The Marketing Orientation in Relation to the Sales Orientation - Essay Example

Mrketing orienttion in reltion to sles orienttion nd production orienttion [Nme of the [Nme of the school] Even though mrketing functions hve long been performed nd middlemn system of mrketing ws well estblished in the lst century, gret chnges hve tken plce in the significnce ttched to mrketing by ll kinds of compnies. In generl, this hs been trnsition from emphsis on selling wht compny hd to the producing of goods nd services tht re wnted by the customers tht mde up the demnd side of the mrket. In the mrketing literture of the lte 1950's nd erly 1960's, the newer emphsis hs been described s the mrketing orienttion, production orienttion, nd sles orienttion. The concepts of mrketing hve been developed historiclly in dependence from the needs of mrket. The evolution my be illustrted by the experience of well-known mnufcturer, The Pillsbury Compny, which, like mny other orgniztions, moved through four ers of emphsis. First, there ws the er of production dominnce. The compny ws founded in 1869 by Chrles . Pillsbury on the bsis of vilbility of high-qulity whet nd proximity of wter power. Mjor concern ws with mnufcturing-not mrketing. ccording to compny executive, compny philosophy in the er of mnufcturing dominnce might be stted s follows: "We re professionl flour millers. Blessed with supply of the finest North mericn whet, plenty of wter power, nd excellent milling mchinery, we produce flour of the highest qulity. Our bsic function is to mill high-qulity flour, nd of course (nd lmost incidentlly), we must hire slesmen to sell it, just s we hire ccountnts to keep our books." The second er ws one of sles orienttion. In the 1930's, competition hd become more significnt nd the problems of reching the mrket hd grown much more complex. Compny officils becme somewht wre of consumer wnts nd needs, nd formed commercil reserch deprtment to develop fcts bout mrkets. More ttention ws given to strengthening the distributing orgniztion, consisting of wholesle nd retil grocers. Compny philosophy in this er is described s follows: "We re flour milling compny, mnufcturing number of products for the consumer mrket. We must hve first-rte sles orgniztion which cn dispose of ll the products we cn mke t fvorble price. We must bck up this sles force with consumer dvertising nd mrket intelligence. We wnt our slesmen nd our delers to hve ll the tools they need for moving the output of our plnts to the consumer." third er of mrketing orienttion did not begin until the erly 1950's. The compny hd experienced substntil post-World Wr II sles growth in new products, principlly cke mixes. It relized tht it could produce hundreds of new products, nd fced the necessity of selecting the best ones. It ws considered essentil to build into the compny orgniztion new function which would coordinte the heretofore seprte compny responsibilities of selling, dvertising, mrketing reserch, nd product plnning, nd provide guidnce for other res. This function ws clled "mrketing," nd mrketing developed the criteri for determining which products to mrket. Emphsis shifted from mnufcturing nd mere sles considertions to determintion of which products would best fit the needs of the compny's customers. Compny policy for the 1950's ws stted s follows: "We mke nd sell products for consumers." mrketing oriented firm is now defined s n "orgniztion culture tht most effectively cretes the necessry behviors for the cretion of superior vlue for buyers nd, thus, superior performnce for the business." (Nrver nd Slter, 1990, p. 21) This definition implies tht the firm needs to understnd buyer needs nd competitive cpbilities nd weknesses, nd it needs to perform ctivities gered to chieving superior customer stisfction. The firm's corporte culture is systemticlly committed to creting customer vlue. The rtionle is tht the more compny understnds nd meets the rel needs of its consumers, the more likely it is to hve hppy customers who come bck for more, nd tell their friends. This process cn entil the fostering of long term reltionships with customers. In order to determine customer wnts, the compny usully needs to conduct some form of mrketing reserch. Overll, the mrketer expects tht becoming mrketing oriented, if done correctly, will provide the compny with sustinble competitive dvntge. The key issue t the hert of 'mrketing orienttion' is wht cn be clled the 'competitive edge', in other words, wht mkes the compny's offering so different from tht of the opposition sles orienttion mkes propositions to the mrket bsed on the compny's perspective. Wheres the mrketer will bse the proposition on competitive edge tht