining how the firm is to competein its chosen businesses.25 Historically, the configuration of a firm’sbusiness units has been evaluated in terms of market share and mar-ket growth using some variation of the Boston Consulting Groupgrowth-share matrix. A simple depiction of this matrix is shown inExhibit 3–9.

The matrix classifies the company’s portfolio of SBUs into fourcategories: stars, cash cows, dogs, and question marks. Stars have alarge share in growth markets. These products are profitable and re-quire investment by the firm to support their continued performance.In contrast, cash cows have large market shares in slower-growthmarkets. These products generate significant cash relative to the ex-penses required to maintain share; hence, cash cows provide funds insupport of other SBUs. Dogs, candidates for deletion or divestment,have modest market shares in low-growth markets. The remainingcategory, question marks, includes strategic business units that are

problems. Ideally, these units with low market share but residence in high-growthmarkets should be supported and invested in to spur market share. If possible, thequestion marks should be shifted toward the star cell.

This view has proven useful over the years as a method for organizing and eval-uating the mix of SBUs contained in company product/business portfolios. Consid-eration of strategy at the business-unit level enables management to stay in closer

An overriding decision for many companies isthe determination of the firm’s mix of strategicbusiness units. Household products, specialtynonfood products, and dressings and saucesrepresent three of Clorox’s strategic businessunits.

Nike has developed a broad mix of athletic product lines and regularly evaluates their relative growthpotential and profitability.


touch with customers, competitors, and costsand to maintain strategic focus. Further, thissimplistic matrix based on market share andmarket growth has been expanded to includemore complete definitions of market attrac-tiveness (beyond market growth) and businessstrength (beyond market share).26 Unfortu-nately, these business portfolios have been crit-icized for placing too much emphasis onmarket-share growth and entry into high-growth businesses to the neglect of managingcurrent businesses well.27

More recent views of strategy formulationhave evolved beyond discussion of star andquestion mark SBUs. New marketing strate-gic thinking emphasizes what can be, ratherthan what is. The emphasis is upon identify-ing opportunities for growth that do not nat-urally match the skills of existing businessunits. After years of downsizing, companieshave begun to redefine strategy generationand to search for creative ways to grow andcompete effectively. Instead of figuring outhow to position products and businesseswithin an industry, strategy should focus onchallenging industry rules and creating to-

morrow’s industries, such as Wal-Mart did in retailing or as Charles Schwab didin the brokerage business.28

Business Strategy Decisions The basic objective of a business strat-egy is to determine how the business unit will compete successfully—that is, howthe business unit’s skills and resources can be translated into positional advantagesin the marketplace. Management wants to craft a strategy difficult for competitorsto copy so the business can sustain any advantages it has. For example, some re-tailers achieve sustainable advantages by selecting the best locations for their retailstores, effectively shutting out competitors from those areas. Other retailers try togain advantages by offering the lowest prices. Price advantages are often difficult tosustain, however, because competitors can usually match them.

A business strategy consists of a general strategy as well as specific strategies forthe different business functions such as marketing. The general strategy is based ontwo dimensions: market scope and competitive advantage.

Market ScopeMarket scope refers to how broadly the business views its target market. At one ex-treme, a business unit can select a broad market scope and try to appeal to mostconsumers in the market. The business might consider all consumers part of onemass market; more likely, it will divide the total market into segments and target allor most of those. An example of a broad market scope strategy is the move by Nikebeyond shoes into most every sports market. At the other extreme, a business unitcan focus on only a small portion of the market. An example of a focused marketscope strategy for a large, known international firm is Honda’s introduction of alimited number of new car models compared with the broad offerings of U.S. au-tomobile manufacturers.

Exhibit 3–9

Simple growth-share matrix

Question markStar

DogCash cow

High

High

Low

Low

Relative market share

Pro

duc

t-m

arke

t g

row

th (p

erce

nt)

Sources: B. Heldey, “Strategy and the Business Portfolio,” Long Range Planning,February 1977, p. 12; and George S. Day, “Organizing the Product Portfolio,”Journal of Marketing, April 1977, p. 34.


Competitive AdvantageCompetitive advantage refers to the way a businesstries to get consumers to purchase its products overthose offered by competitors. Two basic strategies areagain possible. A business can try to compete by offer-ing similar products and services as competitors, but atlower prices. Succeeding in a low-price strategy typi-cally requires the business unit to have a lower coststructure than that of competitors. Wal-Mart is a goodexample of a business that prospers with a low-pricestrategy. It offers the same brands as many other re-tailers, but at lower prices. Wal-Mart can sustain thisadvantage and be profitable because it has a very lowcost structure and constantly looks for ways to reducecosts.

