Demand Driven Strategic Planning
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Demand Driven Strategic Planning

Marcos Fava Neves

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eBook - ePub

Demand Driven Strategic Planning

Marcos Fava Neves

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About This Book

This book offers students and practitioners alike an integrated approach to strategic planning for companies. Marcos Fava Neves presents a new and unique perspective on this critical topic based on three main points: strongly demand-driven decisions that bridge the gap between long- and short-term strategy; a vision of a company as an integrated network, full of relationships that deserve consideration during the planning process; and the introduction of 'collective-action' thinking, which raises the prospect for cooperation between competitors. With this clear, comprehensive framework for strategic planning, companies can be sure to navigate today's complex environment and enhance their prospects of success.

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Information

Publisher
Routledge
Year
2012
ISBN
9781135875190
Subtopic
Marketing
Edition
1

1 The Company as an Integrated Network

Before proceeding to the main objective of this book and beginning our discussion of demand driven strategic planning (DDSP) it is important to discuss the fundamental concepts that will be used in the development of planning and of the tools that will aid this work and facilitate the implementation of planning efforts, always directing the company towards the market.
Thus, the following points are considered in order to begin DDSP:
  • understanding the marketing concept and its importance to the company;
  • the company’s network vision under the marketing lens;
  • the importance of collective actions in marketing (joint efforts);
  • the importance of strategic marketing planning, their advantages and general vision;
  • beginning the planning process: understanding the company and its history.

What is Marketing?

