Appendix Two
The BBM Glossary of Strategic Management Concepts & Terms: A Sample

Introduction

Any academic subject comes with its own vocabulary of concepts, acronyms and a wide variety of ‘professional’ jargon: the business strategy, finance, economics and marketing disciplines are major offenders in this regard. Theories of international business and strategic management are rooted in a range of social science disciplines, including macro and microeconomics, sociology, psychology and, of course, geography.

Geography itself is a composite construction of a discipline, as is marketing. Consequently, the emphasis of the BBM Glossary is on established ‘go-to-market’ principles and its focus is strongly rooted in the practice of global and domestic business strategy while also acknowledging the complex organisational challenges likely to be encountered in implementation. The glossary also provides illustrative ‘real-world’ examples for many of the concepts described and related entries are cross-referenced in bold.

The BBM Glossary

The table below presents a sample of a broad cross-section of glossary entries from the British Business Manifesto book. The blank rows represent a break in the full listing, each one representing single or multiple entries.

Concept or Term Explanation
B2B

 

Business to Business markets. Also defined as industrial markets or organisational markets. Although the term B2B has become widely used, it is worth noting that vast amounts of economic transactions are conducted between suppliers and non-business organisations such as government departments (e.g. health, education, military & defence) and not-for-profit organisations such as charities etc. From a practical strategic marketing management perspective, it is better to think in terms of organisational markets or ‘organisational buyer behaviour’.
B2B2C

 

Business to Business to Consumer markets. By far and away the most common Marketing Channel in consumer markets worldwide is the sale of products & services through retail outlets, e.g. Walmart, Etsy, Aldi, Carrefour, Alibaba, Tesco, Spar, Amazon etc. Such companies are very sophisticated in their buying behaviour and share all the behavioural characteristics of B2B customers. Consumer goods companies such as P&G/Gillette, Unilever, Henkel, Reckitt Benckiser, The Kraft Heinz Company and Nestlé nowadays have ‘trade marketing’ teams dedicated to strategic retail key accounts. In the last decade, retailers have become more sophisticated, more concentrated (via mergers & acquisitions) and increasingly international. The combination of these forces has made them more powerful which, when combined with their growing procurement professionalism, means that consumer goods suppliers must embrace the goal of winning trade loyalty (‘trade push’) in addition to securing brand loyalty (‘consumer pull’).
 
Bargaining Power
of Suppliers
The strength an organisation has over its customers relating to Price and the related terms & conditions associated with the Value Proposition it is selling. Where the buyer has total control over its customer base it enjoys a market position approaching monopoly. Powerful manufacturers such as Microsoft, Intel, Caterpillar Inc., Hitachi, Siemens and IBM, for example, leverage their positions of leadership in their own market segments to extract huge economic value from buyers. Smaller customers, e.g. SMEs, are potentially powerless and vulnerable in the absence of unique/proprietorial technologies. If companies struggle to exert bargaining power over their customers, they have the option of integrating forwards in the supply chain (see Vertical Integration). ‘Bargaining Power of Suppliers’ is one of Porter’s 5-Forces.
Brand

 

