In the business world, profitability may be considered as one of important factors that a company is looking for because it can refer to its survival in the business in terms of capability to invest. It appears that marketing department might play a crucial role in increasing its sales by applying suitable marketing tools in order to encourage consumers to make purchase decisions on its products. However, Board of Directors does not realise an importance of marketing executives in the boardroom. They might prefer to be interested in important issues which would severely affect the company and also financial reports such as balance sheet, income statement, statement of cash flow. It is obvious that they might focus on operational and financial aspects more than others. This assignment will point out essentials of marketing function to Board of Directors, especially for the Chief Executive Officer. In addition, the reason why marketing should be focused as a strategic activity will be defined here.
A Relationship between Board of Directors and Marketing Department
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Board of Directors (BOD) is a group of persons who are elected by shareholders of a company in order to take control of an overall business. Susan Shultz (2001) describes that BOD should approve corporate strategy and evaluate major investment. Moreover, they should provide general suggestion of the business and advise management on significant issues facing the corporation, as well. Neville Bain (2008) also states that there are four main tasks which BOD should pursue. Firstly, they establish vision, mission and values of the company. Secondly, they decide the strategy and the structures. Thirdly, they delegate authority to management and monitor and evaluate the implementation of policies, strategies business plans. Lastly, they account to shareholders and be responsibility to stakeholders. BOD is comprised of both executives and non-executives directors. Executive directors are elected from executives within the company. On the other hand, non-executive directors are chosen on the basis of their previous experience which is related to the business (Johnson, Whittington & Scholes, 2011).
Marketing Department is responsible for creating value for customers by understanding customer needs and building customer relationships in order to capture value from customers in return (Kotler & Armstrong, 2012). Marketing are positioned as one of primary activities according to the Michael Porter's value chain within the company. By gaining reinforcement from both support and other primary activities such as operations, logistics, service, it can deliver value to consumers in order to produce higher margin products.
Due to the fact that Board of Directors is apparently on the top of organisation chart, their responsibility is concerned with the organisational management and overall activities in the organisation as a whole. Each function in the organisation chart would be paid attention to. In a company, there are five key activities which would be involved such as general management, marketing, finance, accounting, and operation. In order to operate the business smoothly, all the mentioned activities would collaborate to achieve the organisational goal. Vision, mission, goal and objectives of the company should be clearly appointed by top management team and those should be delivered to all employees. Peter Drucker's Management By Objectives (MBO) is one of an approach which might be worthwhile for a company. Basically, employees have been encouraged to set goal and objectives. Consequently, all players in the organisation might work towards the same goal. It would help an organisation planning, directing, controlling and assessing its management systematically. Moreover, MBO may indicate performance of the organisation, as well.
One of important things which BOD is concerned with is financial performance and shareholders. Marketing activities is also significantly engaged to it. Peter Doyle (2000) points out how marketing creates value and how Shareholder Value Analysis (SVA) can be applied as a powerful technique for developing and justifying marketing strategies. SVA is a kind of financial measures which illustrate the contribution of marketing to the company's financial performance. There is a fascinating relationship between marketing and SVA. 'Without marketing, SVA is just another accounting tool that sacrifices long-term competitiveness for short-term profits' (Doyle, 2000: 310). On the other hand, SVA demonstrates a framework for marketing to collaborate with other functions in the company more effectively. Graham Hooley et al. (2004) also describe the relationship between marketing and performance outcomes. High level of market orientation would enhance resources such as marketing assets and market innovation capabilities (Slater and Narver, 1995; Han et al., 1998 cited in Hooley et al., 2004). Well-developed marketing resources may lead to higher market performance through an increase in customer satisfaction, customer loyalty, sales volume and market share, which in turn bring to financial performance at last (see Figure 1).
Always on Time
Marked to Standard
Figure Marketing and performance outcomes
Source: Hooley, G., Saunders, J. & Piercy, N. (2004) Marketing Strategy and Competitive Positioning , pp. 21.Market-oriented culture
Customer satisfaction & loyalty
Sales volume & market share
Jean Johnson et al. (2012) indicate four key dimensions of a company's strategic orientation which would impact its market orientation strategy by conducting the cross-sectional quantitative research. The study sampled 800 companies from various sectors including electronics, fabric, transportation, computer equipment. The first dimension is a company's aggressiveness which refers to its efforts to gain market share, eagerly. Secondly, it concerns how much the companies contributes to future orientation, which mainly focuses on building sustainable competitive advantage. Thirdly, the marketing formalisation would be a systematic approach to help decision makers tackling with explicit issues, understanding market and enhancing customer satisfaction through the manoeuvre. Lastly, risk proclivity is a consistent paradigm of taking or avoiding risk of an organisation. The result reveals that a company's aggressiveness vigorously affects market orientation. For large organisations, their strategic orientation tends to be inconsistent with a market orientation due to a lack of concentrating on sustaining an existing market. However, risk averse large companies tend to build their market formalisation in order to strengthen relationships with existing customers.
