Balance Between Shareholder Value and Customer Needs - Thesis Proposal Example

Can strategic marketing create a satisfactory balance between shareholder value and needs? s Submitted by s: Project background It is broadly considered that the growth of a business as well as shareholder value is developed on the foundation of investments that seek to acquire and retain customers (Nalepka and Ujwary-Gil, 2011, p. 218). However, together with this principle, literature has demonstrated an increased recognition that the ways in which vital customer based outcomes are developed in the shorter term has significant effects for long-term performance. Organizations are increasingly believing in the platitude that the satisfaction of customer needs is inevitably connected to the long term value of the shareholders with the financial markets continuing to emphasize it while rewarding business growth in the shorter term (Nalepka and Ujwary-Gil, 2011, p. 552). The managers who are supposed to develop resource allocation decisions consider the resolution of this important tension as requiring a balance between strategic marketing goals associated with the retention of the customers and acquiring the customers (Baines, Fill and Page, 2011, p. 200). However, some risks are associated with this balancing act as on one side the returns to specific marketing activities are considered (McDonald, Payne and Frow, 2011, p. 364). On the other side, is a factor that has not elicited lot of systematic attention, which is the manner in which the vital customer based outcomes have been developed in the shorter term and the associated vital implications for the longer term. Determining a marketing strategy that can be able to balance value for both the shareholders and the customers in terms of needs has always appeared to be an impossible endeavor (Doyle, 2008). This is because of the potential trade off that exists in value generation associated with the two main stakeholders. In most of the cases, more for one is considered as being less for the other party but this does not mean that there are no ways of satisfying the needs of the customers while generating values for the shareholders (Bierman, 2001, p. 10). Research questions Businesses strive towards maximizing their profitability so that they can increase their shareholder value while at the same time satisfying the needs of the customers so that they can have a market for their products. Achieving these to fetes is a complicated task and most companies find it difficult to address both aspects at the same time. It is in this context that this research seeks to find out whether strategic marketing has the ability to develop a satisfactory balance between the value of the shareholders and satisfying the needs of the customer. Aim The main aim of this study is develop an evaluation and assessment of whether strategic marketing can create a reasonable equilibrium between shareholder value and the needs of the customer. Objectives The objectives of this research will be achieved through studying and discussion the listed goals, which are important aspects of this research endeavour. To understand what is meant by shareholder value To understand what needs of the customer means in the context of marketing To find out if strategic marketing has an ability to create a reasonable balance between the value of the shareholders and needs of the customers The research will employ qualitative methods in testing the mentioned aspects as far as creating equilibrium between value of the shareholders and needs of the customers is concerned. The results of the research will be used to demonstrate clearly if the hypothesis that marketing strategies can balance the aspects of stakeholder value and needs of the customers is true. Literature Review Creating an alignment of supply abilities with the attributes of demand guarantees that the customer is considered as the most important part of the supply chain (Kim, 2012, p. 270). However, the process of aligning these capabilities to the needs of the customer entails more than just meeting the demands of the customer, and is supposed to be an activity that involves the whole company as well as its competitive position (Preece, Moodley and Smith, 2003, p. 40). In this regard, the idea of customer alignment can be defined as the practice of ensuring that the approaches used for the supply chain are well matched to the strategies used for marketing (Hanna and Newman, 2003, p. 190). This entails aligning strategies within as well as between the partners present in a supply chain while delivering value to the customers. In the same context, customer value includes the benefits that are perceived by the customers, which are obtained through products or services when compared to the costs of purchase (Yi, 2014, p. 72). This makes it clear that delivery of customer value is an important aspect to a company as the customers are the important components of the supply chain. Nonetheless, delivery of financial value to the shareholders is also important and can be reflected in different business performance measures such as profit and growth in the size of the market (Lawrence, Gunasekaran and Krishnadevarajan, 2009). In this regard, shareholder alignment can be defined as the process of creating compatibility between the business strategy and the functional strategies together with the business process that are utilized in the delivery of these aspects (Fioretos, 2011, p. 162). This entails aligning strategies and processes within and between the various partners in the supply chain and the delivery of value to the shareholders. Shareholder value is a financial value that is created specifically for the shareholders by the companies in which they have investments and since shareholders value growth and profitability, reduction in the cost of operation, fixed assets and efficiency in regard