is vluble to the customer. (Formlly known s the 'Competitive Differentil dvntge' - CD.)To illustrte vi the use of consumer good, - sy, frozen pes: The 'sles-oriented' compny would mke propositions tht their pes were bigger (or smller), greener, fresher, withstood freezing longer, etc. thn the competition. They my even go on to offer specil dels such s 'This week's specil offer, buy two nd get one free, collect the pckets to get specil premium 'gift', free delivery (if business to business) etc. The list cn be s long nd s ingenious s the mind is fertile. The "mrketing oriented" compny will first sk the prospective customer (prospect), wht they wished to use the pes for, nd then bse their product nd offering on stisfying the needs thus reveled. So tht for business to business: The resturteur will be offered petit-pois to delight the most jded pllet (becuse he/she is buying customer stisfction for their resturnt, not pes). The hospitl dietitin will be offered pes tht meet the nutritionl requirements of the nursing regime. The locl eduction uthority will be offered pes for school dinners tht: will retin texture for up to three hours to llow for centrl cooking nd subsequent distribution, nd when the kids get to them - re gurnteed bullet proof. nd for consumers: The mothers of fmilies will be offered: - economy pcks for the freezer, -pes mixed with diced crrots for ttrctive mels, - sugr-snps for tht intimte 'tte--tte' mel with hubby, fter long week, when the kids re in bed. Those on their own, such s pensioners, nd the like will be offered: single portion pcks, perhps products suitble for the microwve. This pproch, tiloring the competitive edge to the needs of the prospect, is primrily imed t defending price by creting differentil which is not only ttrctive to the customer, but lso inhibits the potentil customer's bility to compre like with like when shopping round. It relly works well, when the prospect believes tht the vlue of the perceived differentil is worth ny extr price [or whtever else they my hve to forego] in order to cquire the offering. The criticl issue for mrketing orienttion is: To know wht the prospect/customer wnts, nd wht price they re willing to py for it. However, not only is this difficult in itself, but in ddition, the three questions below re NOT mutully exclusive for the mrketer: How do we produce/operte more efficiently How do we persude people to buy from us Wht do people wnt, tht they re willing to py for In order to be successful, the mrketer will see these centrl questions s being criticlly interdependent, in tht: no mtter how good the competitive differentil, if customers re not mde wre of its existence, how nd where it cn be obtined, nd for how much money, (rising this wreness being in the relm of sles ctivity). They will not be ble to buy, nd no mtter how good the sles, if the costs of production/opertion re not under control, the compny cn, nd often will, bleed to deth. So fr this rgument hs estblished tht, for optimum business results, compny should dopt the business orienttion pproprite for the stge of the supply nd demnd cycle pplying to its mrket t tht time. If supply nd demnd were the only considertion, compnies without the muscle necessry to dominte their mrket, should be flexible enough to sty in step with, though perhps slightly hed of, their mrket's supply nd demnd cycle. However, there re forces in ddition to 'supply nd demnd' tht ensure tht nowdys, most compnies hve little option other thn to dopt mrketing orienttion if they wish to do more thn just 'scrpe by'. s n exmple of mrketing oriented compny, I will discuss Smsung mrketing concept further in this pper. Smsung's mrketing strtegy is bsed on three min issues which hs been successfully implemented over the yers of compny's existence nd re still tking plce in its current policies. The first strtegy reltes to product dimension nd it my be viewed best from the perspectives of: (1) the product life cycle (PLC); (2) product price level; (3) diversifiction, nd (4) product chrcteristics, which together provided foundtion for building SEC's unique competitive dvntges. First, Smsung's product development from the PLC perspective shows cler pttern of the compny following the PLC in reverse order. When it strted its opertion in 1971, Smsung selected monochrome television sets s its first product, even though they were lredy in the declining stge of the mrket in the dvnced countries. The next mjor product, color television sets, ws introduced in 1977, elsewhere in the mture mrket stge s they hd been produced for more thn two decdes. By the erly 1980s, the compny nrrowed the technology gp by producing videocssette recorders (VCRs) nd