A business may also compete through differentia-tion, that is, offering consumers something different from and better than com-petitors’ products. If it is successful in achieving the desired differentiation, thebusiness can typically charge higher prices than its competitors do. Neiman Mar-cus, for example, offers a unique product mix and exceptional service to differen-tiate itself from competition. Consumers are willing to pay higher prices to receivethese benefits.Bobbie Oglesby comments on competitive advantage: “Increasingly, competitiveadvantage in business is being powered by instant access to information. Inaddition, kids today carry pagers and phones so they are constantly connected tofriends and family. Microsoft understands access to information will be one ofthe fundamental necessities in the twenty-first century. As a result, we’veupdated our corporate mission to state our vision of providing ‘access toinformation anytime, anywhere, and on any device.’ As a result, all our productsare developed to be Internet-savvy, plus our corporate tag line ‘Where Do YouWant To Go Today’ was developed to reflect this vision.”

Wal-Mart competes globally on the basis of providing namebrands at lower prices, made possible by low cost structure.

Earning Customer Loyalty

Lands’ End: Retention based on qualityCompanies that focus on obtaining and keeping profitablecustomers, productive employees, and loyal investorsgenerate consistently superior results. Lands’ End, thesecond-largest clothing catalog retailer in the UnitedStates, is one such company. Lands’ End maintains un-usually high inventories to enhance its ability to fill cus-tomer orders. Every effort is made to retain customers, asrepeat business is required to cover the costs of obtainingbuyers. Michael J. Smith, new CEO for Lands’ End, assertsthat its customers will pay for great quality sold by em-ployees who treat them well. Providing high-quality mer-chandise and excellent service are the two pillars that formthe basis of Lands’ End’s efforts to retain customers andbuild customer loyalty. This basic strategy, coupled withdeliberate innovation through international expansion andspecialized catalogs for certain segments (such as petitesfor women), has spurred growth to projected sales over$1.1 billion.

Lands’ End has also devised a Web site that works as acomplement to its well-known catalog. In fact, as of late1999, LandsEnd.com and Gap.com rank 1 and 2 amongapparel retailers in sales lured by Web sites. The on-line siteoffers the entire line of clothes, as well as other productsand several unique services. Color swatches enable colorcombinations to be evaluated, for example, and the Shop-ping Aids Division provides two unique resources: With Ox-ford Express, shoppers can peruse the selection of morethan 10,000 button-down dress shirts, and Your PersonalModel allows women to enter their measurements and thenreceive fashion advice.

Sources: Susan Chandler, “Lands’ End Looks for Terra Firma,” BusinessWeek, July 8, 1996, pp. 128 and 131; Robert C. Blattberg and JohnDeighton, “Manage Marketing by the Customer Equity,” Harvard BusinessReview, July–August 1996, pp. 136–44; Frederick F. Reichheld, The LoyaltyEffect: The Hidden Force behind Growth, Profits, and Lasting Value (Chicago:Bain and Company, 1996); Julie Skur Hill, “Online Selling Puts Dent in Stores,Catalogs,” Advertising Age, September 27, 1999, p. S18; and “Mail-OrderLegend Masters E-Commerce,” Computer Shopper, May 1999, p. 280.


General BusinessStrategiesCombining the market scope and competitiveadvantage decisions produces the four generalbusiness strategies presented in Exhibit 3–10.The exhibit provides examples of each strategyfor the airline industry.29

Kiwi Airlines targets the small-business orleisure traveler on routes between Newark,Chicago, Atlanta, and Orlando. Thus, its mar-ket scope is focused on only two segments anda few routes. Kiwi achieves competitive advan-tage by offering low fares with no purchase ortravel restrictions.

Destination Sun Airways focuses on flightsfrom the Eastern seaboard to Florida destina-

tions such as Fort Lauderdale and West Palm Beach. It flies only routes abandonedby the major carriers. Therefore, it maintains an advantage by providing airlineservice not available from other carriers.

Most of the major airlines, such as American, United, and Delta, employ broad,differentiated strategies. These global carriers compete on many of the same routes,but try to differentiate themselves through service, frequent flier programs, andother benefits. These airlines must be price competitive, but their major strategic fo-cus is to find ways to differentiate themselves on nonprice factors.

Although a strategy of broad scope and low pricehas been seen in the airline industry, several carriershave been unsuccessful in implementing it. Examplesare People’s Express, Braniff, and Eastern Airlines.These carriers all failed, largely because none could re-duce its cost structure enough to be profitable at thelow fares.