A brand is built upon a Value Proposition which is closely aligned to the requirements and aspirations of carefully selected target market segments. A brand is much more than a name: a strong brand reputation is the reward for the satisfaction that a company delivers, not what it says (promotes) in its Marketing Communications. Brands must be managed very carefully – they can take a long time to build but are easily destroyed. From a customer perspective, strong positive brands are associated with cumulative positive experiences. From a supplier perspective, a brand is a specific name, symbol or design (or a combination) used to distinguish a product or service from its rivals. A successful brand is one which identifies with a value proposition that is superior at satisfying the customer’s functional (see EVC) and/or emotional (see PVC) needs. See Chapter Four, Strategic Marketing and Chapter Five, Strategic Brand Management, for detail, insights and examples.
Brand
Cannibal-
ization
The situation arising when a company launches a new product which takes share from its existing brands. Very often the fear of brand cannibalization prevents companies from launching new Value Propositions, potentially leaving the categories vulnerable to New Entrants and/or Substitutes, e.g. Apple i-pod displacing Sony Walkman in the personal hi-fi category, iPhone & Samsung displacing Kodak photography and any number of Fintech companies challenging traditional financial services sectors. Pro-active cannibalization by suppliers can extract more value from mature markets which, by definition, have no volume growth potential (see Zero-Sum). Gillette, for example, systematically cannibalizes its leading brands with the launch of increasingly sophisticated shaving systems, e.g. Fusion displaces sales of Sensor, in the process increasing the profit margin per blade subsequently sold.
Break-through
Solution
A radical departure from a traditional solution to meeting customer needs. Examples include cloud computing (e.g .Gmail, AWS, Salesforce.com), tablet ‘computers’ (e.g. Apple iPad, Samsung Galaxy Tab), digital music (e.g. Apple Music, Spotify), digital photography (including Snapchat, a software/cloud platform which has described itself as ‘a camera company’) etc. Not necessarily a new or ‘superior’ technology. Not necessarily rooted in technology and can embrace any business process, e.g. supply chain, customer service etc. Similar to Substitutes (Porter) and Disruptive Technologies (Christensen).
Business Mission

 

Has many general definitions and applications (e.g. ‘mission statement’) but, from the business strategy perspective presented in this BBM Glossary, refers to the question a company asks, at the business unit level, “What Business Are We In?” As Professor Ted Levitt observed in his seminal article Marketing Myopia, the danger is that a company provides an answer relating to the products it currently makes or with reference to the industry it is currently part of, i.e. it gives a supply-side definition of its mission. Business mission should be derived from a Customer Preference (demand) perspective since customers don’t buy ‘products’, they seek solutions to their needs. So, for example, the railroad industry provides train journeys – the customer solution is transportation (Levitt’s original example); Cineworld operates movie theatres – the customer solution is entertainment experiences (see Chapter Four, Strategic Marketing). See also: Market/Industry Life Cycle; Disruptive Technologies.
Buyer Behaviour How and why consumers and organisations behave in the way they do when making purchase decisions. Major contributions to the marketing literature from psychology (Consumer Behaviour) and sociology (Organisational Buyer Behaviour) have provided deep insights into the motivations and behaviours underpinning the buying process.
Capabilities &
Competencies
Capability refers to the technologies and business processes a company has or is creating and is central to the Resource-based View approach to global business strategy creation. Competency refers to the skills of a company’s employees, either at a functional level (e.g. marketing, supply chain, HRM etc.) or organisation-wide, e.g. leadership.
Competitive
Advantage
