The Hierarchy Of Strategies Marketing Essay

The word Strategy was originally introduced and defined in ancient military texts. It comes from the Greek word strategos, meaning a general in command of an army. It is formed from 'stratos', meaning army and 'ag', meaning to lead. (Warnock Davies, 2000)

Although 'strategy' first became a popular business catchphrase during 1960s, it continues to be subject of widely differing definitions and interpretations. Strategy is not a thing; it is rather an ongoing process. "Strategy is a way of thinking about a business, of assessing its strengths, of diagnosing its weaknesses, of envisioning its possibilities." To summarise from what we have learnt so far, "strategy is not something we have, it is something we do and have to keep doing in order to support and grow a successful business or organization." (Jonathan Pugh, L. Jay Bourgeois III, 2011). The simplest definition of Strategy as been provided by Ohmae (n.d., cited by Michael Thomas, 1989), which sees strategy "as meaning paying attention to customer needs and avoiding direct competition".

However, the definition in "Marketing Strategy - a decision-focussed approach 5e" by Walker, Mullins, Boyd and Larrenche; successfully describes the term as:

"A strategy is fundamental pattern of present and planned objectives, resource deployments, and interactions of an organisation with markets, competitors, and other environmental factors"

It says that a strategy should always be able to specify:

What - objectives to be accomplished

Where - as in, on which industries and product markets to focus

How - to allocate resources and activities, so as to meet environment opportunities and threats in each product-market and also gain a competitive advantage

In other words, "strategy is a design or plan for achieving a company's policy goals and objectives". Strategy decides how the goals and objectives of a company were to be achieved, the operational units that will be used to achieve them, and how would those operational units be structured. It is again strategy that determines what resources will be required and how these resources will be acquired/used, to achieve goals and objectives of the company. Strategy is hence, "a design or plan that defines how policy is to be achieved." (Warnock Davies, 2000)

According to Walker et al (2006), a well-developed strategy contains sets of issues:-

Scope: It refers to the span of the strategic domain; which means, the number and types of industries and market segments it competes in or have plans to enter.

Goals and objectives: Strategies should detail desired levels of achievement on one or more scale of performance - such as volume, profit, or return on investment - over a particular time period for each businesses and product markets and also, for the organisation, as a whole.

Resource deployments: As every organisation's financial and human resources is limited, formulating a strategy also includes deciding how the resources are to be obtained and how they would be allocated, within each business or product-market, among businesses, product markets, functional departments and activities.

Identification of a sustainable competitive advantage: A very important part of any strategy is to plan, how the organisation would compete in each of its business and product-market. How it would position itself to develop and sustain a competitive advantage over its current and potential competitors? To answer these kinds of questions, managers need to look at each business and product-market and their market opportunities in, along with the company's unique competencies or positive points compared to its competitors.

Synergy: Synergy exists when a company's businesses, product-markets, resource deployments and competencies harmonize and support one another. Synergy helps to boost the total performance of the specific businesses to be greater, than it would have been otherwise.

HIERARCHY OF STRATEGIES

Most organisations do not have a single comprehensive strategy any more these days. In fact, hierarchy in strategies originated in 1920s, when some of the largest US firms started to diversify strategy. (Bala Chakravarthy, James Henderson, 2007). So, firms now, have a hierarchy of interrelated strategies, which are formulated at a different level of the firm. According to Walker et al (2006), the three major levels of strategy in most large, multiproduct organisations are :

Corporate strategy

Business level strategy

Functional strategies

(hierarchy structure from book)

The corporate strategies are handled by the corporate level, which is the highest level in any organization.

Corporate managers are concerned with the issues of overall organization, and their decisions or actions affect all other organizational levels.

The business level comprises of smaller units within the entire organization that are generally managed as self-contained businesses. The idea behind this is to break a huge and complex organization into smaller units that can successfully operate like independent businesses. This is the level at which competition takes place; i.e., business units usually compete against competitor business units and not corporate levels.

