The underlying logic of market-driven strategy is that the market and the customers that form the market should be the starting point in business strategy formulation.  A key advantage of becoming market oriented is gaining an understanding of the market and how it is likely to change in the future.

A business is market oriented when its culture is systematically and entirely committed to the continuous creation of superior customer value.

A)  Characteristics of Market Orientation

	Customer Focus:  Must start with customer needs and wants, decide what needs are to be met, and involve the entire organization in the process of satisfying customers.  Must  determine what values buyers want to help them satisfy their purchasing objectives
	Competitor Intelligence:  Failure to identify and respond to competitive threats can create serious consequences for a company
	Cross-Functional Coordination:  Must get all business functions to work together to provide superior customer value

 

	Superior Customer Value:  Achieving superior customer value requires superior understanding of what creates value for customers
	Cross-Functional Assessment:  Must get over hurdles of getting people from different functions to share information about the market and work together to develop innovative products
	Shared diagnosis and Action:  Then, one must decide what actions to take to provide superior customer value  Becoming market oriented requires making major changes in the culture, processes, and structure of the traditional pyramid-type organization

 (A) Identifying Distinctive Capabilities (See Exhibit 1-5)

	Must offer a higher contribution to superior customer value or
	Enable an organization to deliver value to customers in a more cost effective manner

(B) Types of Capabilities (See Exhibit 1-6)

One method is to determine whether processes operate from outside the business to inside, operate form the inside out, or are spanning processes

(C) Value and Capabilities

Value for buyers consists of the benefits and costs resulting from the purchase and use of products.  Value is perceived by the buyer.  A company needs to identify value opportunities that match its distinctive capabilities.

	See Exhibit 1-7 for an example of how one can create customer value
	Customers form value expectations and decide to purchase goods and services based on their perceptions of product benefits less the total cost incurred

(A) Value Initiative Examples

	Analyzing customer needs
	Analyzing target markets and boosting service quality
	Using cross-functional teams to develop products and services
	Achieving operational excellence
	Innovation

(A) Market Sensing and Customer Linking Capabilities

	Market Sensing Capabilities:  To be effective, various information sources must be identified, and processes must be developed to collect and analyze information.
	Customer Linking Capabilities:  Creating and maintaining close relationships with customers are important in market-driven strategies

(B) Aligning Structure and Processes

Market orientation and process capabilities require cross-functional coordination. and involvement.  Thus, structure and processes should be aligned to improve the overall level of product quality, reduce costs, and improve service delivery.