Competitive advantage can be anything which gives a company an edge over its rivals. It contrasts with Differential Advantage which focuses on the customer and their perceptions of one supplier’s Value Proposition compared to those of its rivals. Competitive advantage can be rooted in business processes which are not explicitly of direct relevance to the customer, for example, procurement, IT, management education, superior access to raw materials, outsourced activities and so on. In his 1985 book on the subject, Michael Porter proposed Value Chain analysis to enable a company to analyse its business processes to determine which activities should be improved, outsourced, added to and so on in order to drive profitability. See also: Value Constellation.
Customer
Preference
Used to distinguish from customer needs, which relate to generic categories such as leisure, transportation, photography etc. So, there is a need for transportation but customers express preferences for different transportation modes, e.g. road (car or bus), rail, air, sea etc. Throughout this BBM Glossary, the term customer needs & preferences is widely used and this simple distinction between the two words has links with many of the key concepts defined, e.g. Marketing Myopia, Business Mission, Market Segmentation, Disruptive Technologies, Market/Industry Life Cycle and Threat of Substitutes amongst others.
Differential
Advantage (DA)
Anything, real and/or perceived, which differentiates a company and/or its brands in the mind of the customer. DA can be rooted in the product, the availability, the price, the service, the brand associations, etc. It can be based on one or many variables in the Marketing Mix. DA can be grounded in genuine value proposition superiority or it could be a perceived superiority, for example, brand impact. DA is about being superior to rivals or unique at supplying the bundle of benefits valued by customers in a segment. DA should embrace PVC and EVC and the strongest brands in consumer and organisational markets combine both to give MSPs. Companies should endeavour to ensure that their DA is sustainable and impossible to copy for the period of the Strategic Audit and Go-to-Market Plan. DA should be continuously improved or augmented on an on-going basis (see kaizen) and should be profitable in the short and/or long term.
Diminishing
Returns
The point at which a company must invest more and more to get less and less by way of return. Often used to determine an acceptable (and profitable) level of market share. Sometimes used to determine whether Organic Growth or M&A will lead to the least expensive way of gaining market share. For example, BP’s acquisition of Castrol and Aral gave both time and resource advantage over developing, respectively, the global lubricants and German petrol retailing markets. PepsiCo invested in fast-growing ‘fast-food’ categories (Pizza Hut, KFC, TGI Fridays, Taco Bell) in the US rather than relentlessly pursuing tiny and (costly) market share gains in the ‘Cola wars’ with Coca Cola. Similarly, P&G merged with Gillette, simultaneously leveraging the global reach of Gillette’s distribution channel system and Procter’s extensive product portfolio. For either to achieve such expansion alone would have been prohibitively costly.
Disruptive
Technologies
An alternative solution to meeting customer needs (see Customer Preference). In its original sense, as published by Clayton M. Christenson in ‘The Innovator’s Dilemma’, the focus was on R&D/Technology, but the concept can also apply to business processes, e.g. Dell’s supply chain revolution in the PC industry; also, Harrys.com shaving club subscription business model. Similar to Substitutes in Porter’s 5-Forces. See also: Marketing Myopia; Business Mission.
Distinctive
Capabilities (DCs)
These are those business strengths which give a company a Competitive Advantage and/or a customer-based Differential Advantage. For example, Gillette has distinctive capabilities in blade technology, intensive distribution channel management and brand management, i.e. a powerful combination of technology and marketing superiority over its rivals. DCs are unique to a company and contribute hugely to the sustainability of competitive and differential advantages. See the discussion relating to organisational capabilities for business strategy in Chapter Eight, Implementing Business Strategy.
 