One airline that might succeed with this strategy isSouthwest Airlines. Southwest began as a narrow-scope, low-price airline in 1971, and the company hasposted profits for 20 consecutive years. The airline nowserves 36 different cities and is expanding into severalothers. Thus, its market scope is broadening. South-west may be able to do what most other airlines havenot: make its no-frills approach work even with abroad market scope.30

As Southwest expands its market scope, many ma-jor carriers have announced plans to go after the short-haul market. Continental has already entered theshort-haul business with CALite. USAir, Delta, andUnited have similar plans. The major carriers are try-ing to borrow from the strategies that have madeSouthwest successful.31 Delta, for example, has part-nered with Air France and Swissair in strategic al-liances to expand its offerings. In addition, DeltaConnection is affiliated with other southeastern air-lines to cover short-haul travel, and it recently pur-chased Comair, enabling even greater accessibilitythroughout the eastern United States.32

Exhibit 3–10

General business strategies

Market scopeFocused Broad

Kiwi Airlines

Southwest Airlines

Destination Sun Airways

AmericanUnitedDelta

BraniffPeople’s Express

Co

mp

etit

ive

adva

ntag

eD

iffer

entia

tion

Lo

w p

rice

Strategic alliances enhance the ability of companies to provideadded value. United Airlines has joined forces with SAS andother airlines to provide expanded market coverage.


Marketing Strategy Decisions Recall from Chapter 1 that a mar-keting strategy addresses the selection of a target market and the development of amarketing mix. The remaining chapters in this book discuss these areas in great de-tail. Our purpose here is to provide an overview of the two basic types of market-ing strategies and to discuss international marketing strategy.

Marketing strategies are developed as functional strategies at the business-unitlevel and as operating strategies at the product level. The two strategies differ inspecificity of decisions. Business strategy decisions are relatively general, intendedto provide direction for all business-level marketing activities. Product strategy de-cisions are very specific, because they guide the actual execution of marketing ac-tivities for individual products. Exhibit 3–11 compares the decisions for the twotypes of marketing strategies.

Business Marketing StrategiesA business marketing strategy must be consistent with the general business strategy.For example, if the general business strategy includes a focused market scope, thetarget market strategy must concentrate on only a few market segments, perhapsonly one. If the general business strategy is low price, the price strategy must be lowprice. Aside from these obvious constraints, several strategic options are typicallyavailable in each marketing strategy area.

Saturn Corporation provides a good illustration of a business marketing strat-egy.33 General Motors established its Saturn business unit to develop new ap-proaches for manufacturing and marketing cars, and the unit reported its first profitin 1993. Saturn’s original general business strategy was a broad market scope and

Exhibit 3–11 Business and product marketing strategies

Decision Area Business Marketing Strategy Product Marketing Strategy

Target market Segmented or mass approach Specific definition of target market to be served

Product Number of different products Specific features of each product

Price General competitive price level Specific price

Distribution General distribution policy Specific distributors

Marketing communications General emphasis on marketing Specific marketing communications programcommunications tools

Being Entrepreneurial

Gap: “Clicks and mortar . . .”GAP has succeeded in the retail clothing business by of-fering value and unique style, as well as a sense of belong-ing to its customers. This approach has now beenextended to their very successful Internet operations. Byaggressively promoting both the store operations and theWeb site, Gap enables both to benefit from the strengths ofeach. In fact, among apparel chains, Gap is now the lead-ing seller in on-line sales. In spite of the difficulty of sellingclothing, as opposed to less-personal types of items, suchas books and computers, Gap’s record is attributable to thefollowing. Overall, Gap recognizes the importance of mini-

mizing the cannibalization of retail sales due to on-line pur-chases. This is achieved through its savvy returns policy:Nonfitting on-line purchases may be returned without has-sle to local Gap stores. At the same time, computer usersvisiting the store are encouraged to register on Gap’s Website; this allows Gap to send weekly e-mails announcingsales and new styles.

Sources: Julie Skur Hill, “Online Selling Puts Dent in Stores, Catalogs,”Advertising Age, September 27, 1999, p. S18; Louise Lee, “ ‘Clicks andMortar’ at Gap.Com,” Business Week, October 18, 1999, pp. 150, 152;and Edward O. Wells, “The Diva of Retail,” Inc., October 1999, p. 38.


a differentiated competitive advantage. The strategy includes a segmented targetmarket, a relatively narrow product line, value-based pricing, selective distribution,and balanced marketing communications. Recently, Saturn has revamped its strat-egy to include an expanded product line with a sport-utility and mid-sized sedan.The sport-utility vehicle is targeted at the comparable Honda and Toyota vehicles.These additions are the result of pleas by Saturn dealers for expanded productlines.34

Saturn focuses on the broad market but divides it into specific segments and de-velops strategies for each. It offers a relatively narrow product line with many op-tions available for each product. Pricing is based on value, and dealers typically donot negotiate. Distribution is selective, with only certain dealers chosen to marketthe Saturn vehicles. Marketing communications are balanced between advertising toinform consumers and get them into the dealers, and personal selling to sell the cars.