The functional level consists of all the diverse functional areas within a business unit. Most of the work of a business unit is done in its various functional units. Marketing forms an essential part of this level and therefore, functional level, is often also terms as Marketing level. (Marketing's Strategic Role in the Organization, Jason C.H. Chen, n.d.)

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KEY COMPONENT OF STRATEGY

Strategic planning typically occurs at each organizational level, in multiproduct organizations. Strategic plans of higher organizational levels are meant to provide direction for strategic plans of lower levels. In other words, lower-level plans are created, in order to execute the higher level plans. Because of this relationship, strategic planning needs to be incorporated and steady throughout levels. (Walker et al 2006)

Types of Strategic Plans

According to Marketing's Strategic Role in the Organization (Jason C.H. Chen, n.d.), there are different strategic plans, as per the hierarchal levels of an organisation, as below:

Corporate strategic plan - It is meant to provide guidance for strategic planning for all other organizational levels. Some of the important corporate strategy decisions comprise of issues regarding corporate vision development, corporate objective formulation, resource allocation, etc. These helps in determining the type of company, the firm is or wants to become.

Business strategic plan - It indicates how each self-contained businesses unit, in the corporate family expects to win in the marketplace, keeping in mind the vision, objectives and growth strategies, given in the corporate strategic plan. These units, within the same organization generally have different objectives and business strategies. Each business is concerned about decisions related to the range of the market it serves and consists of various functions to be performed, in which for each major function, strategic plans may be developed. So, most organizations generally have marketing, financial, manufacturing, and other functional strategic plans as well.

Marketing strategic plan - It comprises of plans of marketing managers to execute the business strategic plan. It is focussed on the "general target market and marketing mix approaches". Each business unit has a separate product marketing plan that focuses on specific target markets and marketing mixes, for every product.

Product marketing plan - It normally includes both "strategic decisions (what to do) and execution decisions (how to do it)". It is particularly important for organizations to integrate their strategic plans across all levels.

(key components structure from book)

WHERE DOES MARKETING FIT INTO STRATEGY?

Marketing has a very important role to play, in the strategic planning process in most organizations. Marketing is generally a part of the functional level within the smaller business units of any organisation, but in some of them, marketing positions are there at the corporate level as well. Below is a diagram, which explains this but however, marketing, in some or the other way, involved in strategic planning at all organizational levels. (Marketing's Strategic Role in the Organization, Jason C.H. Chen, n.d.)

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Strategic marketing describes marketing activities that affect corporate, business, and marketing strategic plans. John Zinkin (2006), attempting to bring together the perspectives of Drucker, Doyle and Friedman, defines it as - "Strategic Marketing creates competitive advantage through the customer value provided by relationships with valued customers to maximise shareholder value."

Marketing management relates to marketing strategies of specific product. It is different from strategic marketing in its basic origin. Strategic marketing is concerned with general strategic decisions and are handled at corporate and business levels whereas, Marketing management is concerned with definite strategic decisions for each product and also, the day-to-day activities required in order to execute these strategies effectively. Marketing managers, at the operational level, needs to particularly focus on the four Ps of the marketing mix - product, price, promotion, and place (distribution). (Jason C.H. Chen, n.d.)

Marketing and marketing management's strategic role, is now in a stage of considerable transform and development. In the new organizational environment, marketing operates at all three levels, i.e., corporate, business or SBU, and functional or operating levels (Boyd and Walker 1990). In addition to this, marketing can also have three different dimensions - "marketing as culture, marketing as strategy, and marketing as tactics" and each of these are found at a separate level of strategy. "Marketing as culture, is a basic set of values and beliefs about the central importance of the customer that guide the organization (as articulated by the marketing concept), is primarily the responsibility of the corporate and SBU-level managers." Marketing as strategy is implemented at the SBU level, where market segmentation, targeting, and positioning are the key focus areas and it also defines the way in which the firm is to compete in its chosen business. At the operating level, marketing managers need to focus on marketing tactics, i.e., the "4Ps" of product, price, promotion, and place/distribution, which are the elements of marketing mix. "Each level of strategy, and each dimension of marketing, must be developed in the context of the preceding level. As we move down the levels of strategy, we move from strategy formulation to strategy implementation." (Frederick E. Webster, Jr., n.d.)