Effectiveness “Doing the right things” (after Professor Peter Drucker), i.e. striving for success in meeting customer needs & preferences fully and better than rivals. Strategic and external in focus. Strong financial performance comes from companies who are predominantly motivated by being effective while simultaneously paying close attention to operational excellence (Efficiency). Effectiveness is the driving force of customer-focused, competitively differentiated, long-term mind-set, strategically thinking, market-driven companies.
 
Entry Barriers Differential Advantages which a company creates, builds and manages to protect a market position. Includes intellectual property such as patents, trademarks and proprietary secrets and less obvious but equally powerful factors such as satisfied customers (see Brand Equity), loyal channel partners and engaged employees. Building and maintaining entry barriers should be a continuous process (see kaizen), particularly in Business Environments with high degrees of innovation and competitive intensity.
Environment
Sensitivity
Relates to the Business Environment: companies should pro-actively scan their external market conditions (Macro and Micro) and design global business strategies to meet the market KSFs, exploit emerging opportunities and off-set potential threats. TOWS rather than SWOT. Describes an ‘outside-in’ perspective on global business strategy development, argued by many to be particularly important in conditions of extreme turbulence and discontinuous change amongst external business environment forces. See Chapter One, Scanning & Sensing the Business Environment.
EVC Economic Value to the Customer. Describes the rational motivations underpinning Buyer Behaviour which de-emphasise price and prioritise value (see Price Conscious), e.g. extra revenue generation, greater productivity, less downtime, reduced total cost of ownership etc. Essential to demonstrate in business markets where higher prices can be achieved if EVC can be proven with reference to functionality, benchmark tests, case studies, references, testimonials etc. Requires Capabilities & Competencies in value-based selling. In consumer markets, suppliers typically know that they are selling a psychological (emotional) value proposition (see PVC) but they will always try and give a ‘Reason to Believe’ (RTB), i.e. a rationale for consumers to pay a premium price. So, for example, cats prefer Whiskas, Dogs are healthy with Pedigree, Nike delivers sports excellence, Ralph Lauren manufacture world-class products – but sells ‘dreams’.
FMCG Fast Moving Consumer Goods. Describes the product categories which are purchased frequently by families and individuals, including groceries, soft drinks, cigarettes and so on. Supplied by manufacturers such as Proctor & Gamble, Unilever, Kraft Heinz Company and Henkel etc. through supermarkets (outlets & online) and small grocery stores.
Franchise A branding and/or technology concept (similar to Licensing). The franchisor owns the ‘idea’; the franchisee pays royalties to use it. Very typical in service industries, with examples ranging from McDonald’s outlets to BP petrol stations. Also, very common for service industry companies expanding internationally, for example, the Disney theme park in Japan, Holiday Inn worldwide etc.
 
Functional
Integration
In big organisations and many larger SMEs there is a tendency for business functions (e.g. marketing, finance, production, logistics, R&D etc.) to work separately in what some commentators describe as ‘functional silos’. Each function will pursue its own objectives and very often these will conflict with those of other functions. A good example is the potential conflict between marketing and production. Marketing key performance indicators (KPIs) are based around Effectiveness measures, i.e. long term strategic targets, customer loyalty and customised offers. Production key performance indicators are based around Efficiency measures, i.e. short term operational targets, maximum output from minimum input, being ‘lean’. Marketing will want to offer a wide variety of Value Propositions while production will want to minimise product variations. As another example, the supply chain function wants 100% product availability-on-demand while finance executives recoil from ‘excessive’ inventory and working capital. Functional integration aims to reconcile these differences and increasingly companies now create cross-functional teams for many business tasks, e.g. for new product development (NPD). New business processes can also solve the problem, e.g. flexible manufacturing systems and robotic technology solved the variety vs standardization trade-off (see Mass Customization).
 
Image Image is an intangible factor which is directly correlated to the quality of the goods and services a company provides. A positive image is earned by companies when they consistently deliver on the promises that they make, and it is reinforced through an effective Marketing Communications programme, including advertising, well managed public relations, well trained key account managers etc. A negative image is created when a company fails to deliver on what it promises and, even if performance subsequently improves, there can be a long legacy effect hindering image recovery. In technical jargon, an image is a dependent variable, a function of something else. From a more practical perspective, a strong positive image is earned by providing customers with cumulative positive experiences (see Brand and Brand Equity). Positive Word-of-mouth (W.O.M.) contributes hugely to positive image and there is often a Network Effect which applies, e.g. when a particular brand is seen as ‘cool’. See Chapters Five, Strategic Brand Management and Six, Integrated Marketing Communications.
   