Product Marketing StrategiesProduct marketing strategies require very specific decisions (see Exhibit 3–11). Thetarget market is defined in detail, the product features and options specified, exactprices established, actual dealers identified, and a detailed communications pro-gram developed.

These decisions must be consistent with both the general business and the busi-ness marketing strategies. For example, Saturn’s target market for each product fitswithin the market scope of the general business strategy. The unit decides on eachproduct within the business product line, sets prices within the business productguidelines, uses appropriate dealers, and develops a communications strategy sim-ilar to the business communications strategy.

International Marketing StrategiesMarketers must address two key areas when developing international marketingstrategies: selecting an entry strategy and deciding on a strategic orientation.

ENTRY STRATEGY An entry strategy is the approach used to market productsin an international market. The basic options include exporting, joint ventures, and

Technological advances are often the central theme for competitive service strategies. In addition,this Peapod brochure promotes convenience and the ability to enhance shopping decisions throughsuch features as comparison shopping and coupon-redemption capabilities.

ThinkingCritically

• What planningissues would themanufacturers ofSaturn automobileshave to confront indeciding whetherto use a standard-ized marketingstrategy forpromoting its carsin Europe?

• What effects wouldnot using a stan-dardized strategyhave on marketingcosts?

• What possiblemarketing strate-gies might BMWimplement in theUnited States asopposed toEurope?


direct investment. Each option has advantages and disadvantages in level of invest-ment and amount of control.

Exporting is a method of selling products to buyers in international markets. Theexporter might sell directly to international buyers or use intermediaries, such asexporting firms from the home country or importing firms in the foreign country.Exporting typically requires the lowest level of investment, but it offers limited con-trol to the marketer. Carrier (commercial air conditioners), Caterpillar (construc-tion equipment), and Chrysler (cars) are firms actively engaged in exporting.35

At the other extreme is direct investment, where the marketer invests in produc-tion, sales, distribution, or other operations in the foreign country. This normallyrequires the largest investment of resources, but it gives the marketer the most con-trol over marketing operations. Wang Laboratories, for example, emphasizes directinvestment by operating 175 sales and distribution offices worldwide.36 UnitedKingdom’s Cadbury Schweppes PLC purchased Industrias Dulciora SA to give Cad-bury the second-largest market share in Spain’s confectionery market.37

In between these extremes are various joint-venture approaches. Joint venturesinclude any arrangement between two or more organizations to market products inan international market. Options are licensing agreements, contract manufacturingdeals, and equity investments in strategic partnerships. Investment requirementsand marketing control are usually moderate, although this depends upon the detailsof each joint venture. Examples of joint-venture strategies include Apple Com-puter’s licensing of its new PowerPC chip to Asian firms such as Taiwan’s Acer; thejoint venture for pesticides, named Qingdao Ciba Agro Ltd., between Switzerland’sCiba-Geigy AG and China’s Qingdao Pesticides Factory; and the marketing part-nership between Delta Airlines and Virgin Atlantic Airways to coordinate flightsand give access to London’s Heathrow Airport.38

INTERNATIONAL STRATEGIC ORIENTATION Firms operating in interna-tional markets can use two different orientations toward marketing strategy. Witha standardized marketing strategy, a firm develops and implements the same prod-uct, price, distribution, and promotion programs in all international markets. With

Successful product strategies emphasize desired end benefits. Toyota promotes their cars’technology in foreign markets.


a customized marketing strategy, afirm develops and implements a dif-ferent marketing mix for each targetmarket country.39 Most interna-tional marketing strategies lie some-where between these extremes,leaning toward one or the other.

These different marketing mixesmay involve changes to the commu-nications mix, the product itself, orboth. At the corporate level, a globalstrategy views the whole world as aglobal market. A multinational strat-egy recognizes national differencesand views the collection of othercountries as a portfolio of markets.

Coca-Cola, for example, uses alargely standardized marketing strat-egy, where the brand name, concen-trate formula, positioning, andadvertising are virtually the same

worldwide, but the artificial sweetener and packaging differ across countries.40 TGIFriday’s restaurants are successful in the Far East using the same concepts as in theUnited States. The mix of American memorabilia and chatty, high-fiving waitersproduces high sales per store. In fact, the TGI Friday’s in Seoul generates double thesales volume of an average restaurant in the United States.41

Nissan, in contrast, uses a more customized marketing strategy by tailoring carsto local needs and tastes. One success has been the Nissan Micra, designed specifi-cally to negotiate the narrow streets in England.42 Similarly, Campbell’s Soup getshigher sales by adapting its products to local tastes. For example, sales acceleratedwhen it introduced a cream of chile poblano soup to the Mexican market.43