to working capital are the main drivers (Jonker and Witte, 2006, p. 338). Therefore, the two most commonly employed measures in terms of shareholder value are market and economic value added (Kozami, 2005, p. 82). Numerous companies experience the dilemma of if they should direct their efforts towards delivering value to their shareholders or satisfying the needs of the customers (Abbing, 2010, p. 9). There is a common notion that pursuing the needs of one party will certainly hinder delivering to the other party (Ronnegard, 2006, p. 140). In most of the instances, shareholder value emerges victorious and this leads to a situation where the opportunities for synergy are missed. Nonetheless, marketing strategies have a capacity to satisfy the needs of the customers while at the same time creating value for the shareholders. Even though supply chain strategies are associated with the delivery of superior customer values, meeting the needs of the shareholders is also important (Lan and Unhelkar, 2006, p. 105). This enables a dependable supply and logistics service, reduction in the costs of the inventory as well as shorter cash-to-cash cycle times. It thus addresses the needs of the shareholder in regard to growth in revenue, reduction in the costs of operation and fixed assets along with working capital efficiency (McLoughlin and Aaker, 2010, p. 102). An alignment gap develops when there are inconsistencies between the strategies implemented and the processes that are used and this leads to loss of value for the customer and the shareholder, and these gaps can be based on the customer or the shareholders (Eliason, 2012). Marketing and supply chain strategies deal with four supply chain processes including planning, sourcing, making and delivery and these strategies focus on fulfilling demands (Leeman, 2010, p. 77). This review is centered on the main aspects of marketing strategy, which are market segmentation, and an appreciation of the customer value. These factors address the connection between the supply chain and marketing and thus they can be aligned. The companies that deal with industrial products rather than consumer products may be associated with comparatively small marketing functions while their function in terms of sales is relatively bigger (Baker, 2001, p. 176). In this situation, marketing can be replaced by sales and the title of the function is not important, as what is vital is its concern for the creation of demand, which entails market segmentation, and appreciation of customer value. Achieving a superior marketing strategy does not depend on copy pasting the best practices associated with one company to another (Kazmi, 2007, p. 64). Considering the unique setting that marketing strategies operate in, excellence can be achieved through applying a solution that is specific to a particular context (Ramesh Kumar, 2009, p. 4). Maximizing shareholder value The value of the shareholder is the worth that is given to the shareholders based on the capacity of the executives to increase profitability along with the shares and prices of shares (Rappaport, 2014, p. 90). Therefore, it can be considered as the cumulative collection the planned decisions that have an impact on the capacity to grow resourcefully the quantity of cash flowing freely in the long term (Hiles, 2007). The key drivers of shareholder value are wise investment decisions as well as the generation of healthy returns on the capital that has been invested. This creates a fine line between increasing the value of the shareholders in a responsible manner and doing all that is necessary to increase profitability. Resolutions that are arrived at recklessly and antagonistically pursuing profits while not considering the surroundings or other people can make the worth of the shareholders to wane (Baker and Martin, 2011: Loughrey, 2013, p. 9). Maximizing the shareholder value is a management principle that implies that the management is firstly supposed to consider the interests of the shareholders as well as its business actions (Kontes, 2010, p 2: Putten, 2008). However, the legal premise of principle of publicly traded firms states that the management is supposed to maximize the profitability of the organization, meaning that they are not legally obliged to work towards the maximization of the value of the shareholders (Denning, 2010, p. 73). The concept of maximizing the value of the shareholders is typically highlighted but at the same time opposes the apparent actions of CEO and other managers who benefit at the expense of the shareholders. It is not easy for any manager to influence the value of the shareholders as it is normally broken down into components that are considered as value drivers including revenue, incremental capital expenditures, costs of capital and operating margins among others (McGrath, 2011). Considering some of these aspects clearing demonstrates that profit maximization in the short term does not essentially increase the value of the shareholders. It is most notable that the competitive advantage period addresses this and if a business is selling products that are sub-standard in order to decrease costs and make quick profits, its reputation can be damaged and this decreases its competitive advantage in the long-term. It is the same case for the businesses, which do not focus on research or invest in properly trained and motivated workers (Mudahar, Jolly and Srivastava, 1998, p. 15). Shareholders as well as market analysts typically discover these matters and ultimately decrease the prices that are ready to part with for shares associated with these form of businesses. Concentrating solely on value of the shareholders is broadly condemned especially after the financial downturn that occurred towards the end of the 2000s. Even though focusing on the values of the shareholders can be of financial benefit to the owners of a company, it