microwve ovens (MWOs) s the new chmpions of revenue genertion, both of which were in the growing stge in the world mrket. Finlly, by the erly 1990s, Smsung ws ble to mnufcture nd sell stte-of-the-rt products, such s DRMs nd digitl videodisc (DVD) plyers in the introductory stge of the world mrket. From price-level perspective, the growth pth begn from products t the low end of the price rnge nd grdully moved up in prllel with rising incomes nd technologicl cpbility. The first product ws modest 12[inches] monochrome television set, followed by 12[inches] color set, which grdully becme lrger nd included more sophisticted functions nd design. The sme pproch ws pplied to VCRs nd MWOs. Strting from the low end ws strtegic choice bsed on three environmentl conditions previling t the time: low ntionl income nd limited purchsing power of the locl mrket; joint-venture prtner tht ws unwilling to shre technologies in high-end product rnges; nd the vilbility of niche export mrket (primrily in the United Sttes) for low-end models. Regrding diversifiction, Smsung Electronics initilly operted with rther simple product structure, minly concentrting on television receivers nd home pplinces. From the erly 1980s, the compny begn to diversify its product lines. The diversifiction, however, ws strtegiclly limited to the electronics-relted re: Nmely, s SEC's technologicl cpbility incresed, it developed relted diversifiction strtegy (Rumelt, 1982), first, into broder rnge of consumer electronics nd home pplinces nd then into more chllenging res, such s personl computers nd peripherls, communictions equipment, nd semiconductors, thereby pproximting Mtsushit's product composition. But the Smsung product composition remined skewed hevily towrd consumer electronics nd home pplinces, ccounting for s much s 81.8 percent of the compny's totl sles revenues in 1988 (Kim, 2002, p. 255). Technology cquisition - the second technique used in compny mrketing policy - ws one of the key determinnts in formulting Smsung's strtegy. In the erly 1970s, the required technologies were not vilble, even t rudimentry level, within the compny or in Kore, so tht Smsung initilly hd to rely on foreign sources. Smsung sequenced its technologicl cpbility in five phses, progressing from the esiest to grdully more dvnced levels: Phse 1: Mstering simple ssembly techniques of complete knockdowns (CKDs) imported from joint-venture prtners; Phse 2: Modifying the imported CKDs by sourcing some prts or components from third prties of Smsung's choice; Phse 3: Designing new products through reverse engineering without direct relince on foreign ssistnce; Phse 4: Designing dvnced products through reverse engineering with innovtion; Phse 5: ttining technologicl competence whereby product nd process innovtion strt to pper throughout the compny. When the first monochrome television receiver ws produced in 1971, Smsung ws in phse 1 of ssembling CKDs imported from Snyo of Jpn, which supplied the bsic technology s the joint-venture prtner. Smsung engineers were determined to lern nd cquire the technologies necessry to produce the trgeted products, but the technology-ssistnce greement rrely produced criticl technologies beyond bsic ssembly know-how. By ggressively studying, investigting, discussing, nd exploring the secrets of the criticl technologies, they overcme the seemingly insurmountble tsk of mstering the necessry know-how (Kng, 2003, p. 23). Soon, in phse 2, modified versions of monochrome TVs begn to roll off the production line nd, by 1977, Smsung hd dvnced to phse 3, when they begn production of color televisions. In ddition, the first VCRs nd MWOs were reverse engineered in 1979. fter mstering the bsics through reverse engineering, Smsung mnged to enter into licensing greements with foreign compnies tht owned the ptents nd other protected rights relted to mnufcturing of the products. For exmple, Smsung hd licensing greement with Toshib in 1981 for MWOs, with Philips in 1982 for color TV technology, nd with JVC in 1983 for VCRs. This sequence of reverse engineering, followed by licensing greement, ws preferred becuse it not only gve Smsung more fvorble position in license negotition, but, more importntly, it fcilitted nd hstened technology internliztion. During this process Smsung mde serious efforts to develop its own product-design competence. It strted to increse in-house R&D budgets nd stepped up its efforts to ssimilte dvnced foreign technologies nd to develop new products (Hobdy, 1997, p. 12). By the mid-1980s, Smsung hd entered phse 4 with the bility to reverse-engineer innovtively, nd it produced such products s 1M DRM chips (1986) nd cmcorders (1989). Smsung's competitive