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Copyright Balakrishnan 2009

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Lecture 2

Driving Value

Value: worth, cost, rate, assessment,

importance, significance, usefulness,consequence, merit, help, appreciate,

respect, esteem, cherish, set great store

by, assess, estimate, evaluate,appraise(profit, price, charge)


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Session Objectives

Reinforce Situational Analysis

Understand value in context of company point

of view: Alignment & Adaptation

Understand value from customer point of view

Understand value from value chain point of

view


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Review

Page 109: Exhibit 3.12: Which segment willhave the most potential? Why?

If Ivory needs to survive what will you do?


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Calculating Market Size

Start with available information Macro data (census) etc

Competition (similar product, technology, same

customers) Extrapolation

Industry growth

Potential (can and willing to buy)

Penetration (share - $, volume etc)


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Achieving Superior

Performance

Determining

DistinctiveCapabilities

Customer

Value/Capabilities

Match

Becoming Market-Orientation

Characteristics of a Market-Driven Strategy

(Fig 1.1)


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What is market orientation?

Strong customer focus: creating customer valueNOT customer orientation

Intelligence management: acquisition, evaluation,dissemination and action (formal/informal)

Alignment of goals/structure internally(coordination and cascading) by managingresources (identifying distinct capabilities) andstakeholders

Adaptation to changing external conditions:macro and competition

Long-term orientation


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Becoming Market Driven: What

capabilities should I focus on?

Internal OrientationAND

Mkt-driven Strategies

Market SensingCapabilities

Customer LinkingCapabilities


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Alignment and Adaptation

Source: George S. Day, Journal of Marketing, October 1994, 41.

Spanning Processes

Outside-InProcesses

Inside-OutProcesses

EXTERNAL EMPHASIS INTERNAL EMPHASIS

Market sensing Customer linking

Channel bonding

Technologymonitoring

Customer orderfulfillment

Pricing

Purchasing

Customer servicedelivery

New product/servicedevelopment

Strategy development

Financial management

Cost control

Technologydevelopment

Integrated logistics

Manufacturing/transformationprocesses

Human resourcesmanagement

Environment health andsafety


Capabilities

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Capabilities

IdealCapabilities

Applicable to MultipleCompetition Situations

Difficult toDuplicate

Superior to theCompetition

Source: George S. Day, Journal of Marketing, October 1994, 49.


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DISTINCTIVE CAPABILITIES

Capabilities are complex bundles of

skills and accumulated knowledge,

exercised through organizationalprocesses, that enable firms to

coordinate activities and make use of

their assets.

George S. Day, Journal of Marketing, October 1994, p.38.Copyright Balakrishnan 2009

d i ki S f

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Adaptation -Making Sense of

Perceptions of Reality: managing it.


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Value Composition

Monetarycosts

Time

Psychic andphysic costs

Product

Services

Employees

Image

Benefits

Costs(sacrifices)

Value(gain/loss)

Copyright Balakrishnan 2009Effort

Relationships

Emotions

Experiences

Social Interaction

WOM

Value for Soap?

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Need Analysis (Kotler)

Latent Need (needs that exist but not aware of) Hidden Needs (exists aware but thinks cannot

be got)

Stated needs (what customer says he values)

Real Needs(what he actually values)

Unstated Needs (he values but does not mention)

Delight Needs (thrills him)

Secret Needs (wants but scared to mention)


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Other Stakeholders

Relationships: With Whom? (Value chain,influencers, internal partnerships,

governments)

Product modularity

15-20% of total co. resources are based on

strategic alliances

Benefits: access to markets; enhance value;reduce risk; share complementary skills;

acquire knowledge; build/sustain close

relationships; access to resourcesCopyright Balakrishnan 2009

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Reasons for Strategic Alliances

Enhance value for customer (CPV

benefits/costs)

Reduce risk due to environmental uncertainity

and exploit opportunities presented

Gain access to markets (places, spaces, minds)

Gain access to/develop competencies and

resources for SCA (technology/knowledge etc)

Build bonds/relationship with key

stakeholdersCopyright Balakrishnan 2009

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Marico: created in 2003, many brand

category leaders in FMCG, first comoil in India. Has 2.5 mn distribution oIndia. Main areas Edible oil, beautyhealthcare, some laundry.

P&G is a Fortune 500 brand. Main Business beauty

and household FMCG. Most brand are No1 or 2.

Got 23 brands over $1 billion in annual sales

18 more brands between $500 million and $1

billion

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Evaluating Potential for Collaboration

Which company? Why?

What's in it for each? Is the demarcation

clear?

Costs of collaboration.

Is it essential?

The organizational fit: Sony/Apple


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Types of Relationships

Joint Ventures

Internal Partnering (agreements)

Strategic Accounts Others?

NokiaMorph


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Questions

Outsourcing and Control?

Long-term or short-term?

Transfer of competitive advantage? Insularity or loss of innovation?

Control and adaptability?

Exit clause Relationship management and culture

compatibility

Read Ikea case study (case 2-2)

1-4 &7 Chapters

Documents

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