Some companies are moving from customized to standardized marketing strate-gies. Appliance marketers traditionally customized products for each country. ButWhirlpool, through extensive research, found that homemakers from Portugal toFinland have much in common. It now markets the same appliances with the samebasic marketing strategy in 25 countries.44

The adaptation versus standardization decision is subject to a number of some-times conflicting factors. Factors encouraging standardization include economy-of-scale advantages in production, marketing effort, and research and development. Inaddition, increasing economic integration in Europe and intensifying global com-petition also favor standardization. In many cases, however, demand and usageconditions differ sufficiently to warrant some modifications in marketing-mix of-ferings. The factors favoring adaptation in international strategy include differinguse conditions, governmental and regulatory influences, differing consumer behav-ior patterns, and local competition. Adaptation is also consistent with the marketorientation principles of the marketing concept. Accordingly, standardization mayonly hold for brands with universal name recognition and for products that requirelittle knowledge for effective use, such as soft drinks and jeans.45

One study of 35 companies in Japan, Europe, and the United States that havesuccessfully strong brands across countries revealed four common ideas about ef-fective global branding:

1. Stimulate the sharing of insights and best practices across countries.2. Support a common global brand-planning process.3. Assign managerial responsibility for brands in order to create cross-country

synergies and to fight local bias.4. Execute brilliant brand-building strategies.46

Standardized and customized marketing strategies suggest two alternativeapproaches for the design of international marketing strategy. Coca-Cola uses astandardized approach for certain apsects of its marketing mix.


Executing Strategic Plans Developing strategic plans is one thing; exe-cuting them effectively is another. One route to effective execution of strategic plansis encouraging individuals within an organization to work together to achieve or-ganizational objectives, reflecting the development of relationships within the or-ganization. Two forms of teamwork are important: across the different functionalareas and within the marketing function. In addition, comarketing alliances enablepursuit of strategic objectives under certain conditions.

Cross-Functional TeamworkTraditionally, the different functions within an organization worked largely in isolation.Manufacturers manufactured, engineers engineered, marketers marketed, and ac-

countants accounted. With little direct communicationbetween these functions, their orientations were oftenmore adversarial than cooperative, especially since eachfunction has somewhat different objectives and operatesfrom a different vantage point.

Exhibit 3–12 presents the different orientations be-tween marketing and the other organizational functions.The potential difficulties in getting different functions towork together as a team are clear. Why should produc-tion care about marketing’s interests when it is supposedto produce as much as possible as cheaply as possible?There was no reason for one function to care about an-other in this type of situation, and typically they did not.

The problem is that if an organization does not pro-duce products that consumers will purchase, it does not matter how low productioncosts are. More and more organizations are realizing this and adopting a marketing phi-losophy, which means that everyone within the organization focuses on satisfying cus-tomer needs. And satisfying customer needs requires teamwork within an organization.

Many organizations have overcome differences in functional objectives and ori-entations by communicating the importance of teamwork. They reward the meet-ing of organizational goals such as customer satisfaction instead of merelyfunctional goals such as low-cost production.

An interesting example of cross-functional teamwork is in the use of multifunc-tional teams to work with organizational customers. Companies such as Hewlett-Packard, Du Pont, Polaroid, and CIGNA send multifunctional teams from marketing,

manufacturing, engineering, and R&D to visit specificcustomers regularly. The objective is to promote team-work among employees from different functional areas,to develop a customer focus in all functional areas, to col-lect useful marketing information about customers, andto improve customer relationships. The value of thesemultifunctional customer visits is expressed by an R&Dmanager:In the past, engineering and marketing would argue about aproduct. . . . Instead, now we have marketing, manufactur-ing, and engineering all together deciding on the goal fromthe beginning. It’s more of a trust and team-building kind ofthing. We traveled together and went to all of these cus-tomers together. And we had conversations following it sothat we trust each person’s opinion more.47

Marketing TeamworkEven within marketing functions, teamwork is not uni-versal. Different marketing functions often operatesomewhat independently—advertising people perform

Exhibit 3–12

Business function orientations

Function Basic Orientation

Marketing To attract and retain customers

Production To produce products at lowest cost

Finance To keep within budgets

Accounting To standardize financial reports

Purchasing To purchase products at lowest cost

R&D To develop newest technologies

Engineering To design product specifications

Many organizations have emphasized cross-functional teamworkto overcome barriers caused by pursuit of functional objectives,such as low-cost production, rather than long-term customersatisfaction. Hewlett-Packard combines new products withteamwork across functions to enhance market acceptance.


advertising activities, salespeople sell products, brand managers manage theirbrands, and marketing researchers engage in marketing research. Many firms havelittle coordination among the different marketing functions. Today, however, theleading organizations are coordinating their marketing efforts and requiring closecontact among the different marketing functions.

