Marketing

Marketing Strategy: New Directions for Theory and Research Author(s): Yoram Wind and Thomas S. Robertson Source: Journal of Marketing, Vol. 47, No. 2 (Spring, 1983), pp. 12-25 Published by: American Marketing Association Stable URL: http://www.jstor.org/stable/1251490 Accessed: 01-03-2018 00:11 UTC

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide

range of content in a trusted digital archive. We use information technology and tools to increase productivity and

facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected].

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at

http://about.jstor.org/terms

American Marketing Association is collaborating with JSTOR to digitize, preserve and extend access to Journal of Marketing

This content downloaded from 194.170.173.124 on Thu, 01 Mar 2018 00:11:25 UTC All use subject to http://about.jstor.org/terms

Yoram Wind & Thomas S. Robertson

Marketing Strategy: New Directions for

Theory and Research

THE marketing field would appear to be at a point of discontinuity in its development as a discipline.

The focus of this change is the emerging literature on "marketing strategy" which promises to enrich the discipline and to broaden its perspective. Not since the Carnegie and Ford Foundation reports some 20 years ago, which prompted marketing scholars to de- velop and integrate behavioral and quantitative theo- ries and methods into the discipline, have we wit- nessed the same potential for intellectual ferment.

Marketing management, which dominates the dis- cipline at present, is most fundamentally concerned with the design of the marketing program or mix. This literature has not focused on the mission of the firm

nor on how to gain competitive or consumer advan- tage, although such issues may be implicit in the mar- keting management perspective.

By contrast, marketing strategy focuses explicitly on the quest for long run competitive and consumer advantage. As such, it has a high degree of overlap with business strategy and can be viewed as an inte-

New directions for marketing strategy are pro- posed, aimed at overcoming the current limita- tions of marketing theory. An integrated strategic marketing planning approach is offered, together with a pilot application of the process. The paper concludes with an agenda for research on mar- keting strategy.

gral part of and perspective for business strategy. Marketing strategy's difference is that it serves a boundary role function between the firm and its cus- tomers, competitors and other stakeholders. Market- ing is uniquely able to assess consumer needs and the firm's potential for gaining competitive advantage, which ultimately must guide the corporate mission.

Marketing develops strategy based on analysis of consumers, competitors and other environmental forces which then should be combined with other strategic inputs (such as financial, R&D and human resources) to arrive at an integrated business strategy. Sound business strategy should have a marketing perspec- tive, i.e., marketing should provide inputs to strategy generation and the evolved strategies should be tested against the reaction of consumers, competitors and other stakeholders.

In the quest for competitive advantage, the fore- most concern should be the likely market response to the proposed strategy. In order to be successful, the strategy-whether driven by cost, technology, distri- bution, service or other competitive advantages of the firm-has to be consistent with consumer needs, per- ceptions and preferences. Most of the business strat- egy literature deals with marketing variables-whether market share, market growth, market development or product differentiation-but tends to ignore the fun-

Journal of Marketing Vol. 47 (Spring 1983), 12-25. 12 / Journal of Marketing, Spring 1983

Yoram Wind and Thomas S. Robertson are Professors of Marketing, The Wharton School, University of Pennsylvania. The authors are indebted to Oliver Heil, The Wharton School, for his insightful comments and reviews of this paper.

This content downloaded from 194.170.173.124 on Thu, 01 Mar 2018 00:11:25 UTC All use subject to http://about.jstor.org/terms

damental marketing perspective that calls for an em- pirical assessment of consumer responses to the stra- tegic options.

A marketing perspective for the development of business strategy is consistent with the early literature on the marketing concept, which recognized that mar- keting is not only a set of functions but also a guiding philosophy for the firm. Yet most firms tend to adopt other orientations. Production and sales have tradi-

tionally dominated the considerations of many firms. Financial considerations have dominated many deci- sions of conglomerates and multi-line businesses, and in high technology firms, technology has been para- mount. More recently, concern with the increased productivity of Japanese companies has led to a focus on the human factor and a focus on management style (see, for example, Pascale and Athos 1981). Concep- tually, it is desirable to have a balanced perspective incorporating multiple disciplinary considerations, guided by the ultimate strategic consideration of what set of customers to serve with which product/service offerings.

The oddity is that the marketing strategy literature has been developed primarily by nonmarketers. Only lately have marketing scholars realized the potential value of a strategy perspective. The strategy focus, however, is finding high receptivity in the marketing community and is disseminating rapidly in textbooks and MBA-level courses, although the research base is yet to develop to any appreciable extent.

Limitations in Marketing's Theoretical Base

The emergence of the marketing strategy perspective stems from a number of limitations that have become obvious recently within the marketing discipline. These limitations have been defined perceptively in some re- cent Journal of Marketing articles. Webster (1981), in particular, reflects top management's concerns with marketing including the failure of marketing creativ- ity, the lack of understanding of the financial impli- cations of decisions, the declining productivity of marketing, and the limitations of the product man- agement system. Myers, Greyser and Massy (1979), in an audit of marketing R&D over the past 25 years, conclude that much research innovation in marketing never reaches line managers. Mauser (1980) laments the marketing field's almost exclusive concern with domestic issues, as well as the irrelevance of much of its research to marketing practitioners: "The quality found in the Journal [of Marketing] consists largely of useless exercises of limited interest to a few affi- cionados far removed from real-world needs and is- sues" (p. 98).