WHAT IS MARKETING STRATEGY?

Most of the writers, on the subject of marketing strategy, describe it in the sense that they consider it to be. For example, Chang and Campo-Flores (1980) considers marketing strategy to be a vital and important part of marketing function. "Similarly, Baker (1978) sees it as being a broad means of achieving given aims, Luck and Ferrell (1979) as being fundamental means or schemes and Kotler (1976) as being the grand design to achieve objectives". Even some companies, who had taken part in the previously reported research, have given same kind of broad statements. Many companies had claimed that their marketing strategy is a long term activity and some also said that it helped in the overall achievement of objectives of the firm. (Gordon E. Greenly, 1984)

However, the definition of marketing strategy in "Essentials of Marketing: A Global-Managerial Approach, 9th edition" by William D. Perreault, Jr. and E. Jerome McCarthy, is as follows :

"A marketing strategy specifies a target market and a related marketing mix. It is a "big picture" of what a firm will do in some market. Two interrelated parts are needed:

1. A target market - a fairly homogeneous (similar) group of customers to whom a company wishes to appeal.

2. A marketing mix - the controllable variables the company puts together to satisfy this target group."

When marketing strategies are specified for some particular target customers, it is called target marketing. It is different from mass marketing, in the sense that; in target marketing, the marketing mix is customised for a specific target group whereas, in the latter, same marketing mix is used in general, for everyone. The figure below, portrays this idea even more clearly.

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The main focus of marketing strategy is to successfully achieve the firm's objectives within a specific business unit, by effectively allocating and co-ordinating marketing resources and activities. Therefore, specifying target market(s) is the major issue regarding the scope of a marketing strategy, for a particular product or product line. The next issue is to seek competitive advantage and synergy through a modified program of marketing mix elements (mainly the 4Ps of product, price, promotion and place) as per the needs and wants of potential customers of the target market. (William D. Perreault, Jr. and E. Jerome McCarthy, n.d.)

To support and strengthen business strategy, proper functional strategies are necessary; specially Marketing strategies. This is because, marketing strategies represent the set of integrated decisions through which the business targets to achieve the marketing objectives and also, meet the expectations of its customers, in the target market (Varadarajan & Clark, 1994). As noted by Michael Porter (1985, p. xvi) : ''Competitive advantage grows fundamentally out of the value the firm is able to create for its buyers.'' As discussed earlier, the most important marketing decisions relates to market segmentation and targeting; and also to develop a positioning strategy based on the marketing mix decisions. (Business Horizons, 2010)

MARKETING ROLE IN FORMULATION AND IMPLEMENTATION OF STRATEGY

According to Chakravarthy & Doz (1992, cited in Business Horizons, 2010) the development of effective strategies within a business is called Strategy formulation. For the strategy to be effective, its formulation process needs to be customised so as to meet the challenges that are inbuilt in the organisation's environment and marketing strategy, as different strategies may have different goals and would be rather suited for different environmental contexts (Chakravarthy & Lorange, 1991).

C:UsersHPDesktopAnnieBirmingham UniversityContemporary Issues in Strategic MarketingAssignmentsassignment 1picsthree-tiered structure envisaged in the planning.jpg

The figure above shows the three-tiered structure envisaged in the planning process and the interaction of each level with the others. The benefits of a company, derived from marketing planning, are a result of its position in its life cycle, its competitive environment and most importantly, its internal environment. Marketing plan has been successfully developed as a means to change corporate culture to customer focused outlook. (William Giles, 1989)