Many consumer product manufacturers, for example, foster close coordinationamong brand managers, salespeople and sales managers, and marketing researchersto execute tailored marketing programs for individual retail stores. Working as ateam, they uncover information about the customers of each store. The sales andbrand managers then work together to execute specific marketing programs foreach store to improve sales and profits.

Kodak’s reorganization illustrates the importance of marketing teamwork. Inchanging from a product-driven to a marketing-driven philosophy, the company es-tablished a group to integrate marketing functions that had been run separately,such as advertising, sales promotions, public relations, sales, and marketing re-search. The integrated group will work together in developing and executing allmarketing plans.48

P&G uses a “business management team” approach to run each of its 11 productcategories in efforts to encourage global brand success. The teams consist of four man-agers, headed by an executive vice-president, who have line authority for research anddevelopment, manufacturing, and marketing in each region. For example, the head ofhealth and beauty aids in Europe also chairs the hair global category team. Because theteams are headed by top level executives, there are no organizational barriers to car-rying out decisions.49

Bobbie Oglesby comments on growth challenges: “The Internet is fundamentallychanging how we market products at Microsoft. With our Web sites and e-mailalerts/newsletters, we are able to form direct relationships with customers. Weare also able to provide much more personalized and customized information tomeet their individual needs, making one-to-one marketing much more cost-effective than it was in the past.”

Co-Marketing AlliancesCo-marketing alliances include contractual arrangements between companies offer-ing complementary products in the marketplace. The alliance between Microsoftand IBM was instrumental in the growth of Microsoft. Such alliances are increasingin frequency and enable firms to gain specialized resources from previously compet-ing organizations. The success of co-marketing alliances is dependent on the care ex-hibited in partner selection and the extent to which relationships are balanced inpower and benefit to both partners. Like in relationships between suppliers, cus-tomers, and employees, trust and commitment to the relationship in a co-marketingalliance engender cooperation and profitable network performance.50

Solution selling, in which products are marketed together as a means to constructa meal, has become quite popular. Interestingly, this approach has brought togetherprevious competitors, such as Tyson and Pillsbury. Their coordinated effort to sellSliced and Diced vegetables and chicken involved all aspects of partnering, from us-ing national advertising to encouraging retailer support.51

Other alliances include Northwest Airlines and Visa, Kellogg’s Pop-Tarts andSmuckers Jelly, and Krup’s coffeemakers and Godiva chocolate. So, too, hasQuaker Oats partnered with Nestlé in the development of granola bars with candy-bar appeal. Mattel and P&G are combining to share information and to promotetheir diaper brand, Pampers Playtime. And the co-branding of credit cards (e.g.,Rich’s and Visa) by retailers is also increasing; it enhances the visibility of the par-ticipating retailer. Determinants of the success of these alliances include prior atti-tudes toward the two brands and the perceived appropriateness of both brand fitand product fit. More-familiar and well-known brands are most effective at gener-ating positive reactions to brand alliances. In particular, a branded component (e.g.,Intel, NutraSweet) carries a certain equity and signals quality and performancemore strongly than conventional attributes.52


Summary1. Discuss the three basic levels in an or-

ganization and the types of strategicplans developed at each level. Organiza-tions can be defined at three basic levels. Thecorporate level is the highest and responsiblefor addressing issues concerning the overall or-ganization. The business level is the basic levelof competition in the marketplace. It consists ofunits within the organization that are operatedlike independent businesses. The functionallevel includes all the different functions within abusiness unit. Strategic plans are developed ateach level. Corporate and business strategicplans provide guidelines for the development ofmarketing strategic plans and product market-ing plans.

2. Understand the organizational strategicplanning process and the role of mar-keting in this process. The general strategicplanning process consists of examining thecurrent situation, evaluating trends in the mar-keting environment to identify potential threatsand opportunities, setting objectives based onthis analysis, and developing strategies toachieve these objectives. Strategic marketingdescribes marketing activities at the corporateand business levels. Marketing managementemphasizes the development and implementa-tion of marketing strategies for individual prod-ucts and services.

3. Describe the key decisions in the devel-opment of corporate strategy. The keycorporate-level decisions include establishinga corporate vision, developing corporate objec-tives and allocating resources, determining a

corporate growth strategy, and defining thebusiness-unit composition. Corporate strategydecisions affect strategic planning at all lowerorganizational levels. And strategic plans atlower organizational levels are designed to ex-ecute the corporate strategy.

4. Understand the different general busi-ness strategies and their relationship tobusiness marketing, product marketing,and international marketing strategies.General business strategies require decisionsconcerning market scope and competitive ad-vantage. Market scope can range from fo-cused to broad; competitive advantage mightbe based on pricing or differentiation. Combin-ing the market scope and competitive advan-tage options produces four general businessstrategies. A firm’s business marketing strat-egy must be consistent with its general busi-ness strategy. Decisions on market scope andcompetitive advantage directly affect businessmarketing strategies. Product marketingstrategies must also be consistent with andserve to execute business marketing strate-gies. International marketing strategies requiredecisions about entry method and strategicorientation.