Much of this criticism, in our opinion, is valid.

Perhaps the strategy perspective holds the promise of enriching, expanding and increasing the relevance of the field. There is nothing inherently wrong with the marketing management perspective except that its fo- cus on the design of the marketing program is limited. Most of the literature centers on improving decisions within specific marketing mix components at the brand level, for example, advertising weight, message de- sign or distribution channel decisions.

From our vantage point there are seven key lim- itations within the marketing field that must now be addressed and corrected. This paper delineates these limitations and proposes a conceptualization and re- search agenda for overcoming them by adopting a more comprehensive marketing strategy perspective.

The limitations are as follows:

* A fixation with the brand as the unit of analysis,

* The interdisciplinary isolation of marketing,

* The failure to examine synergy in the design of the marketing program,

* Marketing's short run orientation,

* The lack of rigorous competitive analysis, * The lack of an international orientation, and

* The lack of an integrated strategic framework.

Fixation with the Brand as the Unit of Analysis

Research by marketing scholars is seldom conducted at the product category, strategic business unit (SBU) or corporate level. A review of pricing research by Rao (1982), for example, indicates that it is conducted almost exclusively at the brand level. As we move from brand strategy to product category, SBU and corporate level strategies, the marketing literature has less and less to contribute. The role of "corporate marketing" is particularly unclear and many diversi- fied firms focus their marketing activities at the op- erating division (SBU) level, with only a limited cor- porate marketing function. This focus reflects the weakness of the marketing literature in dealing with corporate level issues-whether new business deci- sions, mergers and acquisitions, the allocation of re- sources among various businesses, or harvesting ex- isting businesses.

Research on corporate level marketing should fo- cus on the logic and value of the marketing function, the relationship to other parts of the organization, and an assessment of the costs and benefits of such a func- tion. The tasks of corporate level marketing would seem to include consultation to senior management on mar- keting issues, a marketing perspective for corporate level strategic planning, the conduct of marketing au- dits at the SBU levels, and the provision of staff ex- pertise in marketing (e.g., marketing research) which

Marketing Strategy: New Directions for Theory and Research / 13

This content downloaded from 194.170.173.124 on Thu, 01 Mar 2018 00:11:25 UTC All use subject to http://about.jstor.org/terms

would be too expensive and redundant to include at each SBU level.

The Interdisciplinary Isolation of Marketing

The interdependency between marketing and the other business functions has received little attention in the

literature. Considering the marketing-finance inter- face as an example, much of what is taught in mar- keting never goes beyond simple breakeven analysis, and financial objectives are frequently not explicit. Marketers are often unaware of the financial conse-

quences of decisions. This disciplinary isolation is not unique to marketing since, in return, marketing con- cepts, methods and inputs are frequently ignored in the decision perspectives of other business functions. The emergence of new interdisciplinary journals on business strategy may be a step toward resolving this isolation.

Changing the isolationary focus of marketing re- quires new linkages between marketing and the other management disciplines. Research and theoretical de- velopment in marketing have borrowed from and re- lied heavily on the behavioral and quantitative sci- ences. This strong and maturing interdisciplinary orientation has led to a serious oversight-a lack of theory and research on the interrelationship between marketing and other management functions. The in- terdependency between marketing decisions and their nonmarketing consequences has been overlooked. Consider, for example, the quality control implica- tions of a quality product positioning, or the financial and inventory control implications of expanded pro- motional activities, or the marketing implications of inventory cutbacks or tighter credit policies.

A comprehensive understanding of the web of in- terrelationships between marketing and the other busi- ness functions requires:

* finding solutions to the inherent conflict be- tween marketing and many of the other busi- ness functions,

* developing organizational designs that explic- itly incorporate marketing and nonmarketing considerations,

* developing marketing decision models that are based not only on marketing considerations but also on relevant considerations from the other business functions.

Failure to Examine Synergy The marketing literature has tended to focus on in- dividual components of the marketing mix and to ig- nore synergy in the design of the marketing program, including product and market segment selection. Most research pursues a single-minded dedication to opti- mizing a component of the mix (e.g., advertising weight

decisions). More recently attention has been given to the interdependency between pairs of marketing mix components and especially advertising and pricing. Yet, there is still a significant research void in our under- standing of the synergistic effect-"2 + 2 = 5"- among the various marketing mix components.

Similarly, synergy has been ignored in the selec- tion of products and markets. In fact, most of the stan- dardized portfolio models, including those advocated by Boston Consulting Group, McKinsey and Arthur D. Little, offer frameworks for product/market clas- sifications assuming independence of each unit of analysis and ignoring the likely synergy among the portfolios, including shared resources and interdepen- dency of demand.

Synergy has long been advocated as a key com- ponent of any strategy (Ansoff 1965, Hofer and Schendel 1978). The roots of synergy within the mar- keting literature are contained in the concept of can- nibalization (negative synergy) among brands within a product category and the possible positive synergy within a product line. Marketing strategy requires, however, more explicit attention to synergy focusing on its measurement and the generation and evaluation of positive synergy-based strategies, extended to the total marketing program and the portfolio of products and segments.

Short-Term Orientation

The criticism that U.S. business has an unduly short run orientation has come into particular focus recently because of the present fascination and contrast with the Japanese management system. Hayes and Aber- nathy (1980) and others who have focused on the cur- rent problems of U.S. industry have all highlighted the unproductive short-term focus of U.S. firms and the potential dysfunctionality of annual and quarterly profit goals.