Industry Structure Describes how many firms supply a specific industrial sector. When there are many suppliers with small shares of industry output the industry structure is fragmented. This is a common industry structure in emerging markets as many companies enter in pursuit of the high growth potential on offer. When three to five suppliers account for a high percentage of industry output (e.g. 70%) the industry structure is concentrated and is described as Oligopoly. This is the most common industry structure in mature markets and arises after industry Shake-out. Two dominant firms define a concentrated industry structure known as a duopoly and when there is only one supplier in an industry this is known as a monopoly.
Innovation To be distinguished from Invention (the creation of a new technology or idea). Innovation refers to the successful commercialisation of a new technology or idea. It embraces both product development and market development. Market development includes investments in brand building, channel management, salesforce organisation etc. Innovation is essential for balancing current cash flows with pipelines of future profits (see Portfolio Management). A reputation for successful innovation over time (e.g. 3M, P&G, Alphabet, Amazon, Netflix, Apple, Next, AstraZeneca) has a strong impact on a company’s share price and positively influences many stakeholders, for example, suppliers, employees, channel partners and, of course, customers. See Chapter Three, Innovation & Entrepreneurship.
Joint Venture (JV) A JV has similar goals to a Strategic Alliance but is typically based on shared equity ownership on a ‘Parent-Parent-Child’ basis, i.e. the JV itself is the ‘child’ of two (or more) parent companies. JVs are often created to share high fixed costs, for example, in R&D (Philips/LG in LCD displays) or petroleum storage (BP/Exxon at remote sites). Major problems arise when the corporate strategies of the parent companies head in a different direction than those at the time of the JV creation (e.g. Waitrose/Ocado). Joint ventures which bring together complementary capabilities are much more likely to be successful than those created between companies with similar or substitutable capabilities. See Chapter Seven, A Practical Framework for Business Strategy Success.
 
Key Success
Factors (KSFs)
KSFs are external factors which market conditions dictate that any company must be able to comply with to succeed or even survive. They are determined from an analysis of the Business Environment (opportunities/threats) and are rarely the only things which a company must address to be more successful than its rivals, i.e. they tend to be ‘qualifiers’ to earn the ‘right to compete’ and not ‘differentiators’ to build sustainable Differential Advantage.
Licensing A branding and/or technology concept (similar to Franchising). Common in many manufacturing sectors where products and/or processes protected by patents and other types of intellectual property are licensed to independent companies to produce. These may be granted to a complete sector (e.g. Dolby sound technology for the consumer electronics industry) or to exclusive business partners (e.g. Coca-Cola, which licenses its famously secret recipe to independent bottling companies on a regional basis worldwide). See Chapter Seven, A Practical Framework for Business Strategy Success.
 
Market and
Industry Life

Cycles
The principles and dynamics of market and industry life cycles are very similar to those of the more widely known product life cycle (PLC) concept. Market life cycle relates either to a geography (e.g. China) or a sector (e.g. the tablet ‘pc’ market). Industry life cycle relates to the suppliers who serve the sector. The principal difference between these and the PLC is that ‘market’ and ‘industry’ can span many product life cycles. For example, IBM maintained its strong leadership position in information processing when the product form changed from typewriters and mechanical calculators to electronic solutions embracing hardware, software and services. Market life cycles are driven by Customer Preferences, particularly when these change, for example, with the availability of Disruptive Technologies: nobody buys photographic film (product) anymore but the ‘demand’ for capturing images (market) has grown exponentially in recent years.
Market
Segmentation
A marketing process which groups customers with similar needs & preferences into one segment and separates them from others with different needs & preferences. The company then selects the most attractive market segments to serve, taking into account: (i) the segment KSFs; (ii) its own existing and potential Capabilities & Competencies; (iii) its ability to build sustainable Differential Advantage; (iv) risk assessment & mitigation; (v) long term profit potential. This is the strategic dimension of market analysis and marketing management, i.e. it relates to decisions which companies take regarding where to compete. Companies can choose to serve many different segments (e.g. Ford) or to focus on a specific segment (e.g. Aston Martin). Markets break down into segments as a direct result of competition and innovation, i.e. the greater the intensity of competition, the more choice availability for the customer. Ultimately, the logic of segmentation leads to a segment of one, i.e. companies must adapt their Value Proposition for individual customers. In consumer markets, this is known as Mass Customisation. In organisational markets key account management frameworks, processes and tools are utilised to identify which accounts are worth investing in with reference to customisation – these are often known as strategic accounts: Ford, for example, is a strategic account for BP; the global retailer Carrefour is a strategic account for Philips.
Marketing Mix Definition: “The mixture of controllable variables that the organisation blends to provide customer benefits and Differential Advantage in the target market segments it chooses to serve”. Traditionally, the blend of marketing mix decisions relates to Product, Price, Place (distribution), Promotion, known as ‘the 4Ps’. In service businesses there is an extended marketing mix: People (see Contact Personnel); Physical evidence (tangible representation); Process (systems, ‘back office’ etc.), known as ‘the 7Ps’. An Efficient and Effective marketing mix provides the foundations of sustainable differential advantage. The marketing mix is the operational dimension of market analysis and marketing management, i.e. it relates to decisions which companies take regarding how to compete.
 