5. Realize the importance of relationshipsand teamwork in executing strategicplans. The complexity of today’s business en-vironment requires cooperation both acrossdifferent business functional areas and withinthe marketing function itself. Cross-functionaland marketing teamwork are necessary to exe-cute strategic plans effectively.

Understanding Marketing Terms and ConceptsCorporate level 51

Business level 51

Functional level 52

Corporate strategic plan 52

Business strategic plan 52

Marketing strategic plan 53

Product marketing plan 53

Strategic marketing 54

Marketing management 55

Business networks 55

Corporate vision 56

Core values 56

Core purpose 56

Core competency 58

Market penetration strategy 59

Market expansion strategy 59

Product expansion strategy 60

Diversification strategy 60

Unrelated diversification 60

Related diversification 60

Strategic business unit (SBU) 60

Market scope 62

Competitive advantage 63

Entry strategy 66

Exporting 67

Direct investment 67

Joint ventures 67

Standardized marketing strategy 67

Customized marketing strategy 68

Global strategy 68

Multinational strategy 68

Co-marketing alliances 70


The merger between previous BankAmerica andNationsBank to form Bank of America now leaves HughMcColl in charge of an organization with $614 billion inassets. This makes Bank of America the largest and mostnationwide bank, larger than Citicorp and ChaseManhattan. The bank has some form of relationship withmore than two million businesses, 85 percent of thenation’s largest businesses, and over 30 millionhouseholds. Now earnings growth hinges on making thebank’s 4,500 branches and 14,000 ATMs run smoothly.The results of frequent acquisitions to build a companythis size, as well as managerial turnover associated withbuying firms, have caused problems in transition and lossof market share in some areas. In addition, operating

costs are increasing. The general process following thebank’s acquisitions is to feature streamlined, lightlystaffed branches.

The eventual key to success will be the ability of Bankof America to handle its various customer types and itsown employees. For example, the identification ofcustomers by profitability is a concern. Bankersencourage profitable customers by offering CDs atpremium rates and discourage nonprofitable customersby charging them higher checking fees; the ability tomake these distinctions was limited after the merger withBarnett Banks in Florida. Bank of America also lost asignificant share of its private trust customers after it tookover Boatman’s Bancshares in Missouri. As Bank of

Thinking About Marketing1. How does a firm’s corporate vision affect its market-

ing operations?

2. How does marketing differ for a new, single-productventure and a large, multiproduct corporation?

3. What are the basic options for a corporate growthstrategy?

4. Look at “Earning Customer Loyalty: Lands’ End: Re-tention based on quality.” How might Lands’ Endgrow through market penetration?

5. How do business marketing strategies and productmarketing strategies differ?

6. What are the keys to effective execution of strategicplans?

7. Refer to “Being Entrepreneurial: Gap: ‘Clicks andMortar.’ ” What core competency drives Gap’s Inter-net success?

8. How does an understanding of the marketing envi-ronment, as discussed in Chapter 2, help in the de-velopment of strategic plans?

9. Why do firms change their business composition?

10. How do corporate objectives affect marketing oper-ations?

Applying Marketing Skills1. Read an annual report for any company. Using onlythe information in the report, describe the firm’scorporate, business, and marketing strategies.2. Pick a recent issue of Business Week, Fortune, or anyother business publication. Review it to identify examplesof corporate growth strategies used by different firms.

3. Interview a marketing executive at a local firm. Askthe executive what types of strategic plans the firmdevelops and what is included in each strategic plan.Also, inquire about the firm’s strategic planning process.

Using the www in MarketingActivity One Go to the home page ofHoneywell (http://www.honeywell.com).

1. What does the site say about core competencies andcorporate vision?

2. How are the businesses organized within the largercorporation?

3. How does the site describe Honeywell’s emphasis onthe production of quality products?

Activity Two Find the Internet home page ofa company that you admire and that offers multipleproduct lines.

1. What company did you choose? Why?

2. What strategic business units make up the company?

3. What is the overall mission for the firm? Whatmarketing strategies are used to support that mission?

4. Describe the primary product benefits used as thefocal point for the marketing strategy of one of thecompany’s products.

Making Marketing DecisionsCase 3-1 Bank of America: Appealing to MultipleCustomer Categories


America develops its new product identity, plans include anew initiative to train branch bankers to handle moresmall-business products. On the positive side, Bank ofAmerica Corp. has announced it will no longer give outcustomer information to telemarketers.