The marketing discipline has been criticized in particular and with considerable justification for this short run orientation. Indeed, marketing's focus has been on short run forecasting and optimization pro- cedures, while assuming an essentially stable, contin- uous environment. The methodological base-includ- ing, for example, multidimensional scaling, conjoint analysis, and various new product forecasting meth- ods-assumes an existing set of brands and percep- tions. The field has little to offer in terms of gaining long run advantage or the successful marketing of dis- continuous innovations that require new consumer be- havior patterns. We can tell practitioners whether con- sumers want a minor product change, such as a new flavor, but we offer little guidance in assessing po- tential demand for discontinuous innovations, or the demand for existing products under radically different environmental conditions.

14 / Journal of Marketing, Spring 1983

This content downloaded from 194.170.173.124 on Thu, 01 Mar 2018 00:11:25 UTC All use subject to http://about.jstor.org/terms

The addition of a long-term perspective calls for a reorientation in management philosophy. It might require organizational changes (such as an organiza- tional design that separates the long-term strategic marketing functions from the daily tactical marketing operations). In addition, new methodological devel- opments would be required, focusing on:

* the generation and evaluation of creative long- term strategic marketing-oriented programs,

* the design of early warning systems to identify environmental (e.g., market, competitive or government) turning points in order to direct changes in corporate and marketing strategies, perhaps necessitating better integration of var- ious data bases (secondary sources, primary marketing research data, syndicated environ- mental monitoring services and corporate data) in order to develop methods for forecasting fu- ture consumer needs and competitive activities under a variety of expected environmental and market scenarios, and

* the development of approaches for short-term allocation of marketing efforts consistent with the preservation of future options, thus maxi- mizing the long run expected value for the firm.

Lack of Competitive Analysis

With the exception of the advances made in assessing consumers' perceptions of the competitive environ- ment via product positioning and market structure analysis and the design of positioning strategies, most marketing texts have ignored systematic treatment of competitive analysis. The topic is typically included as one of the components of environmental analysis, but with few notable exceptions (for example, Kotler 1980), little attention has been given in the marketing literature to alternative competitive strategies. This is especially surprising given marketing's early theoret- ical focus on the search for differential (competitive) advantage (Alderson 1957).

Recently, Porter (1980) has attracted considerable attention to the competitive strategy area. Yet he gen- erally ignores marketing considerations. Consider his three generic strategies-differentiation, cost leader- ship and focus. They are implicitly based on a two- by-two matrix of strategic advantage (perceived uniqueness vs. low cost) and strategic target (indus- try-wide vs. a particular niche). These dimensions and strategies ignore the fact that all markets are hetero- geneous and thus, a nonsegmented strategy is inev- itably suboptimal. In addition a focus on generic strat- egies can serve as an obstacle to creativity and can obscure the subtlety of most successful strategies.

The marketing strategy literature must develop methods for assessing competitive actions and reac-

tions and for developing offensive and defensive com- petitive strategies. This work has been left to game theorists, industrial economists and a few business strategy and business policy writers. Yet, as in the case of Porter, these efforts tend to ignore relevant marketing variables. (For an exception, see the in- sightful work of Henderson (1983), based on an anal- ogy to biological systems.) In particular, competitive analysis should incorporate the market response func- tions for the marketing programs under consideration (including positioning by segment) under a variety of environmental and competitive conditions.

Lack of an International Orientation

The marketing literature is almost exclusively domes- tic and most marketing texts simply add on an inter- national marketing chapter. The sheer size and growth rate of the U.S. market may have encouraged such ethnocentrism, but conditions have changed. Given unfavorable balance of payments, higher market growth rates in a number of other regions, equivalent stan- dards of living in much of Western Europe and Japan, greater foreign competition in the domestic market, and the increased importance of multinational opera- tions for most international firms, we can no longer ignore the multinational dimensions of marketing thought and research.

In particular marketing strategy should provide di- rection not only for marketing decisions in other coun- tries but also for the set of multi-country international decisions. These decisions center on the development of the most desired portfolio of countries by mode of entry, by market segments, by products and by mar- keting programs. Such portfolio decisions involve the allocation of resources among the components of the international portfolio, the scheduling of entry to the various markets, and the design of an organization for worldwide marketing activities. The scope, diversity and complexity of these decisions calls for the devel- opment of new concepts and methods or, at best, the modification of existing concepts. It is essential, therefore, that current marketing concepts and meth- ods be evaluated for their applicability to international operations, modified as necessary, or supplemented with new concepts and methods more appropriate to multinational decisions.

Lack of an Integrated Strategic Framework

The final limitation is the lack of an integrated stra- tegic framework offering an operational approach to the generation and evaluation of marketing strategy alternatives, while overcoming the limitations men- tioned above. It is the objective of this paper to pro- pose such an integrated framework for strategic mar- keting and to offer an agenda for marketing strategy research which, if implemented, could increase the

Marketing Strategy: New Directions for Theory and Research / 15

This content downloaded from 194.170.173.124 on Thu, 01 Mar 2018 00:11:25 UTC All use subject to http://about.jstor.org/terms

FIGURE 1 A Marketing Oriented Approach to Strategy Formulation and Evaluation

I

Market Opportunities-- Business Strength Analysis

II The Added Strategic Marketing Dimension

III Objectives Strategy Generation Evaluation

relevance of marketing to its users and enhance the intellectual value of the field.