does not clearly measure some social issues such as employment as well as moral issues associated with the business. Some marketing strategies may maximize the value of the shareholders but at the same tome decreasing the welfare of the third parties and shareholder value that is associated with short term goals has been criticized as decreasing the overall economic progress due to decreased accumulations of business capital. It may also be disadvantageous to other stakeholders like the customers, for instance, a company may stop providing support for old or even new products so that it can be able to increase the value of the shareholders. In addition, a short-term focus on the value of the shareholders can be unfavorable to the long term value of the shareholders, for instance, gimmicks that boost the value of stocks for a limited time may have a negative impact on the long term value of these stocks. The inherent and extrinsic worth of a company is measured through a blend of financial success, its usefulness in the society as well as the level of satisfaction of its workers, where the priorities depend on the character of the people and the entities that collectively own shares in a company (Sherman, 2011, p. 52). Nonetheless, this concept can be difficult to execute in practice as a consequence of the difficulties associated with defining the corresponding measures for usefulness to the society as well as the satisfaction of workers. Satisfying the needs of the customer Customer satisfaction is a phrase that is frequently employed in marketing and is a measure of the manner in which a company to meets or even surpasses the expectations of the customers in regard to supplying products as well as services (Weil and Maher, 2005, p. 662). Customers’ satisfaction can therefore be considered as the sum of customers who have experiences with a company or its commodities that have surpassed its indicated objectives in terms of gratification (Swamidass, 2001, p. 37). Very many managers use customer satisfaction as a measure of their level of success and it is considered as an indicator of the performance of a business while at that same time being of a balanced scorecard (Hassanien, Dale and Clarke, 2010, p. 206). In marketplaces that are competitive, characterized by businesses competing for customers, satisfaction of the needs of the customers is considered as a differentiator and has progressively become a key aspect as far as marketing strategy is concerned. In organizations, customer needs satisfaction ratings can have profound effects and they direct the workers on the significance of fulfilling the needs and expectations of the customers. Additionally, if the ratings are lowered, it may lead to problems that may have a negative effect on sales along with profit margins of the company or business. These aspects qualify a significant dynamic and when a brand has customers who are loyal, there is a positive word of mouth marketing that is gained, and this is free and very effective. For that reason, it is important for businesses to manage efficiently the satisfaction of the needs of the customers and in order to do this; companies require dependable and representative measures of this aspect. When seeking customer satisfaction, companies usually inquire from their customers if the products they provide meet or surpass expectations (Duchessi, 2001, p. 71). This means that expectations are a key aspect as far as meeting the needs of the customer is concerned and when the expectations of the customers are high but the reality falls short, then they will be disappointed and their experience will be rated as being less than satisfying (McNealy, 1994, p. 13). Therefore, a luxury hotel for instance, may be rated as being less satisfying than a low cost motel regardless of the fact that its facilities and services are considered as being superior in entirety. The significance of satisfying the needs of the customer is reduced when the company has an increased bargaining power, for instance mobile phone plan providers like Verizon who operate in an oligopolistic industry that is characterized by a limited number of suppliers of particular products and services (Prašnikar, 2005, p. 120: Baumol and Blinder, 2006, p. 249). This creates a situation where most of the mobile phone plan contracts have numerous fine prints with provisions that would not be permissible if the number of customers was low as the level of customer satisfaction would not be high (Alexander, 2010, p. 85). A considerable amount of empirical literature recognizes the advantages of satisfying the needs of the customer to firms and customer satisfaction is leading indicator of the purchasing intentions of consumers as well as their loyalty (Shaw and Reed, 1999, p. 81: Sunder, 2011, p. 67). Data on customer satisfaction is one of the most regularly collected indicators regarding market perceptions with their principle being twofold. First, collecting, analyzing and disseminating data in an organization communicates the importance of paying attention to customers and making sure that their experiences are positive in regard to goods and services (Beecroft, Duffy and Moran, 2003, p. 153). Second, even though sales or share of the market can indicate the current performance of a company, satisfaction is still considered as the best indicator of the manner in which the customers will make their purchases in future (Hill, Self and Roche, 2002, p. 65). A lot of research has focused on the connection between satisfying the needs of the customers and retaining them, and research has indicted that the consequences of satisfying the needs of the customers are more profoundly identified at the extremes (Allen and Wilburn, 2002, p. 92). Methodology This research will assume a qualitative approach as its methodology using interviews that will be both structured and semi-structured. The