McColl argues that the mergers enhance scale, whichenables the company to spread costs over a largercustomer base and is more important as the financialservices industry becomes more technology driven.Moreover, consolidation in the industry has been fueled bythe encroachment of nonbank competitors and changingregulations that have allowed banks to expand into newproduct categories, as well as into new geographic regions.

Questions

1. What obstacles does Bank of America face in itsoperations as a national bank operating across sucha diverse geographical area?

2. How do banks organize their operations in regard tocustomer categories?

3. What difficulties arise in providing customer servicefor such large and complex organizations?

4. What opportunities for competition confront Bank ofAmerica?

SOURCES: http://www/bankofamerica.com/annualreport/html/sharemsg.cfm; “Bonding,” The Economist, April 18, 1998, p. 7; Eryn Brown,“BankAmerica: An Open Dialogue,” Fortune, August 3, 1999; Bernard Condon, “Who’s Minding the Branches of BofA?” Forbes, September 6, 1999,p. 58; Timothy L. O’Brien, “Big Bank Says It Won’t Share Customer Data,” The New York Times, June 12, 1999, p. B1; and “A Megabank in the Making,”Business Week, September 13, 1999, p. 144.

Case 3–2 Virgin Atlantic Airways: Flying toward U.S. Markets

Virgin is best known for its competition withthe larger and more staid British Airways.Virgin has benefited greatly in Great Britainfrom its underdog role in competing for the

lucrative transatlantic travel business. In the smaller andconfined British environment, Virgin has gained widerecognition. The company aggressively promotes andprices air travel fees and services and has developed verystrong brand recognition. Its corporate reputation,regardless of the business endeavor, is clear: innovation,value for the money, and an element of fun.

Virgin is now applying this philosophy in its efforts tobreak into the U.S. market. Questions remain, however,about its ability to succeed in the U.S. market where it willface both more competitors and an environment in whichcompanies typically spend a lot more on marketing. Oneaction taken by Virgin was the opening of a 75,000-square-foot megastore in New York’s Times Square. The store isdescribed as the world’s largest record, movie, book, andmultimedia store. Virgin’s soft-drink brand, ranked in GreatBritain above Pepsi, has been introduced in selected U.S.markets. Its airline does indeed possess considerablename recognition among business travelers in the UnitedKingdom. Recently, Virgin has begun aggressivelypromoting incentive vouchers that can be purchased andapplied for whole or part payments on package holidays,flights, hotel accommodations, and car fares.

Virgin gets much credit for competing with BritishAirways, and its “cool” image has established a nice nichein the United Kingdom. The cola success has been due toprice; the airline success has been due to unique customer

services and creative promotions and advertising. Yet, thehurdles confronted by Virgin in its efforts to successfullycompete in the United States are formidable.

Virgin Airways continues to make heavy use of a varietyof promotions and media in efforts to strengthen its positionin competition for cross-Atlantic travel. For example, VirginAtlantic has targeted United and American airlines fortravelers between Chicago and London using billboardsmentioning the Chicago fire. In an effort to boost awarenessin the United States, Virgin Atlantic has advertised usingbillboards and full-page ads promoting their Web site. Otherpromotions tied the company to the debut of the secondAustin Powers movie, The Spy Who Shagged Me. A cross-promotion between Virgin and Joe Boxer promotes round-trip travel to London. In addition to the airline, RichardBranson has now attached his name to dozens of unrelatedventures and some marketing experts warn the brand nameis in risk of becoming diluted. Many of these venturesinvolve Branson only putting up his name for controllinginterests, while wealthy partners provide the required funds.

Questions

1. What major obstacles will Virgin face in the U.S.expansion that are not part of marketing within theUnited Kingdom?

2. What is your evaluation of Virgin’s fun-orientedmarketing strategy?

3. What problems occur when products from the samecorporate brand (Virgin) are differentiated on differentbases (price versus service)?

SOURCE: “Advantages of the Versatile Voucher,” Marketing: Incentive 95 Preview, April 27, 1995, pp. 5–6; Edmond Lawler, “How Underdogs OutmarketLeaders,” Advertising Age, November 13, 1995, p. 24; Cyndee Miller, “The British Invasion,” Marketing News, June 3, 1996, pp. 1, 10; and “Virgin AtlanticShortlisted for Advertising Campaign of the Year,” Marketing Week, February 3, 1995, p. 5; Becky Ebenkamp, “JB, Virgin Unite Again for U.K. Trip,”Brandweek, March 8, 1999, p. 14; Julia Flynn, Wendy Zeller, Larry Light, and Joseph Weber, “Then Came Branson,” Business Week, October 26, 1998,pp. 116–20; “Virgin Atlantic Ads Take Aim at United, American,” Brandweek, October 11, 1999, p. 8; and “Virgin Aims to ‘Shag’ Greater Awareness inU.S.,” Adweek, June 7, 1999, p. 5.