Toward An Integrated Approach The increased interest in marketing strategy has led to a number of recent developments: the acceptance by marketers of corporate strategy models such as the BCG portfolio matrix, the development of strategy check- lists, and symbolic conversion of marketing manage- ment concepts and approaches to the strategy area. In the latter sense, there are a number of marketing strat- egy texts which, aside from a marketing strategy title, do not differ much from the more conventional mar- keting management texts.

These efforts lack the development of conceptual frameworks that incorporate marketing concepts and methods with a strategic orientation and overcome the

limitations just highlighted. Our purpose in this sec- tion is to propose such a framework-presented in an overview form in Figure 1.

The model1 incorporates three main interrelated sections. Section I is a fairly traditional assessment of market opportunities and business strengths. It in- cludes: (a) the analysis of current and projected en- vironmental opportunities and threats facing the firm in total and in each of its business areas (Cell A), and (b) the analysis of the firm's strengths and weaknesses in total and in each of its business areas (Cell B). This analysis is quite similar to the one advocated by the McKinsey/GE strategy paradigms. Its major point of departure is the advocated unit of analysis, which is identified in Section II.

'The model is an extension of an integrated portfolio modeling ap- proach which is fully described in Wind and Mahajan (1982a).

16 / Journal of Marketing, Spring 1983

This content downloaded from 194.170.173.124 on Thu, 01 Mar 2018 00:11:25 UTC All use subject to http://about.jstor.org/terms

Section II contains the heart of the framework and

its unique marketing strategy contribution. Cell C is an analysis of segment by positioning replacing the product/market matrix which is often too heteroge- neous to offer useful strategic guidelines. The output of this cell is the identification of the relevant seg- ment/positioning units that constitute the units of analysis in the opportunity/strength matrix (Cell D). The basis for segmentation and positioning is illustra- tive. Management should carefully select the most de- sirable bases for segmentation and positioning to en- compass all of the firm's current and potential offerings. In addition, the size and characteristics of each unit are identified as input to the portfolio analysis (Cell G) and strategy generation and evaluation (Cells H and I) phases. Figure 2 illustrates this part of the anal- ysis with a specific example of a positioning/segmen- tation scheme and the link between Cells C and D and the opportunity and strength analysis (Cells A and B).

The model then focuses on an explicit analysis of synergy. This analysis (Cell E) can follow the ap- proach outlined in Wind and Mahajan (1982b) or any other approach that identifies the magnitude and sources of synergy and incorporates synergy considerations in the generation and evaluation of strategic options. Given limited resources and an inability to appeal to all seg- ment/positioning categories, it is important to find commonalities that result in positive synergy among the products, market segments and components of the marketing mix.

Shown below is an illustration of a synergy anal- ysis based on a small portion of a subjective synergy assessment. The responding executives were asked to assess the nature of interdependencies among the cur- rent and proposed new segments/positionings. Using a scale from -3 (negative synergy) to +3 (positive synergy), synergy among the segments/positionings was evaluated with respect to advertising, distribu- tion, manufacturing, etc., as well as overall synergy.

Illustrative Synergy Analysis Overall

synergy

SIP1 S2P2 S2P3

S1P1

X x -3

0

S2P2

+1

X

+2

S2P3

0

+2

X

The partial results suggest that based on the in- formation available (including inputs on cross-elastic- ity and shared resources among some of the seg- ments/positionings on selected variables), there is no synergy between S2P3 and SIP1, a strong positive syn- ergy between S2P3 and S2P2, and an asymmetric syn- ergy between SIP, and S2P2. (In this latter case SIP, helps introduce the new product S2P2 which in turn is expected to cannibalize SIP,.)

Returning to Figure 1, Cell F evaluates each seg- ment/positioning in terms of the functional require- ments for success and the company's strengths in par- ticular functional areas. It may well be, for example, that the "heavy user satisfied/price segment" requires manufacturing expertise as the key to success, whereas the "heavy user satisfied/performance segment" re- quires technology (R&D) as the key to success. De- pending on the company's strengths in manufacturing vs. R&D, there may be implications for seg- ment/positioning selection. Figure 3 illustrates an outline for such a functional analysis.

The final cell in Section II is a portfolio analysis. The portfolio is viewed as the core of the process and allows both the evaluation of the current portfolio of the firm and generation and evaluation of new port- folios leading to the selection of a target portfolio. This analysis can be done at any level-whether at the corporate (with SBUs as the units of analysis within the portfolio) or at the SBU or product group level (with segments/positionings as the units of analysis).

The portfolio analysis can involve any number of portfolio models. Given, however, the limitations of some of the more common standardized portfolio models (Day 1977; Wensley 1981; Wind, Mahajan and Swire 1983) and the advantages of customized port- folio models (Mahajan and Wind 1982), it is recom- mended that management employ a customized ap- proach. Figure 4 illustrates a portfolio analysis system centered around the Analytic Hierarchy Process (Wind and Saaty 1980). This system incorporates a number of the previous analytical stages (Cells A, B, C, E, F, H and I) and a financial risk return (or modified stochastic dominance) approach using the AHP as a framework and methodology for the generation and evaluation of alternative portfolio strategies.