Roles of marketers in Board of Directors
Although marketing might crucially take part in an organisation, now it appears that there might be issues which should be considered. Mark Davies & Barry Ardley (2012) point out that strong marketing leadership takes a crucial part in the value of marketing. They also reveal that there are five factors which involve in reducing the role of marketing department in the board meeting. Firstly, according to Malcolm McDonald & Hugh Wilson (2004) and Jagdish Sheth & Rajendra Sisidia (2005), the role of marketing department has been reduced in terms of sales support, tactical promotional activities or marketing communication. Moreover, other managers have intervened in the core strategy which formerly relates to marketing. Secondly, young marketing executives lack skills in team-working, decision making and negotiation (Dacko, 2006) which are necessary for working effectively. Thirdly, marketers are likely insensitive to environmental change such as economic downturn, low cost competitors, technological advances. Fourthly, competency required for marketing is neglected. Comparing to accountants who tend to follow accounting regulations tightly. While marketers tend to be more flexible due to their responsibilities. Lastly, as a result of lack of model of measurement, marketing accountability is difficult to achieve.
In the meaning of marketers who want to be promoted to executive level, Roger Bennett (2009) states that they need to prepare themselves in terms of knowledge and problem solving skills, from his research of which the data is from senior marketers in 209 registered companies in the food and beverages manufacturing sector. Additionally, emotional intelligence, social behaviour, financial and general management knowledge would distinguish from others. Coral Ingley & Nicolas Van de Walt (2001) conducted a research on 'The Strategic Board: the Changing Role of Directors in Developing and Maintaining Corporate Capability' by analysing the selection, evaluation and performance of board of directors in New Zealand. It is obvious that not only strategic vision and leadership, but also individual competency are an essential qualification in director capability.
Marketers as strategists
It appears that marketing department might be reduced its strategic role in a company, especially for its executive board. Although the Board of Directors realises how important marketing is, they may not rest assured that marketing is highly relevant to the word 'strategy'.
According to Alfred D. Chandler, 'strategy is the determination of the long-run goals and objectives of an enterprise and the adoption of courses of action and the allocation of resource necessary for carrying out these goals' (Johnson et al., 2011: 4). Strategy comprises of three levels which spread from top management level. Corporate strategy defines a company's overall direction in terms of objectives of the company, acquisition and allocation of resources and coordination of every Strategic Business Units (SBUs). Business strategy focuses on one range of business. It may deal with positioning the business against competitors, anticipating changes in environment. Functional departments such as manufacturing, marketing, finance might develop their strategies in terms of resources, processes and people in order to implement both corporate and business strategies (see Figure 2).
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Figure Hierarchy of strategy
Source: Wheelen, T. & Hunger, D. (2004) cited in Johnson, G., Whittington, R.& Scholes, K. (2011) Exploring Strategy (9th edition), pp. 38.
As a part of an organisation, marketing has to cope with the change in marketing environment such as new entrants, customer behaviour, technological update. In order to build and maintain competitive advantage of a business, marketers should formulate marketing strategies to fit the environment and capabilities of the company. However, the strategies might reflect to vision, mission, goal and objectives of its company. Not only environmental analysis, but also analyses on customer, competition and industry would be recognised. The information which is derived by applying the PESTEL analysis and the Porter's Five-Force model, would encourage marketers to define their strategic position in the market. After that, they would develop strategic options in terms of marketing directions and methods by which the strategy might be pursued, based on competitive advantages. When they evaluate all strategic alternatives and implement by putting in the operating plan, a review of strategies should not be neglected through strategy control and metrics.
Enrique Claver et al. (2007) conducted a case study on the clarification of the relationship between environmental management and firm performance of a Spanish agricultural cooperative which is known as COATO. It succeeds in broadening its agricultural activities to various products such as vegetables, fruits, honey, almond, oil. It is awarded for outstanding achievement which guarantees quality and sustainability of the cooperative. Not only are there agricultural products, but also services for members of the cooperative for example financial services, technical support, fuel station, training. According to the research's findings, COATO examines environmental factors that would have an influence on the business in order to formulate a corporate strategy to gain a competitive advantage. After carrying out the research, the organisation might be affected by four factors which are environmental regulations, stakeholders, the Spanish cooperative sector, and complementary resources and capabilities. The last two factors involve with environmental management. COATO found that many Spanish cooperatives lack technology and facilities for toxic and waste management. It can reflect obstacles to cooperatives' adaptation to environmental issues. The more there are good environmental management practices, the more positive influence they may have. These information helped the managers to determine the strategic direction which is eventually transformed into 'proactive environmental strategy'. The strategy comprises of environmental management-prevention and pioneering entry strategy. Its performance is evaluated on three aspects which are environmental performance, economic performance and competitive advantage. At the end, the acceptance of the proactive strategy positively affects both environmental and economic performance. Moreover, there is a high probability of gaining a competitive advantage through cost and differentiation.