Developing the Marketing Plan

Earlier, as businesses were simple, with fewer products and an obvious market to target at; therefore, the main strategy was to offer good quality, at a reasonable price and increase sales. But today, most companies are usually involved in a range of businesses, functioning in various markets, against different competitors who offer a number of technologies and products in a market that is no longer constrained within the national boundaries of a country. With time, firms do make changes both in their organisation and product, due to various environmental factors. Sometimes these are big changes and sometimes they are small. But for the future, no matter which route is taken, a consistent strategic approach is more likely to achieve goals; and for that, a good plan is very much necessary. (William Giles, 1989)

Writers such as Hayes and Abernathy(1980), Anderson(1982) and Piercy (1982) reported that recently, the emphasis on marketing in companies has been "orientated towards short-term gains in revenue and profits". Therefore marketing tactics of short-range operational planning is being given more importance. Although the latter is obviously important, it is equally important to consider full marketing strategy. This is because, it helps to contribute in future performance and success, along with providing a framework for the annual marketing plan operations. (Gordon E. Greenley, 1984)

"A successful planned approach towards marketing should achieve the following benefits:

• Improvement in profit targets and investment return;

• Focus on the company's selected markets;

• Efficient use of scarce resources;

• Use of company and product strengths working together;

• Development of new products and markets for the future;

• A proactive approach to change;

• Additional business concentrated in areas of competitive strength;

• A renewed vigour and enhanced motivation of managerial staff;

• A perspective on the need for cultural change within your organisation."

The planning system itself needs the use of some organising principle, which were developed by combining many successful approaches and concepts, suitable for a variety of businesses. But it's not a universal solution or any short-cut; rather there can't be any. However, it does give a reliable approach for evaluating opportunities and comparing other strategies. It also provides the basis for allocation of resources to provide the best competitive advantage. This is what majorly comprises of the Marketing plan. The amount a firm gets out of the exercise is directly proportional to the amount of effort the firm puts in at all levels of the organisation. (William Giles, 1989)

IMPORTANCE OF MARKETING

Apparently, lack of proper accountability and influence has resulted in undermining the reliability of marketing within the firm and also threatened its existence as a separate potential unit within an organisation (O'Sullivan & Abela, 2007; Rust et al., 2004). The importance of marketing activities is at risk and even marketing scholars have raised their voices showing concerns about the chance of power of marketing subunits declining (e.g., Day, 1992; Kotler, 2004; Kumar, 2004; Sheth & Sisodia, 2005). This has led to several studies on the marketing's role within the firm (e.g., Homburg, Workman, & Krohmer, 1999; Verhoef & Leeflang, 2009).

Power of Marketing :

There are many different perspectives and proper theories on power (Bacharach & Lawler, 1980; Lukes, 1975). In fact the concept of power has been studied in a large variety of areas, starting from organisational change to social group dynamics and planning. However, it has been argued that the application of the concept of power in marketing has been slow and restricted due to "theoretical fragmentation and lack of convergence" (Merlo, Whitwell, & Lukas, 2004). In fact, the use of power theory in marketing has been limited mainly to four areas: (1) distribution channels, (2) organizational buying, (3) consumer behaviour and (4) the influence of marketing departments and marketing people. Fundamentally, power may be defined as the ability of a performer to get a different performer to do something that the latter would not have otherwise done.

In a review of main schools of thought in power and their possible worthiness in Marketing Research by Merlo et al. (2004), he identifies four main areas of thought on power: "the bureaucratic perspective, the critical contingencies perspective, the network perspective and the psychological perspective". Although each of these perspectives is useful to study various marketing phenomena, Merlo et al. (2004) points out that the 'critical contingencies approach' is best to study the distribution of power within the firm, and particularly, the power of the marketing function. This approach says that there are "three key elements of power: (1) a function's ability to cope with uncertainty, (2) its substitutability, and (3) its centrality within the work flow of activities". Therefore, the power of marketing can be defined as "the extent to which the marketing subunit is relied upon to cope with uncertainty, is non substitutable, and holds a central location within the work flow of activities." (Industrial Marketing Management, 2012)

Role of Marketing within the Firm :

This section is about the contribution of marketing departments in firm's performance. Studies of the role of marketing within the firm, may be divided into four key categories :

Research that examine the role of marketing as an orientation (Kirca, Jayachandran, & Bearden, 2005; Langerak, 2003; Slater & Narver, 2000). These studies tend to prove the positive link between market orientation and performance.

