Far

understanding marketing Management goals, ami high gtowth versus low risk, l-iach. choicc in this sei of <rade-ol'fs ealls fur a different marketing strategy.

Many believe that adopting the goal of strong market share growth may mean having to forego Strong short-term profits, i or years, Compaq priced aggressively in order 10 in ¡¡Id its ipqrkei share in the computer market. Subsequently, Compaq decided lo pursue profitability at the expense of growth. Vet Cllafttn and Tichy believe that most businesses Can be a growth business and can grow profitably,43 They cite success stories such as GE Medical, Allied Signal. Citibank, and Ciii Capital, :tll enjoying profitable growth. Some so-called tradeoffs may not lie trade-offs at all,

Strategic Formulation

Goals indicate what a business unit wants to achicve: strategy is a game plan for getting there, livery business must design a strategy lor achieving its goals, consist! ng of a marketing strategw and a compatible technologysimiegyand sottrcing strategy

Michael 1'orter has proposed three generic strategies that provide a good starting point for strategy thinking; overall eosl leadership, differentia* tinn. and focus. iq

Overall cost leadership, I lie- business works hard to achieve the lowest production and distribution costs so that il can price Lower than its compel iters and win a largo market share. Firms pursuing ibis strategy must be good at engineering, purchasing, manufacturing. and physical distribution, They need less skill in marketing. The problem with this strategy is that other firms will usually compete with still lower costs and hurl the firm that rented its whole future on cost.

■ DlffenntiatMat. The business concentrates on achieving superior performance in an important customer benefit area valued hy a large part of the market. The firm cultivates those strengths that will contribute to the intended differentiation. Thus the firm seeking quality leadership, lor example, must mokr products with the best components, put them together expertly, inspect them carefully, and effectively communicate their quality, u Focus, I'lie business focuses on one or more narrow market segments. The firm geis io know these segments intimately and pursues either cost leadership or differentiation within the larget segment.

The online air travel industry provides a good f sample of til esc three Strategies: Tra velocity is pursuing a differentiation strategy by offering the most comprehensive range of services to the traveler. I.owestfare is pursuing a lowest-cost strategy; and Last Minute is pursuing a niche strategy in focusing oil travelers who have the flexibility lo travel on very short notice,

According to J'nrier, firms pursuing the same strategy directed to (bo same target market con slit Ute a strategic group.I he firm thai carries out that strategy best will make the most profits. Firms that do not pursue a clear strategy and try 10 he good tin all strategic dimensions do the worst. International Harvester went out of the farm equipment business because it did not stand out in its industry as lowest in cost, highest in perceived value, or best in serving some market segment. Porter drew a distinction between operational effectiveness and strategy1"1

Many companies believe they can win by performing the satbe activities mote effectively than their competitors: but competitors can qulcMy copy the operationally effective company using benchmarking and other tools, thus diminishing the advantage of operational effectiveness. Porter defines strategy ¿ts "the creation of a unique and valuable position involving a different set of activities." A company can claim that it has a strategy when it "performs different activities from rivals or performs similar activities in different ways " Companies such as littiA, Southwest Airlines, Deli Computer, So Turn, and l-tome Depot run their businesses much differently from their competitors: and these competitors would 11 nd it hard to copy and synchronize all die different activities that a strategically differentiated company carries ont.

Coinpanies are also discovering that they need strategic partners if they hope to b o t'ffcciivc. Even giant compuriiiL'S—Al&l. IBM, Philips, Sicilians—

DEVELOPING fcSARKETING STRATEGIES AND PLANS CHAPTER 2 57

A ceteUralion al a Star AflbntS inaugufal. The E'fc Mantebtings lajefrtet tG airl.nes thai covet most of Itw alone

often cannot achieve leadership, cithei nationally or globally, without forming alliances with domestic or tiutliinational companies that complement or leverage their capabilities and resources.

fust doing business in another country may require the firm to license its product, form a joint venture with a local Arm, or buy from local suppliers to meet "domestic content" requirements. Asa result, many firms are rapidly developing global strategic networks, and victory is going to those who build the better global network. The Star Alliance, for example, brings together 16 airlines—Lufthansa, United Airlines, Mefticana, Air Canada, ANA, Austrian Airlines, British Midland, Singapore Airlines, Tyrol can. l.auda, SAS, Thai Airways, Vnrig. Air New Zealand* Asian a Airlines, and Spanair—Into a huge global partnership that allows travelers to make nearly seamless connections to about 700 destinations.

Many Strategic alliances take the form of marketing alliances. These fall into four major categories.

!. Protincl or scrvlcc alliances - One company licenses another to produce its product, or hvo companies jointly market their complementary products <>r a new product. For instance, H&R Block and Hyatt legal Services—two Service businesses—have also joined together in a marketing alliance.. 'I. Promotional alliances - One company agrees to carry a promotion for another company's product or service. McDonald^ for example, has often teamed up with Disney to offer products related to tunent Disney films as past of its meals for children-

3. Logisticsalliances - One company offers logistical services for another Company's prod ■ net. E-or example, Abbott La bora lories warehouses and delivers all of 3M's medical and surgical products lo hospitals across the United Slates.

4. Pricif^ collaborations - One or more companies join in a special pricing collaboration. Hotel and rental car companies often offer mutual price discounts,

Companies need to give creative thought to finding partners that might complement their strengths and offset their weaknesses. Well-managed alliances allow companies to obtain a greater sates impact at less cost. To keep their strategic alliances thriving, corporations have begun to develop organizational structures to support them and have come lo view rhe ability io form and manage partnerships as core skills (called Partner Helat ion ship Management, PilM).™

Both pharmaceutical and bio tech companies are starting to make partnership a core competency. In the 1980s and 1930s pharmaceutical and biotoch firms were vertically integrated, doing all the research, development, and marketing and sales themselves. hfitJU' they are joining forces a nil leveraging their respective strengths. For ex a tuple, Erbitux, a new drug to aid treatment of colorectal cancer, is the result of just such a partnership, The drug was originally discovered in hiotech company lmClone Systems' clini' cal labs, but will be marketed via lin Go tie's partnership with pharmaceutical giant Krisiol-Meycrs Sqlilbb.*"

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