Kyung Hoon Kim et al. (2011) studied the relationships between Sustainable Competitive Advantage (SCA), marketing strategy and employment brand equity in the health service industry in the Republic of Korea in 2009. Researchers believe that marketing strategy which is established from a vision and objectives of an organisation would drive that organisation to be the leader in the market. His research findings indicate doctors working in hospitals agree that sustainable competitive advantage has a noteworthy influence on marketing strategy. The higher level of SCA is, the stronger marketing strategy is. In addition, marketing strategy has a significant influence on hospitals' image.
Michael Volkov et al. (2002) studied consumer behaviour and consumer complaint behaviour, focusing on advertising area, in Australia. Consumer complaint behaviour herein means a set of behavioural and non-behavioural responses to negative perceptions on advertisements. The research shows that there is a significant difference between complaints and non-complainants and advertising complainants tend to widely spread negative messages on products.
Above three researches are examples of implementing strategic marketing to improve performance of the organisations. Not only macro and micro environments, but also 'internal customers' that COATO, a Spanish cooperative, analyses and come up with a 'proactive environmental strategy' which make it become successful in the business. While doctors in hospitals in Republic of Korea tends to agree that Sustainable Competitive Advantage has an influence on brand image of the hospitals. And the study of Michael Volkov et al. shows that consumer behaviour is different and may response to the same marketing tools in different ways. Marketers who possess this information might gain competitive advantage by developing suitable marketing tools.
Marketing is one of primary activities which drive a company to achieve goal. Clear vision, mission, goal and objectives which are developed by board of directors in the corporate level, might enhance the company to create competitive advantage. Consequently, board of directors and shareholders might be satisfied by a greater number of financial performance, especially for profitability. Marketing department would be responsible for monitoring marketing environment and appraising the company's capability to create, evaluate, choose and implement the most appropriate marketing strategy. However, every function in a company should work collaboratively and strategically to reach the goal.
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Generic strategy for creating competitive advantage
G.T. Lumpkin et al. (2002) thoroughly examine
Sustainable competitive advantage
Sustainable competitive advantage in a company
C. Marlena Fiol (2001) argues that organizational identity as a core competency leading to competitive advantage by contextualizing and providing meaning to new adaptive behaviours. I suggested that organizational identity represents a relatively inimitable resource, leading to sustainability of the advantage.
Figure TQM process, activities, tacitness, complexity and sustainability of advantage
Source: Reed, R., et al. (2005) 'Total Quality Management and Sustainable Competitive Advantage', Journal of Quality Management, pp. 13.
Role of marketing in sustainable competitive advantage
Unique and valued products
Clear, tight definition of market targets
Enhanced customer linkages
Established brand and company credibility
You are to prepare a persuasive paper in which you attempt to convince your (hypothetical) manager to take a particular action related to a strategic marketing topic of your choice
Your paper will be related to issues we discuss in class
Sample topics might include:
- Market orientation is not the only important business orientation of a successful business
- Listening to the customer can harm dynamic innovation in the long-term.
- The important role of market driving behaviour versus market driven behaviour
You are to prepare a persuasive paper in which you attempt to convince your (hypothetical) manager to take a particular action related to a strategic marketing topic of your choice. Your paper will be related to issues we discuss in class. Sample topics include: why new research approaches should be used to understand consumer markets in addition to consumer survey approaches, or why market orientation is not the only important business orientation of a successful business, or why listening to the customer can harm dynamic innovation in the long-term (*NB* Please note this paper must not be on the role of marketing within corporate boards - as outlined in the 'Get the Evidence Brief above'). A good example of a topic could be the important role of market driving behaviour versus market driven behaviour, illustrating your paper with examples from the Virgin Galactic Space Project (http://www.virgingalactic.com). See the following quotations:
Harris and Cia (2002:172) explain that "a small number of leading theorists reminded the marketing academy that being 'market driven' was not necessarily the solution for, or indeed the practice of, every firm." The emergence of this research agenda went further, cautioning against the institutionalising of "overly close relationships", not least because this would "suppress innovation and harm firm performance" (Harris and Cia, 2002:173).