Section III is common to most strategic planning models. Its central focus is the generation (Cell H) and evaluation (Cell I) of objectives and strategies. Objectives are not viewed as fixed but are determined

by management. The higher level objectives are given as guidelines only for lower level management. This approach is consistent with a marketing perspective for management decisions and allows managers to identify the set of objectives most relevant for their particular corporate needs and to assess their relative importance under a variety of environmental condi- tions. (A number of empirical studies suggest that share, profit and other objectives vary in their perceived im- portance, depending on the expected environmental conditions; see, for example, Wind and Saaty 1980, Woo and Cooper 1982.)

The generation and evaluation stages together with the last stage of this section, the planning of an im- plementation and monitoring plan (Cell J), are illus- trated in Figure 5.

Marketing Strategy: New Directions for Theory and Research / 17

This content downloaded from 194.170.173.124 on Thu, 01 Mar 2018 00:11:25 UTC All use subject to http://about.jstor.org/terms

FIGURE 2 Illustrative Market Opportunities and Business Strength Analysis by Segment Positioning

C SEGMENT BY POSITIONING ANALYSIS (by country) Expected Size and Characteristics of Selected Segments/Posi tioni ngs

Positioning P1 P2 P P4 P 2 3 5

Segmentation ience mance Image

S1: Heavy Users Satisfied

S,: Heavy Users Vulnerable

S3: Light Users Satisfied

S4: Light Users Potential

S5 Light Users Vulnerable

S6: Non-Users Potential

S: Non-Users Limited Potential

Opportunities and Threats

\S g Seg. / Positioning

S1 P S22 . Opportunities

Threats

_ _ _ _~~~~~~~~~~~~~~~~~~~~~~~~

A Opportunity-Threat Analysis (Current & Projected Environ- mental Analysis (by country)).

Likelihood of occurrence and

impact of trends:

* Market demand

[ Competitive behavior * Market distribution

* Technological developments

* Legal/political environment

* Social/cultural environment

I Economic conditions

and their likely inter- dependency (cross impact analysis). This analysis provides the framework for assessing the market oppor- tunities and threats.

B

y *

Strengths and Weaknesses

Seg. / Positioning

SP1 S2P2 ...

Strength

Weaknesses

I

Analysis of Business Strengths and Weaknesses; Situation Analysis and Marketing Audit by Country

A comprehensive situation analysis evaluating the strengths and weaknesses of the firm and its businesses, including an audit of current and planned marketing ob- jectives, strategies and operations. This analysis should include a projected risk-return analysis of the expected return of the current strategies. This analysis provides the frame- work for assessing the company's and business' strengths and weaknesses.

DEvaluation of Segment/Positioning Units on Their Market Opportunities/ Company's Strength (by country)

S1 P3

S3 H 1 P 4

Company's S2 P Strength

S4P3 L

L H Market Opportunities

18 / Journal of Marketing, Spring 1983

'4

A

I

v v

I

This content downloaded from 194.170.173.124 on Thu, 01 Mar 2018 00:11:25 UTC All use subject to http://about.jstor.org/terms

FIGURE 3 Illustrative Analysis of Functional Requirements

EVALUATION OF THE FUNCTIONAL REQUIREMENTS OF THE SELECTED SEGMENTS/POSITIONINGS (by country)

For S1 P1

High -Manufacturing

Company's Service Strength Advertising

-Distribution -Finance

Low R&D

Low High Requirements for Success

Technology

High s P 2 2

S3P3 Low

Low High

Finance

High S2P2

S1 P1 S4P1

Low 1

Low High

Service

High S5P

SiPl

S2P2 Low

Low High

Market Response Functions:

Advertising

Price

Distribution

Salesforce

Other

S 1 P S2 P2

Marketing Strategy: New Directions for Theory and Research / 19

I

v

This content downloaded from 194.170.173.124 on Thu, 01 Mar 2018 00:11:25 UTC All use subject to http://about.jstor.org/terms

FIGURE 4 Illustrative Portfolio Analysis

Source: Based on Wind and Mahajan (1982a)

20 / Journal of Marketing, Spring 1983

This content downloaded from 194.170.173.124 on Thu, 01 Mar 2018 00:11:25 UTC All use subject to http://about.jstor.org/terms

FIGURE 5 Illustrative Objective and Strategy Generation and Evaluation

H. Objectives and Strategy Generation: Generation of: A. Corporate SBU and marketing objectives B. Strategy regarding:

* New product and market development or acquisition. * Selected positioning/segmentation. * Competitive strategies. * Marketing program (product, price, promotion, advertising, distribution, etc.). * Required financial, human and material resources.

I I. Objectives and Strategy Evaluation:

* Expected performance on key objectives. * Impact on other functions of the firm. * Likely market response and performance (conditional forecast given various changes in our strategy,

competitive strategies and environmental conditions). * Integrated evaluation (using computer planning simulation).

J. Planning for Implementation and Control:

Design of adaptive experimentation program, planning continuous monitoring system, design of con- tingency plans and planning of an implementation program including a time and cost CPM.

Feedback Feedback

Some of the unique features of the generation, evaluation and implementation stages are:

* The use of a variety of approaches for the gen- eration of creative strategies. This is not unlike the procedures used for the generation of new product ideas.

* The evaluation stage involves explicit exami- nation of the likely outcome (on all the selected performance dimensions) given a variety of as- sumptions on the nature of the market, com- petitive actions and reactions to our strategies and diverse environmental conditions. These

evaluations typically involve computer simula- tions involving extensive sensitivity analyses.

