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Charles Baden-Fuller Editorial
For many years LRP: Long Range Planning has published pieces
that touch on marketing strategy matters. In this issue we draw together pieces
on retailing, on market planning, and on orientation.
Retailing is one of the largest sectors of the economy, and
the first two pieces look at two dimensions that are of increasing importance:
internationalisation and the internet. In the first piece, Stéphane
Girod and Alan Rugman unpick why so few retailers have been successful as
multinationals. Examining the flagship-network structure adopted by three
examples who are, they identify that retailers need to integrate firm-specific
with country-specific advantages. Christine Ennew and her colleagues examine
the growth of internet retailing, and examine how web-site links can be an
important element in attracting customers to sites. They build and test a
model that explores how these linkages work and give advice on what is the
optimal strategy.
Our third and fourth pieces examine marketing issues. Katy
Mason and Lloyd Harris look at companies' market orientation. They note eight
common misinterpretations, or pitfalls, of market orientation, and provide
tips for resolving the difficulties, stressing the importance of an holistic
approach. Stan Maklan and his colleagues look at another dimension of marketing
– how to assess the case for Customer Relationship Management programmes.
These are typically expensive, and the authors show that the Real Options
approach to investment gives a more accurate picture of which programmes to
take, as well as explaining why traditional IRR or naïve NPV lead to
under-investment in the future.
Stéphane J.G. Girod and Alan M. Rugman Regional Business
Networks and the Multinational Retail Sector rugman@indiana.edu
The authors examine the Flagship Network as a organisational
structure for progressing the international ambitions of large retail enterprises.
They examine the flagship networks adopted by Tesco, Moe¨ t Hennessy Louis
Vuitton and The Body Shop, and compare them with an ‘ideal’ structure,
in terms of their network infrastructure of partners in four key sectors:
suppliers, business partners, selected competitors and non-business organisations.
They conclude that the different profile each network presents depends on
the reasons behind its adoption, which in turn relate to the classic international
business strategy framework of firm-specific and country-specific advantages.
Tesco’s strong country-specific advantages are not balanced with easily-transferable
brand name FSAs, whereas Body Shop’s firm-based reputation (its marketing
strengths allied to its CSR stance) is not matched with correspondingly solid
CSAs. However LVMH is strong in both areas, its compelling affiliation with
French sophistication being matched with internationally recognised brandname
strengths. (The authors note that these strengths may not correlate with the
firms’ comparative reported financial performance or market valuation.)
The authors recommend letting a firm’s initial competitive advantage
position define its internationalisation strategy, creating synergy between
all network partners, and allowing the process time to mature. They also find
trust comes second to contracts, and highlight the need for vigilance against
inter-partner complacency and for diplomacy and a preparedness to refresh
the network to counter dangers of ‘lock-in’.
Christine Ennew, Andy Lockett, Ian Blackman & Christopher P. Holland
Competition in Internet Retail Markets: The Impact of Links on Web
Site Traffic andy.lockett@nottingham.ac.uk
The development of the worldwide web is beginning to have
the revolutionary effect early commentators predicted for it. In its ‘High
Street’ on-line retailers face the same problems as physical shopkeepers
e how best to attract customers to their sites? If brand and location drive
shoppers to physical stores, what works for surfers and internet-junkies?
The authors define website links as the online equivalent of physical word-of-mouth
referral, combining information with recommendation, and examine their effects
on building traffic as opposed to other site attractions such as freshness,
site size, speed of loading etc. They model visits to individual internet
stores as a function of the links each has with other sites and site information/product
content, testing their model with the top 500 companies across five different
industries (CDs, books, travel, banking and broking). In all five sectors,
they discover the industry is highly concentrated (for instance Amazon is
over 20 times more popular than its nearest rival in the book market). Given
the very high proportion of overall traffic in their sector passing through
them, the authors posit that the largest retail websites are developing into
locations, analogous to a shopping mall or a city centre retail area. Their
overall conclusion e that links explain over 60% of visit number variance
between different sites e will be highly relevant for Internet sites’
customer-attraction strategies.
Katy Mason and Lloyd C. Harris Pitfalls in Evaluating Market
Orientation: An Exploration of Executives' Interpretations Harris@cardiff.ac.uk
Industry practitioners do not appear to have a problem with
the concept of market orientation: indeed, it is well accepted that market-orientated
companies perform better than those with a low level of customer focus. But
there does appear to be a problem in managers failing to develop or sustain
a high level of market orientation. This paper suggests that the problem arises
because managers are misreading the extent of their companies’ market
orientation. The authors set out to study if, how and why managers develop
skewed, inaccurate or incomplete assessments of market orientation, not only
of their own companies, but of their competitors also. Although this gap between
perception and practice has been suggested in existing literature, the authors
of this paper present a methodology and findings from 101 interviews with
executives on this issue. The analysis reveals eight common misinterpretations,
or pitfalls, of market orientation. These are: flawed measures of customer
satisfaction; inadequate customer complaint mechanisms; arrogance in the rejection
of new-competitor threats; front-line deviance; distortions driven by macroculture;
misplaced assumptions of cultural unity; strategic tunnel vision; and strategic
inertia and legacy. The breadth of the pitfalls reveals that it is not enough
to focus on single facets of market orientation and that a complete understanding
of market focus can only be achieved through exploring a wide range of intra-organisational
functions and environmental factors. The study generates implications that
are useful to managers who want to question the market orientation of their
companies and offers potential approaches to avoid such pitfalls.
Stan Maklan, Simon Knox and Lynette Ryals Using Real Options
to Help Build the Business Case for CRM Investment s.knox@cranfield.ac.uk
Marketing departments do not need to be convinced of the
value of implementing a Customer Relationship Management (CRM) strategy. They
argue that it is a win:win strategy for both companies and customers. Companies
gain loyal customers and a knowledge base and market uncertainties are reduced.
Customers on the other hand can achieve customised solutions, better service
and lower costs. But if marketing departments do not need to be convinced
of these benefits, finance departments do, and it is at this stage that CRM
can often fail. This article questions the basis on which the business case
for CRM investments is made. It highlights shortcomings with traditional cashflow
analysis such as discounted cashflow and net present value and how these shortcomings
inhibit successful CRM implementation. The authors provide a solution that
urges managers to consider Real Options thinking. Real Options, they argue,
work like financial options: they are instruments that allow the valuation
of situations in which investment decisions can be deferred or piloted. The
paper presents a simulated case study to illustrate how the use of Real Options
in addition to traditional cashflow analysis can impact decision making when
preparing the business case for CRM investments. Such complementary analyses
help ensure that managers focus on both the activities that generate cash,
as well as the strategic aspects of customer relationships that generate longer-term
customer value and profits. It offers implications for managers: how they
make the business case for CRM; and the way in which they structure and implement
CRM programmes.
This issue is available in full on-line at www.sciencedirect.com
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