Keep in mind that many bosses, yours included, may have little professional management training and even less knowledge of social science (not having the benefits of university education and Birmingham University degree!). Criteria for evaluating your paper will be based on 1) how effectively you marshal the best evidence to make your case, 2) the extent you have made your case in a strong, truthful, and convincing manner, and 3) how well you use facts about the particular organization (again, real or hypothetical) to help you make your case.
why new research approaches should be used to understand consumer markets in addition to consumer survey approaches
why market orientation is not the only important business orientation of a successful business
why listening to the customer can harm dynamic innovation in the long-term
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THE 'LEARNING LOG'
The 'Contemporary Issues in Strategic Marketing' is one of my interesting subjects for studying at the University of Birmingham. After being rotated to participate in a marketing division, I have been attacked by many marketing issues which the management team would like to know how to cope with. Although I have taken many marketing courses, in some cases, it is difficult to apply those theories and put that into practice because it seems hypothetical and cannot be achieved. Professor Philip Kotler, a famous marketing guru, said 'Marketing takes day to learn. Unfortunately it takes a lifetime to master'. I could not agree with his quotation more.
In week 1, 'if you don't know where you are going, any road will take you there' was a quotation from Alice in Wonderland which was raised to introduce the strategic marketing. It can obviously illustrate the competitive marketing framework. In order to formulate any plan efficiently, strategists or planners should know what their organisation wants to achieve, through their mission, vision and objectives. If they create any plan without any goal, it would be vague management which may lead to a failure of the organisation. Strategy is also important. 'Strategy is the long-term direction of an organisation' (Johnson,Whittington, & Scholes, 2011: 3). It can identify how to allocate limited resources in a direction that would create a Sustainable Competitive Advantage (SCA). SCA would be worthwhile for an organisation in the long run as long as it can maintain its competitive position in the market. Strategic management could be categorised into three hierarchical levels. Firstly, corporate strategy directs an organisation's overall business management such as defining mission, setting objectives and goals, designing the business portfolio (Kotler & Armstrong, 2012). Secondly, business strategy is concerned about activities under a Strategic Business Unit (SBU) such as targeting a niche market, positioning. Lastly, functional strategy is developed by a functional department such as marketing, human resources, production, in order to achieve corporate goal. Examples of functional strategy are a selection of distribution channels, lowering prices. All three levels of strategy must be consolidated for corporate success (West, Ford & Ibrahim, 2012). From my previous experience in a government agency, my executive board has emphasised that corporate strategy should be clear and must describe a direction of the organisation. In addition, the strategy should be consistent with the government policy. Top and middle-level managers from all divisions will have annual meetings to integrate SBUs' activities following to the vision, mission and objectives of the organisation. Every primary and support activities in the value chain such as operations, marketing and sales, procurement, should work in synergy in order to achieve the organisational goal. It is obvious that some divisions would like to set their Key Performance Indicators (KPIs) as the first priority to achieve. Consequently, other divisions have been affected by those actions such as a conflict between the marketing and operation divisions. Approximately one year ago, a key customer requested for a consultancy project through the marketing division which passed this request to the operation division afterwards. The operation division refused it due to the preference of the government projects which gained more reputation. The marketing division had to solve this problem by outsourcing from another company. This action affected the cost of the proposed project, as well. What I have learnt from this case is that a well-planned strategy will be worthless if staff in SBU or functional level does not realise and implement to achieve the objectives of the organisation.
The activity which allowed students to think about key issues that a tea shop facing in the business is useful because we can apply our knowledge on strategic marketing to analyse this case study. We might know how to cope with this kind of situation in the real working experience.
As a marketer in a government organisation, I have occasionally participated in strategic planning. SWOT, Value Chain and Porter's Five Forces model are used to identify and analyse both internal and external business environment in order to formulate a five-year strategic plan. Consequently, the decision makers know where is the organisation's position in the market, comparing to competitors. Moreover, they can use these information to choose a directional strategy. When studying 'Strategic Fit', I realise that a successful company might be able to balance its strategies, capabilities, and environments efficiently. Strategic decisions at any strategic level would be made after this stage for example resource allocation, strategic orientation, market segmentation. Each strategic decision would be translated into an action plan through methods or tools to reach the goals and it would be monitored and evaluated the performance of each strategic level at the end.
Another two challenges which should be concerned about in my organisation are a late response to the environmental change and how to build sustainable competitive advantage. Due to the fact that the organisation is under the supervision of a minister who is assigned by the Prime Minister, there is a high probability that the minister could be rotated to another position or to be expelled. Hence, the strategy that is formulated by management teams would be influenced by the new minister's policy. This could interrupt the action plan and lead to an unachievable goal.
In conclusion, this module encourages me to think critically by enhancing my basic marketing concepts through a variety of issues, articles, case studies, video clips from Google Videos and YouTube. It would be fruitful for me to apply the knowledge not only from textbooks but also from the lecturer's experience to tackle real marketing issues. In my point of view, this course reviews and updates my comprehension of marketing principles, which I learnt many years ago. I would apply this strategic thinking skills in my job as a marketer in order to participate in creating a sustainable competitive advantage of the organisation.