The competitive analysis part of this model can greatly benefit from review of previous actions and reactions of competitors and a detailed examination of competitors as to their objectives, strengths, weak- nesses and strategic thrusts. The framework outlined in Figures 1-5 has the potential to overcome the stra- tegic limitations identified earlier:

(a) The approach is applicable at all levels of

management: it can be applied at the corporate, SBU, product group or brand levels. The lower the level of management, the fewer the decisions and analyses to be conducted since many of the decisions will be given as inputs (e.g., information about the environment) or constraints (e.g., the corporate objectives). The ap- proach is also designed as an interactive system and not as a "top down" or "bottom up" approach (for the advantages of this approach, see Day 1981).

Consistent with the marketing concept, the major unit of analysis for all level decisions is product po- sitioning by market segment (aggregated if necessary, based on the similarity of strategic thrusts required in each to achieve the desired objectives). The model thus avoids the pitfall of the standardized business and product portfolio models that focus on total product or business performance (which frequently has little to do with actual marketplace strategies).

(b) The approach recognizes the major interde- pendencies between marketing and the other business functions and their related disciplines. The portfolio analysis, for example, includes a modified stochastic dominance analysis that links a financial risk-return

Marketing Strategy: New Directions for Theory and Research / 21

This content downloaded from 194.170.173.124 on Thu, 01 Mar 2018 00:11:25 UTC All use subject to http://about.jstor.org/terms

analysis with the other typically nonfinancial evalu- ations of the market (see, for example, Mahajan and Wind 1982). In addition, a major component of the planning framework is an explicit focus on the func- tional requirements, both within marketing and the other functional areas, for the selected segmentation posi- tioning options.

(c) The approach recognizes the importance of synergy and includes this as an explicit step in the process. Synergy is examined across segment posi- tioning categories and within the total marketing mix. It is also included as an explicit criterion in the AHP- based approach to the generation and evaluation of alternative product/market and distribution portfolios (Figure 4).

(d) The focus of the analysis is on projected data (not just historical performance). Ideally, these pro- jections would be both for the short- and long-term. Similarly, the generation and evaluation of strategy should focus on both time horizons and take into ac- count alternative environmental sceneries. In the same

spirit, one should view the generation and evaluation of contingency plans (for changing markets, and changing competitive and environmental conditions). Furthermore, adaptive experimentation which occu- pies a major role in the monitoring phase is recog- nized as a key safeguard toward the achievement of the firm's long-term objectives.

(e) Competitive and market analysis are explicitly included throughout the analysis stages. Competitive strategies are linked to the overall portfolio and con- stitute a major component of the strategy generation and evaluation phases. In addition, the portfolio anal- ysis can be conducted on competitive products.

(f) The model recognizes the importance of the international dimension. For multinational firms most

of the analysis and decision steps should be conducted by country and a number of cross-country analyses and decisions are made, especially at the strategy gen- eration and evaluation stages. Furthermore, the gen- eration and evaluation of worldwide portfolio strate- gies is a key component of the portfolio objectives, strategy generation and evaluation stages.

(g) The model offers a framework that is poten- tially not only capable of overcoming the seven spe- cific limitations listed earlier but also integrates the solutions in a cohesive operational mechanism. To date it has been applied in one case. A brief discussion of this implementation case follows.

Implementation The process proposed was implemented by a large di- vision of a Fortune 500 firm. The impetus for the ap- plication was management's desire to allocate re- sources better among the division's current products

and to decide on the division's directions for growth (via both internal development and acquisitions). Given these objectives the portfolio part of the process served as the focal point of analysis. Yet, all 10 phases of the process were used and a number of phases were repeated as new information was introduced. The pro- cess was carried out by the eight top managers of the division (including the president and the senior au- thor, who served as an outside consultant). This group met a number of times over a period of six months and at the sessions, reviewed, evaluated and synthe- sized the various inputs required by the process. Mar- keting research data were introduced as presentations to the group who, in turn, used such data as input to the generation of options and their evaluation. The AHP served as the key framework for option generation and evaluation.

The participating managers found the process it- self to be very valuable. It allowed them to devote uninterrupted time to strategic thinking and facilitated a better understanding of the positions of the various participants-their assumptions, objectives and con- cerns. One of the major benefits of the process was the identification of required information and the es- tablishment of procedures for continued collection of such information and its reporting in user-oriented forms. At the conclusion of the process a portfolio strategy was decided that provided guidelines to the division's new product and market activities and al- location of resources among various strategies for the current product-market segments. In addition, a num- ber of other decisions were reached during the various discussions relating to the current operations of the division and its long run mission and relation with other divisions of the firm.

Steps have been taken since then to implement the new product (addition) and market segment (consol- idation and deletion) recommendations. It is too early to judge whether the decisions were the correct ones. Yet, management does feel that the process has been beneficial and initiated a series of quarterly meetings to examine whether the portfolio should be changed and to explore the impact of various events, such as the entry of a new competitor and the change in a competitor's strategy on the division's own strategy.

