Characteristics of market-driven strategy

Answer 1

Market- Driven StrategyMarket- Driven Strategy (MDS) is very essential in formulating business strategy. This approach used is always market-oriented and customer-oriented. Next, understanding what the customers do, understanding the customer's behaviors and measuring the interaction among customers. Therefore, the main point is always orienting to the market and customers in every business activity performed. Characteristics Market- Driven StrategyMarket driven strategy is considerably the most popular organizational approach in running the business nowadays, as the strategy allows the company to obtain a better understanding of the market, as well as their customers; thus, it allows company to achieve competitive advantage, and develop a long-term relationship with the customers.

The fundamental logic of this strategy is that the market and the customers that form the market should be the starting point in business strategy formulation; which therefore an understanding of the market and the customers that form the market is essential.

The characteristics of market driven strategies include:

• Becoming market oriented
• Determining distinctive capabilities
• Finding a match between customer value and organizational capabilities
• Obtaining superior performance by providing superior customer value

Although it is a highly promising strategy, yet it is argued that a long-term commitment is crucial in order to develop these strategies. Becoming Market OrientedA market orientation is a business perspective that placed the customer as the center of a company's total operations. This concepts is basically holds the same idea as the "marketing concept". However, for a business to achieve market orientation, it involves the use of superior organizational skills in understanding and satisfying customers.

A market-oriented organization always gathers information about its customers, competitors, and the markets; analyze it from a total business perspective, decides how to deliver superior customer value, and finally takes actions to provide value to customers.

(Characteristics of Market Orientation)

Customer focusCustomer focus basically stands for understand the customer needs, wants, and responses towards the products delivered. The market-oriented organization understands customers' preferences and requirements and effectively deploys the skills and resources of the entire organization to satisfy customers. Becoming customer oriented requires finding out what values buyers want to help them satisfy their purchasing objectives. Buyer's decisions are based on the attributes and features of the product that offer the best value for the buyer's use situation. The buyer's experience in using the product is compared to his or her expectations to determine customer satisfaction.

Example: Dell Computer's direct contact with its buyers is an important information source for guiding actions to provide superior customer value. The direct, built-to-order process used by Dell avoids the stocking of computers that may not contain state-of-the-art technology. Also, each computer contains the specific features requested by the buyer. Competitors of Dell that market their computers through distributors and retailers have higher costs because price reductions in purchased components (e.g., chips) cannot be utilized for computers in inventory.

Competitor intelligenceA market-oriented organization recognizes the importance of understanding its competition as well as the customer. Failure to identify and respond to competitive threats can create serious consequences for a company.

Example:Western Union did not define its competitive area as telecommunications, concentrating instead on telegraph services, and eventually the 100-year-old company was outflanked by fax technology. Had Western Union been market oriented, its management might have better understood the changes taking place, recognized the competitive threat, and developed strategies to counter that threat.

Cross-Functional CoordinationMarket-oriented companies are effective in getting all business functions to work together to provide superior customer value. These organizations are successful in removing the walls between business functions-marketing talks with manufacturing and finance. Cross-functional teamwork guides the entire organization toward providing superior customer value. Performance ImplicationsCompanies that are market oriented begin strategic analysis with a penetrating view of the market and the competition. Moreover, an expanding body of research findings points to a strong relationship between market orientation and superior performance. Companies that are market oriented display favorable organizational performance compared with companies that are not market oriented. Distinctive CapabilitiesIdentifying an organization's distinctive capabilities is a crucial part of market-driven strategy. Capabilities can be defined as complex bundles of skills and accumulated knowledge, exercised through organizational processes that enable firms to coordinate activities and make use of their assets.

The Major components of distinctive capabilities are:

Organizational Processes

Skills and Accumulated Knowledge

Coordination of Activities

Assets

Example: Zara's new-product development process, which illustrates the retailer's distinctive capabilities, where the new-product development applies the skills of their design team and benefits from the team's accumulated knowledge; the coordination of activities across business functions during new-product development is facilitated by information and technology (the product designs take into account the manufacturing requirements as well as offering high fashion products). The asset is the strong brand image possessed by Zara which helps the launching of the new product.

Creating Value for CustomersCustomer ValueCustomer Value is the outcome of a process that begins with a business strategy anchored in a deep understanding of customer needs. The creation of customer value is an important challenge for the managers, since it is an ongoing competitive challenge in maintaining successful market-driven strategies. Being able to overcome these challenge, the organization is believed to be able to successfully deliver the customer value; hence fulfilled their goals. Superior customer valueSuperior customer value occurs when the buyer has a very positive use experience compared to his/her expectations as well as the value offerings of competitors.

Furthermore, the values could be product differentiation, lower prices than competing brands, or a combination of lower cost and differentiation.

ConclusionThrough the deep understanding of this concept, ability to implement and manage all the elements, as well as the constant management and updates of the strategy, it is believed that the organization will able to achieve its goals.