Strategic relationships and networks: Building the infrastructure to deliver the strategy Lecture 8.

Strategic relationships and networks: Building the infrastructure to deliver the strategy

Lecture 8

A route-map for market-led strategic change

Value-basedmarketingstrategy

New marketing

meetsold

marketing

Strategicthinking and

thinkingstrategically

Customer valuestrategy andpositioning

The strategic pathway

Strategicmarket choices

and targets

Market sensingand learning

strategy

Strategicrelationshipsand networks

Change strategy

Strategicgaps

Organizationand processes

for change

Implementationprocess and

internalmarketing

Part ICustomer value

imperatives

Part IIDeveloping a value-based

marketing strategy

Part IIIProcesses for managingstrategic transformation

The Customeris always

right-handed

The strategic pathway

Marketsensingandlearningstrategy

Strategicmarketchoicesandtargets

Customervaluestrategyand positioning

Strategicrelationshipsandnetworks

Strategic thinking andthinking strategically

Strategictransformationand strategyimplementation

Agenda

• Customer relationships• Competitor and contingent relationships• Collaborator relationships• Co-worker relationships• The network of key relationships

Strategic relationships and networks

Strategicrelationshipsand networks

Customerrelationships

Competitorand contingentrelationships

Collaboratorrelationships

Co-workerrelationships

Customer relationships

• Do we know what we want the customer relationship to be?

• Do we have that relationship or can we get it?• Can we deliver that relationship?• Do we understand the link between the strength of the

customer relationship and the attractiveness of that customer’s business?

The dancehall dilemma

Customer relationship

Customerattractiveness

Strong Weak

High

Low

Prime targetcustomers -

achieve synergy aswe retain the “best”customers (we hope)

Targets forconversion -

are they attractiveenough to be

worth chasing?

Stickycustomers -

they want us, wedon’t want them,

so what do we do?

Mutualantipathy -

they don’t want us,we don’t want them,

end of discussion

Competitor and contingent relationships

• Some fundamental issues:– every organization has competitors– every company says “we know who our competitors

are” and frequently get it wrong– most think that “competitors are in our industry” – see

back to the Competitive Box to dispel that myth

Competitor and contingent relationships

• Really understanding the competition– conventional analysis develops a competitor response

profile– the psychology of competition may be just as

significant – e.g., how ugly are the competitors around here?

Competitor analysis

Competitor’s goalsWhat are they tryingto achieve in thismarket?

Competitor’s strategyWhat is this company’scurrent strategicposition?

Competitor’s strategicassumptions - How does managementlook at the market?

Competitor’scapabilities - What aretheir strengths andweaknesses

Competitor’s response profileIs this competitor satisfied with its current position?What are the likely moves they may make?Where is this competitor most vulnerable?What is this competitor sensitive about, what ismost likely to provoke a competitive reaction?

Adapted from: Michael E. Porter, Competitive Strategy, New York: Free Press, 1980.

How ugly are the competitors around here?

Competitive reactionto our move?

Competitiveaggression

Yes No

High

Low

Fight tothe death

Showdisdain

Weakcounter-attack

Ignoreus

Competitor and contingent relationships

• Where is the competition coming from in this market?– can we predict the strategic moves of our competitors and

maintain our competitive advantage?– do we recognise new potential competitors and new

technologies?– does our value proposition give us a specific positioning thatb

plays to our strengths and avoids head-on competition?

Competitor and contingent relationships

• Critical contingents:– shapers of opinion– regulators– recommenders– gatekeepers– suppliers– supply chain partners

Collaborator relationships

• From outsourcing to alliances and networks– outsourcing– partnership– alliance– vertical integration

Types of collaborative relationship

Short-term

Long-term

Permanent

Jointventure

Verticalintegration

Arm’slength

Outsourcing

Partnership

Alliance

Ownership

Closeness ofrelationship

Low

High

Nature of the relationship

Purchase of goods and servicesfrom outside the company, possiblyover the long term

Short-term focus, but coordinatedactivities between partner companies

Longer-term focus with integration ofactivities between partner companies

“Permanent” arrangement withpartner companies highly integrated

Shared ownership in an operationwith a collaborator company

Full ownership of the activities or operations

Collaborator relationships

• Advantages in collaboration:– cost efficiency– customer service– marketing advantage– strategic advantage– profit stability and growth

Collaborator relationships

• Network organizations– a new organization form: the hollow or networked

organization

The Calyx & Corolla hollow, networked organization

Calyx & Corolla

Customers

FederalExpress

Flowergrowers

1. Customer orders fromcatalogue: phone, fax,mail, e-mail

2. C&C notifies orderto Federal Express andthe chosen flower growerby computer

3. Federal Expresscollects flowers

4. Federal Expressdelivers flowers

Collaborator relationships

• Collaborations that crash– synergy or “ygrenys”

• Managing partnerships and collaborations– corporate compatibility– management style and techniques– mutuality– symmetry

Collaborator relationships

• Partnership-based strategy should consider time and cost in:– establishing the partnership– monitoring the partnership– strengthening the partnership– getting out of the partnership

Co-worker relationships

• Can and will employees/managers in the company/alliance deliver the promise of the value proposition to the customer?– do not assume everyone will think our strategy is

great and buy-in– be realistic about capabilities

• Link to internal marketing strategy

The network of key relationships

• Relationships with customers, competitors, contingents, collaborators and co-workers are connected

• Challenge is to test market choices and value propositions against the network’s capabilities

British Airway’s relationship network

Competitors and contingents Virgin antagonism continues;low cost operators attackingthrough courts; European regulator investigates;no help from government

Collaborators USAir alliance crashed; American Air alliance stalled;travel agents are hostile;

Customers Customer satisfaction levelsfalling; premium passengersswitching brands; higherservice image weakened

Co-workers Climate surveys go down; newbranding is resisted; industrialaction takes place and moreis threatened

BAStrategy

The network of key relationships

• The danger is developing and pursuing attractive strategies that rely on relationship network capabilities which do not exist