Management viewed the process as successful, and other divisions of the same firm are now in the pro- cess of going through a similar process. In terms of the process itself, the application has highlighted at least four important items:

* The process has to be viewed as a flexible framework, not a rigid step-by-step planning process. During the implementation there were numerous iterations moving back and forth among the stages and updating and changing

22 / Journal of Marketing, Spring 1983

This content downloaded from 194.170.173.124 on Thu, 01 Mar 2018 00:11:25 UTC All use subject to http://about.jstor.org/terms

earlier assumptions and conclusions.

* The implementers of this process should be willing to change procedures. A straightforward application of the stochastic dominance ap- proach was found to be unsatisfactory, for ex- ample, and it was modified to include forecast data and to add constraints on the magnitude of allowed changes from current level.

* Data availability is a major obstacle. Yet man- agement's subjective judgments can be used ef- fectively, both as substitute for data and as a way to determine the areas that require addi- tional information (those areas that are impor- tant and on which management cannot agree).

* Top management involvement is critical for the success of the process. Yet, since all the judg- ments are made in a group setting, care should be given to the issue of group composition and group dynamics.

Despite the successful implementation of the process, it still requires the solution of a number of method- ological issues and hence could provide a useful guideline for future research directions on marketing strategy.

Toward a Research Agenda Overcoming the identified limitations of the current marketing literature is essential if marketing is to in- crease its strategic relevance. Research on marketing strategy should incorporate, at the minimum, three fo- cal points:

* Development of sound, consistent conceptual and operational definitions of such key terms as strategy, synergy, etc.

* Examination of the impact of the marketing strategy perspective on new concepts and meth- ods within the field.

* Generation and evaluation of hypotheses on the impact of the marketing strategy perspective on the performance of the brand, product line, SBU and corporation (as well as on the economy as a whole).

Each research focus can lead to a large and diverse set of projects. Altogether, however, it suggests the boundaries of a marketing driven strategy research program. To illustrate some of the types of research that can be undertaken, let us briefly consider a few examples.

Development of Conceptual and Operational Definitions

Even the most basic concepts such as marketing strat- egy, marketing perspective, synergy, etc. have not been

rigorously and consistently defined in the marketing literature. In order to advance our understanding of marketing strategy and the role that marketing plays in corporate and SBU strategy, it is essential to agree on a set of conceptual and operational definitions of the concepts involved. These would include defini- tions of synergistic effects, the dimensions of com- petitive analysis and strategy, the international di- mensions, and all the components of an integrated strategic marketing framework.

Development of New Concepts and Methods

Incorporating strategic concerns in the current mar- keting operations of a firm often requires either mod- ification of current concepts and methods or devel- opment of new concepts and methods. Introducing the marketing strategy perspective at the product line, SBU and corporate level requires, for example, the devel- opment of portfolio based approaches for the alloca- tion of resources among the products and markets.

The portfolio models of business strategy should be modified or new ones designed to develop a mar- keting perspective, including analysis by market seg- ments, recognition of the synergy among the portfolio components, and allocation of resources in accor- dance with the market response elasticities to mar- keting strategy variables. Similarly, the acceptance of the marketing strategy perspective would lead to mod- ification or development of new marketing research methods. More attention should be given to the anal- ysis of secondary data and its integration with primary and internal data, the analysis of cross-business data (such as the PIMS data), and the development of lon- gitudinal and experimental designs.

Not unlike the required developments in market- ing research methods are the applications of the mar- keting strategy perspective to organizational design. Both the organization of the marketing function (at the corporate and SBU level) and organization of the en- tire organization should take into consideration the role

of marketing and the likely organizational obstacles for creative and effective implementation of market- ing strategies and marketing driven corporate and SBU strategies. Modification and development of concepts and method is required, and these, in turn, have to be validated and implemented.

Generation and Evaluation of Hypotheses

The incorporation of the marketing strategy perspec- tive involves not only the resolution of major mea- surement issues (relating to the conceptual and oper- ational definitions of the various terms) and the modification of current or development of new con- cepts and methods, but also the development of a re- search program aimed at assessing the impact of these areas on the performance of all relevant corporate en-

Marketing Strategy: New Directions for Theory and Research / 23

This content downloaded from 194.170.173.124 on Thu, 01 Mar 2018 00:11:25 UTC All use subject to http://about.jstor.org/terms

tities-the brand, product line, SBU and the corpo- ration-as well as of the industry and society at large. Such a research program should focus on the gener- ation and evaluation of various hypotheses assessing the likely impact of the components of the marketing strategy framework.

The range of these hypotheses is limited only by the creativity of the researchers. Such research offers an opportunity to increase the relevance of research in marketing and to start the accumulation of a sub- stantive marketing knowledge base. Some of the most basic research questions are as follows:

* What is the value of the advocated dimension

(e.g., synergy or international orientation)?

* Are companies that subscribe to this dimension more successful than those that don't? How is success to be measured?

* What are the implications of the addition of this dimension (e.g., long-term orientation or inter- national orientation) to the structure and func- tion of marketing? In particular, how does it af- fect the organization of marketing activities (including the structure, task, personnel and technology employed) as well as the planning and implementation of marketing strategies?

Similarly, at the aggregate industry or societal level, research can be coordinated to establish to what extent

industries or societies that subscribe to the proposed dimensions perform better (on whatever criteria one selects) than those that don't. This could provide, for

example, a useful framework for comparative studies between the U.S., Japan and other countries.