McCarthy and Perreault (1997) state that if the majority of people, including managers, were forced to define marketing they would say it means “sales” or “advertising.” This answer is not completely true; sales and advertising are part of what is known as marketing, which includes several other activities, as we will see later. Thus, marketing is defined as “a social and managerial process by which individuals and groups obtain what they need and want through the creation, offer and trade of products and values with others” (Kotler, 1997: 9); in other words, it is a process that aims at satisfying the needs of both parties through trade.
Marketing is used to understand which are the needs of the final consumers and intermediaries (industries, distributors) through a research process, analyzing the behavior of these consumers, and the market, making it easier to see which segments of consumers may be satisfied, which target market the company will act on, what type of differentiation can be offered, how to generate and adapt products, brands and packages to satisfy these needs, the correct pricing strategies for these products, how to make them available to consumers through distribution channels; and, communicate through advertising, publicity and other tools.
Originally marketing in the USA was seen as a branch of applied economics, with studies about distribution channels in times of product scarcity after World War II. A time when the focus was aimed at production, a time in which everything that was produced was in great demand. Until the first half of the 1950s it was considered an administrative function of sales activities. In the 1960s, with the development of the American economy, many “offering” companies appeared, competition increased, and marketing began to be considered an applied behavioral science subject, concerned with understanding the systems involving transactions of products and services between buyers and sellers.
Thus, a new orientation appeared, seeking to fully satisfy a particular group of consumers, offering them what they wanted, in a better way than the competition. In other words, an inverse process. Instead of producing what one knew, in an environment with little competition and afterwards letting the sales staff create and stimulate the demand, stocking the distribution channels and pushing products to the consumers, through research, companies began to perceive what the consumers were demanding, and began to launch products that completely satisfied their customers. This is the thought process in marketing: a thought process that has been reversed, as shown in Figure 1.1.
In a similar way, Czinkota (2010) describes the evolution of marketing, highlighting the production era in which the business philosophy was focused on manufacturing efficiency, the sales era in which the business philosophy was focused on the sale of the existing products, and the marketing era in which the philosophy focused on the customer’s needs and desires. The company offers value to its customers through configuration (the act of “designing” the object – the product), valuation (establishing the trade terms for the object – the price), symbolization (association to certain meanings through advertising) and lastly through facilitation (altering the object’s accessibility – point of sale) (Kotler, 1997).
image
Figure 1.1 The marketing process and market orientation
Source: adapted from Kotler (1997)
The target market of marketing activities is composed by the final consumers, industrial consumers (anywhere in the world), governments, suppliers, employees, agents, competitors and others. The organization is seen as a unit converting the resources of shareholders, directors, employees and suppliers into products that will go directly to consumers or indirectly to them through agents. Government, competitors and other parties watch this activity with the power to sanction or restrict it. All these parties are a target for the organization’s marketing, through the impact they have on the efficiency of the conversion of resources. This broad definition of the target market already demonstrates the coherence of an adoption of a network approach in marketing, which will be discussed next.
Moreover, efforts have been made by companies in order to adapt more to a new marketing perspective, where consumers are no longer considered as isolated individuals, since they are now connected with one another by new technology and social media in a way that has never occurred before.
Therefore, there is an increasingly collective power of consumers, and companies must collaborate with their consumers to succeed in their business as “the centrality of marketing in creating growth and shareholder value suggests a new role for marketing” (Doyle, 2000: 29).
In this sense, according to Kotler et al. (2010) marketing has now shifted to inviting consumers, creating conditions for them to participate in the company’s development of products, communications and so on. In other words, these changes enable creating value through co-creation efforts with consumers.
These changes, along with technology, also makes the process easier in which companies gather market insights – for example, by means of mining social networking data – which in turn makes it possible to improve their understanding of the market’s needs. Thus creating, communicating and delivering offers that have value for both the market and the company’s shareholders.
A demand driven perspective is both important and challenging within organizations. However, this perspective is very important and can affect company performance and, “as a resource, market orientation is a deeply embedded cultural resource which positively influences the development of marketing capabilities” (Trainor et al., 2011: 165).
The following are some of the relevant characteristics of demand driven organizations. This is the “Demand Driven Tool.”
  • Their executives and workers listen to and pay attention to the marketplace. This is a major characteristic, since paying attention is difficult – and it is incredible that we deal daily with companies which are closed to information.
  • They don’t fear being evaluated. In many organizations we see that there is an avoidance of establishing formal and informal evaluations procedures because people will be pressured.
  • They dedicate time to thinking. Time to think nowadays is rare as it is costly. We have to pursue financial, sales targets and all this massive communication is disturbing, since when you are thinking you are disturbed by a new email arriving or a mobile phone ringing. Technology made us much more accessible to people, but the obverse is the continual interruption in thinking processes.
  • They analyze and model macro environmental changes. They are keen to see what is happening in differing scenarios: socio-cultural, technological, economic, and political and legal. Demand driven organizations analyze how these trends and movements affect them.
  • They do mental simulations of possible future changes and their impacts, anticipating movements and reactions. It is the “what if?” question. They model these questions of possible future changes and their impact.
  • They establish closer linkage and connection between stakeholders (consumers, customers, suppliers, distributors, government, shareholders, banks, etc.) via strategies such as open lines of communication, own stores, consumer labs, front-line people empowerment and digital platforms.
  • They share a sense that they are owned by the consumer. The value of the organization is the value given by the consumer; having a clear understanding of customer problems and how the organization can solve them. This requires a change of mindset in employees.
  • They don’t fear change. Some companies face an accommodation process. People won’t change their indifferent attitude, they think nothing is possible, nothing works. This behavior must be changed by stimulus, “If people don’t change, let’s change the people.”
  • They show entrepreneurial and innovation behavior – we see demand driven companies always bringing new concepts and solutions to society.
  • They also share the discipline to make things happen. They take note and take action.
The “Demand Driven Tool” can be used by any company by transforming all these topics in questions related to “how can we improve.”

Every Company Builds a Network

Marketing is more often seen as a facilitator for transactions that may occur between companies. Companies are more and more interdependent and related to each other, literally forming networks. Whenever a company analyzes itself, it needs to construct a network to be used for research, or to work out segmentation, differentiation, product, price, distribution channels or communications. All companies must understand that they are not isolated anymore. They operate in a complex network, interacting with suppliers, buyers, consumers, competitors, the government and other agents.
Therefore a theoretical model of the company network can be defined as the group of supplier and distributor companies for the focus company. As stated by Alderson and Halbert (1971), companies participate in traditional flows of products, services, communication, information, orders and payments necessary to connect the suppliers of raw materials used for production to the final consumers of their products or products processed from the original products.
The concept of networks varies according to how closely we focus. In this book, we work with a focus on the company under analysis, in other words, the “network of that company.” In this sense it is a process of analyzing a company and its group of suppliers and distributors, the existing relations between them and relations with its environment. It is in essence an approach which looks at interactions and relationships. This concept is used by the Industrial Marketing and Purchasing Group (IMP), known as the IMP method or approach (GemĂŒnden et al., 1997; Bridgewater...

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