dvntges represent culmintion of vrious strtegic processes, including the four growth pths previously discussed. The compny's focl point for competitive dvntges hs shifted over time. During the 1970s, Smsung ttempted to win the mrket by the best pricing strtegy, which ws fesible only by relizing the lowest costs in the industry. s Smsung becme competent in mnufcturing, the focl point for building competitive dvntges shifted in the 1980s to qulity. Continued dvncement on the technology ldder enbled Smsung in the 1990s to emphsize technology nd innovtion s the source of competitive dvntge. lthough the focus hs shifted from cost to qulity nd then to technology, throughout SEC's history, price hs remined the most effective tool to keep the compny's competitive edge in the mrket. In fct, one of the most importnt strtegies to which the entire Smsung Group subscribes is the principle of survivl inequlity, which mens tht cost should lwys be lower thn price, which in turn should lwys be smller thn product vlue (Jun nd Hn, 1994, p. 345). In ddition to price, one other fctor should be recognized s unique strtegic element effectively exploited by Smsung, nmely, the concept of speed mngement. Smsung's corporte culture hs put strong emphsis on good decisions nd fst implementtion (Jun nd Hn, 1994). In most cses, SEC not only mde decisions on product development nd technology cquisition fr hed of locl competitors, but it lso shortened the time to implement them into vible position in order to tke dvntge of opportunities rising in the world mrket: VCRs, MWOs, nd memory chips re good exmples of such speed mngement. Growth pth: Mrketing dimension SEC ggressively developed n export mrket from the beginning. Exporting ws considered the necessry vehicle for Smsung to overcome the growth limit constrined by the limited domestic mrket. It hs trditionlly ccounted for round 60 percent of totl revenues. This proportion, however, hs fluctuted since the introduction of semiconductors to s much s 69 percent in 1994 nd 1995 nd down to 55 percent in 1997. Initilly, exports were crried out mostly using OEM (originl-equipment mnufcture) greements. s internliztion of product technologies ws chieved (reching phse 3 of the technology ssimiltion sequence), however, Smsung engineers begn to design their own products, grdully replcing OEM with the ODM (own-design nd mnufcture) products. But most ODM products were lso exported under the buyers' brnd nme. serious effort to export Smsung's own-brnd nme (OBN), lthough ttempted ernestly from the erly 1980s, took off only in the lte 1980s, s Smsung's technologicl prowess nd imge becme recognized in the world mrket. Supported by the export of memory chips, the rtio of OBN incresed to 55 nd 69 percent, respectively, in 1993 nd 1995 (SEC, 2005). The fct tht Smsung chieved its reltive success in wht ws originlly developing economy bers close exmintion. Smsung initilly did not hve the economic nd technologicl infrstructure of the United Sttes to rely on. Insted, it hd to depend on its own internl strtegies to develop its technology bse nd to ensure tht its products were suitble for the world mrket. The implictions of Smsung's strtegies should be evluted closely by mngement strtegists, policy plnners, nd CEOs, especilly those in developing ntions who believe tht they re t severe disdvntge in reltion to estblished compnies nd economic systems. SEC's performnce is neither mircle nor growth distorted by government subsidy. It is the result of very crefully crfted strtegy following n evolutionry lerning process from simple to more complex technologies, nd tking dvntge of synergy effects by synchronizing the strtegy vribles of different dimensions, ll supported by Smsung's highly disciplined corporte culture. Bibliogrphy: 1. Hobdy, Mike. "Est vs. South Est sin Innovtion Systems: Compring OEM with TNC-led Growth in Electronics." Pper presented t the Symposium on Innovtion nd Competitiveness in Newly Industrilizing Economics orgnized by the Kore Science nd Technology Policy Institute, My 26-27, 1997, Seoul, Kore. 2. Jun, Y.W., nd Hn, J.W. Cho Illyu Giup-euro G-neun Gil: Smsung-ui Sungjng-gw Byunshin [ Rod Leding to the Best Enterprise: Smsung's Growth nd Trnsformtion]. Seoul: Gimyoungs, 1994 3. Kng, J.K. Smsung Jeonj: Shinwh-w Geu Bimil [Smsung Electronics: The Myth nd Its Secrets]. Seoul: Koryowon, 2002 4. Nrver, J.C., nd S.F. Slter (1990). "The Effect of Mrket Orienttion on Business Profitbility," Journl of Mrketing 54 (October), 20-35. 5. Rumelt, R.P. "Diversifiction Strtegy nd Profitbility." Strtegic Mngement Journl, 3 (1982), 359-370. 6. Smsung Electronics nnul Report 2005. Suwon: Smsung Electronics Co.. Read More