Conclusions Seven strategy related limitations of the current mar- keting literature were identified as areas requiring ad- ditional theory and research efforts. A marketing guided model for strategy formulation and evaluation was proposed that is believed to overcome most of these limitations. The model has been applied in a large SBU of a Fortune 500 firm. Most of the recommendations developed by the use of this approach are now being implemented. Yet this is not a true validation of the model, and further development and testing is re- quired.

In essence the model is a marketing oriented ap- proach to strategic planning. It provides a marketing perspective utilizing relevant marketing concepts and methods for any strategic decision of the firm. At the same time it offers a strategic perspective for mar- keting decisions. The marketing mix decisions are based on the analysis in the other parts of the model, which reflects necessary strategic considerations currently lacking in the marketing literature. It is hoped that research from a marketing strategy perspective will increase the relevance of marketing, offer new con- ceptual and methodological challenges to its scholars and practitioners, and enhance the revitalization of the discipline and the broadening of its scope to include not only the functional marketing program decision mix, but also a core perspective for all strategic man- agement decisions.

REFERENCES

Alderson, Wroe (1957), Marketing Behavior & Executive Ac- tion, Homewood, IL: Richard D. Irwin, Inc.

Ansoff, H. Igor (1965), Corporate Strategy, New York: McGraw-Hill Book Co.

Cardozo, Richard and Yoram Wind (1982), "Applying a Risk/ Return Approach to Portfolio Analysis and Strategy," working paper, The Wharton School, University of Penn- sylvania.

Day, George (1977), "Diagnosing the Product Portfolio," Journal of Marketing, 41 (April), 29-38.

(1981), "Strategic Market Analysis and Definition: An Integrated Approach," Strategic Management Journal, 2 (July-September).

Hayes, Robert H. and William J. Abernathy (1980), "Man- aging Our Way to Economic Decline," Harvard Business Review, 58 (July-August), 67-77.

Henderson, Bruce D. (1983), "The Anatomy of Competition," Journal of Marketing, 47 (Spring), 7-11.

Hofer, Charles W. and Dan Schendel (1978), Strategy For-

mulation: Analytical Concepts, St. Paul, MN: West Pub- lishing Company.

Kotler, Philip (1980), Marketing Management, Englewood Cliffs, NJ: Prentice-Hall, Inc.

Mahajan, Vijay and Yoram Wind (1982), "Integrating Finan- cial Portfolio Analysis with Product Portfolio Models," in Strategic Marketing, David Gardner and Howard Thomas, eds., New York: John Wiley & Sons.

and John W. Bradford (1982), "Sto- chastic Dominance Rules for Product Portfolio Analysis," Marketing Planning Models, Special Issue of TIMS Studies in the Management Sciences, 18, 161-183.

Mauser, Ferdinand F. (1980), "The Marketing Fraternity's Shortfall," Journal of Marketing, 44 (Fall), 97-98.

Myers, John G., Stephen A. Greyser and William F. Massy (1979), "The Effectiveness of Marketing's 'R&D' for Mar- keting Management: An Assessment," Journal of Market- ing, 43 (January), 17-29.

Pascale, Richard T. and Anthony G. Athos (1981), The Art of

24 / Journal of Marketing, Spring 1983

This content downloaded from 194.170.173.124 on Thu, 01 Mar 2018 00:11:25 UTC All use subject to http://about.jstor.org/terms

Japanese Management, New York: Warner Books. Porter, Michael E. (1980), Competitive Strategy, New York:

Free Press.

Rao, Vithalo R. (1982), "Pricing Research in Marketing: The State of the Art," working paper, Cornell University.

Webster, Frederick E., Jr. (1981), "Top Management's Con- cerns About Marketing: Issues for the 1980's," Journal of Marketing, 45 (Summer), 9-16.

Wensley, Robin (1981), "Strategic Marketing: Betas, Boxes or Basics," Journal of Marketing, 45 (Summer), 173-182.

Wind, Yoram and Vijay Mahajan (1982a), "An Integrated Ap- proach to Portfolio Analysis," working paper, The Wharton School, University of Pennsylvania.

and (1982b), "On the Measurement of Synergy," working paper, The Wharton School, University of Pennsylvania.

and Thomas L. Saaty (1980), "Marketing Appli- cations of the Analytic Hierarchy Process," Management Science, 26 (July), 641-658.

and Donald Swire (1983), "Empirical Comparison of Standardized Portfolio Models," Journal of Marketing, 47 (Spring), 89-99.

Woo, Carolyn Y. and Arold C. Cooper (1982), "The Sur- prising Case for Low Market Share," Harvard Business Re- view, 60 (November-December), 106-113.

Get down to business with Harper & Row texts.

New... Hartley MARKETING FUNDAMENTALS 3/83. 631 pages. Instructor's Manual & Test Bank. Study Guide. Transparency Masters.

Hasty RETAILING ThirdEdition 1982. 620 pages. Instructor's Manual & Test Bank.

McDaniel MARKETING SecondEdition 1982. 752 pages + Appendix. Instructor's Manual. Study Guide. Test Item File on ACCESS.

tL 'H a4etQRqlow |~I ~ To request examination copies, write to Suite 3D, Harper & Row, 10 East 53d Street,

New York, N.Y 10022. Please include course title, enrollment, and current text.

Marketing Strategy: New Directions for Theory and Research / 25

mmm-

This content downloaded from 194.170.173.124 on Thu, 01 Mar 2018 00:11:25 UTC All use subject to http://about.jstor.org/terms