qualitative approach is favored because the research aims at establishing the opinions of the respondents in regard to whether strategic marketing can create a satisfactory balance between shareholder value and customer needs (Görgens-Albino and Kusek, 2009, p. 263). This makes the qualitative approach appropriate for seeking perceptions and views from the people who will be chosen as respondents (Cook and Farmer, 2011, p. 228). After the structured part of the interview is completed, the interviewer will use the responses of the respondents to develop questions that will be used for the semi-structured section of the interview. This approach to research was used as it considers the perceptions of the respondents while focusing on describing the manner in which marketing strategies can create a balance between the values of the shareholders and satisfying the needs of the customers. However, qualitative assessment is influenced by anecdotalism through narrating various cases of phenomenon while at the same time not addressing data in its totality (Gorard and Taylor, 2004: Bryman and Bell, 2011). Through using both structured and semi-structured interviews, it will be possible to pursue some of the interesting responses that will be given by the respondents, which may possess an enriching impact on the data that will be collected (Bernard and Ryan, 2010, p. 29). The collection of data through interviews will be supplemented by other types of data that will be collected through a review of available literature associated with previous studies in order to make it more valid (Laursen, Little and Card, 2012, p. 143). Sampling The target population for this research will be twenty students from various universities who are taking course that are related to marketing and in their second or third years of study. A combination of convenience and quota sampling methods will be used such that convenience sampling will be one that will be available to the study founded on accessibility (Jackson, 2012, p. 102: Ellison et al., 2009, p. 198). On the other hand, the quota sampling will be employed to come up with a sample that is representative of the population in regard to the proportion of various categories of people particularly gender (Silver and Wrenn, 2013, p. 158: LeCompte and Schensul, 2010, p. 170). Among the twenty students from different universities who will be chosen as respondents to this study, eleven will be female and nine male, with particular emphasis on a marketing background. Prior to the interviews taking place, the respondents will be required to give their consent through appending their signatures on consent forms that will be provided by the interviewer (McCaig and Dahlberg, 2010, p. 11: Childress, Meslin and Shapiro, 2005, p. 180). Interview format The interview will entail a collection of closed and open-ended questions, which will be incorporated so that the respondents being interviewed can get an opportunity to provide their personal views in their own words. At the beginning of the interviews, the questions will seek to confirm whether the respondents are aware of the various aspects of the phenomenon that inform the research such as stakeholder value and customer needs. The interview will consequently address more comprehensive factors regarding whether marketing strategies have an ability to create a balance between the needs of the customer and the value of the shareholders in the manner that is covered in the literature review. The interviews will take place at places that will be chosen by the respondents and considered by the interviewer as being conducive for an effective and efficient interview such as in lecture halls in the evening when most of the activities for the day have been concluded. Permission will be sought in advance from the administration of the universities before the interviews take place in their premises in order to create an ease of accessibility to some of the areas within the campuses. Additionally, consent will be also be sought from the respondents prior to the interviews taking place so that the interviewer can be record their responses using a tape recorder so that these responses can be transcribed during data analysis(Roulston, 2010, p. 97). Analysis of data The data gathered through the interviews will be assessed and analyzed to produce information meaningful to the objectives of the research (Love, 2009, p. 76). The collected data will have to be reduced and fitted into applicable presentation formats so that it can be comparatively easy to organize the large amount of information that will be produced in the end (Glatthorn and Joyner, 2005, p. 195). The information that will be gained from this organization will be equated to the theories identified in the literature review to identify if they comply consequent to the data being summarized. Project plan Main Activities (indicators) Time-scale ( in weeks) Resources needed (instruments, software, personnel etc) Proposal defence 2 Mentor and committees Gathering data(interviews) 2 Interviewers, questionnaires, pens and notebooks, recorders Qualitative content analysis 4 Books from the library, personnel to help with the data reduction Hypothesis. 2 Library. Draft thesis Conclusion 2 Reading room, binding machine to arrange for presentation Final paper Submission 1 Transport services, Electronic mail Making amendments 2 Initial literature, material form books Bibliography Abbing, E. 2010, Brand-driven Innovation, AVA Pub, Lausanne. Alexander, E. 2010, Displaced, AleCarn Pub, Atlanta, Ga. Allen, D. and Wilburn, M. 2002, Linking customer and employee satisfaction to the bottom line, ASQ Quality Press, Milwaukee, Wis. Baines, P., Fill, C. and Page, K. 2011, Marketing, Oxford University Press, Oxford. 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Yi, Y. 2014, Customer Value Creation Behavior, Taylor and Francis. Hoboken. Read More