Research that studies the influence of marketing at the corporate level (e.g., Day, 1992; Varadarajan & Clark, 1994). These studies are likely to conceive that the Chief Marketing Officer and the status of marketing's within the firm are closely related (Kerin, 2005; Nath & Mahajan, 2008)

Research that studies marketing as an organisational subunit. Homburg et al.'s (1999) work, demonstrated marketing's relative impact and interaction with other functional units and identified the situations where marketing's influence is higher.

Research that considers marketing's role simultaneously as a function and an orientation. Verhoef and Leeflang (2009) found that a marketing department's influence has positive performance outcomes only because of its link to a market orientation, and note: "the failure of the marketing department's influence to explain significant incremental variance in performance beyond market orientation calls for further research" (p. 30).

Marketing power and business performance :

In a research conducted by Seigyoung Auh and Omar Merlo (Industrial Marketing Management, 2012), the relationship between the marketing power and business performance stands out clear. Their sample formed of an Australian Mailing list, comprising of 600 contacts in both large and medium sized organisations (<=50 employees) in a range of manufacturing industries. The participants included people from all levels of organisation, from Managing directors to CEOs, general managers and others. However, Marketing managers were purposely not included, to enhance the credibility of the findings. Their unit of analysis was the Strategic Business Unit (SBU) and they collected data through a 'self-administered field survey questionnaire', distributed via mail.

After the completion of research and its analysis, the data they got showed that the most powerful subunits within the sample organisations were Production & Manufacturing and Marketing. However, the finding about production is not unexpected, as the sample is from the manufacturing industries. But it is fascinating that marketing holds a more powerful position than Finance department, and even Research and Development. With respect to substitutability, their findings showed that R&D and Marketing are seen as the most non substitutable functions within an organization.

The research also proved that "a powerful marketing function contributes to business performance" and therefore, the recent trend of decline of marketing sub-units needs careful monitoring. Many senior managers tend to first cut down marketing budgets randomly in times of crisis, which is expected to then lead to improve the firm's cash flow without affecting any other function of the business, particularly sales (Quelch & Jocz, 2009). However the research findings are in contrast with the perceived notion and most commonly practiced phenomenon. It suggests that "when marketing's power is low, there may be negative performance consequences." Recently in an interview with Businessweek, Phillip Kotler argued that if marketing is not being able to improve financial performance, the most obvious reason for that is the cut on marketing budget.

As pointed out by Boyd, Chandy, and Cunha (2010), often Chief Marketing Officers (CMO) lose credibility and are blamed more than they deserve, due to the fact that marketing outcomes are not easily measurable. This sometimes leads the Chief Executive Officers of any organisation to believe that CMOs does not deserve to be 'on the executive board of the firm' (Webster et al., 2003) and they tend to reduce the marketing function's ability to acquire and retain the resources, even further (Boyd et al., 2010). The findings of the research by Seigyoung Auh and Omar Merlo that "a powerful marketing function has a direct link to business performance should contribute to persuade company executives of the important role that marketing plays within the firm, and by extension, of the crucial role of the CMO as the primary functional executive with responsibility over marketing." However, it says that, as a firm is an assemblage of various functional groups, it is very important to have some kind of, symmetry of power among the groups. The research result highlights "negative effect of power asymmetry on business performance". But somehow, as the marketing function is believed to provide important strategic suggestions and to develop "customer-getting distinction" through "marketing imagination" (Levitt,1986), sometimes an asymmetrical distribution in favour of the marketing function might have beneficial effects on performance of the firm.