Marketing
Strategy
Decisions taken by a company relating to target market selection, i.e. regarding where it should compete. Related topics include Market Segmentation, Positioning, analysing the Business Environment, understanding Buyer Behaviour, utilising market intelligence systems and undertaking competitor analysis. This category of decisions is often described as a company’s Participation Strategy. See Chapter Four, Strategic Marketing.
Mass
Customis-
ation
This concept describes the ultimate achievement in Market Segmentation: a Value Proposition specifically designed for an individual customer. In practice, this remains rare in its ‘pure’ form, but recent technologies increasingly provide mass market producers with the potential to operationalise the concept. For example, Swatch offers an extensive range of ‘lifestyle’ watches, using robots and flexible manufacturing systems to combine variety and production efficiency. Dell, meanwhile, uses the Pareto Principle to give the impression that its PC systems are tailor-made per customer. In reality, 80% of the PCs sold by Dell come from 20% of the total possible configurations. As another creative example, Amazon uses Suggestive Marketing Communications to provide bespoke offers for each of its millions of individual customers.
MSPs Multiple Selling Propositions. Combines EVC and PVC messages relating to elements of the brand’s Value Proposition. For example, IBM offers scalability (EVC), global support (EVC), is perceived as trustworthy (PVC) and creates long term customer relationships (PVC). The more unique selling propositions (see USP) a company can develop within its value proposition, the stronger will be the brand and the more sustainable the Differential Advantage. See Chapters Four, Strategic Marketing and Five, Strategic Brand Management.
Network Effect The network effect describes a market condition whereby a critical mass of inter-dependent customers uses a common ‘platform’ to consume a product or service. For example, people join Facebook, LinkedIn, Twitter and other Social Networks and either explicitly or implicitly encourage friends and family to join them also. People will join a specific service not necessarily because it’s the best, but because it’s the most prevalent. The network inter-dependency may be real, e.g. file exchange of Microsoft Windows-designed software applications; or perceived, for example, the assumption that the market leader must be the best/safest choice because all those other customers who have chosen it can’t be wrong (e.g. 8 out of 10 cats prefer Whiskas – if they had a choice!).
 
Opportunity Cost The notion that investments made in one business strategy project are resources taken away from others. While alternative funding sources may be available (e.g. debt/equity), it is good practice to acknowledge that resources are finite and should be allocated to maximise economic value: investment in every project should be considered alongside other investments and those which are pursued should be chosen based upon their potential to generate the highest relative return at the lowest relative risk of all the available alternatives.
Organic Growth Growth which arises from a Strategic Audit which leverages a company’s existing Capabilities & Competencies. It can derive from: launching new products; creating more and/or better Marketing Communications programmes; providing more and/or better sales force management; developing more and/or better distribution coverage; offering more and/or better service. Organic growth could also arise from taking existing products into new markets or identifying new market opportunities and creating new products to exploit them. Penetration pricing can also be used to build revenues in a market segment although this potentially does so at the expense of margins and overall profitability. Organic growth resides at the core of the Resource-based View of how companies do/should develop business strategies.
Outsourcing A type of Strategic Alliance whereby a company selects a business partner to undertake a significant business process rather than doing it themselves ‘in-house’. From a financial management perspective, outsourcing turns a fixed cost into a variable cost, freeing up resources to invest in processes where a company can build a Distinctive Capability. Apple’s tight relationship with Taiwanese company Foxconn is a textbook example: ‘Designed in California, Made in China’. Outsourcing can also give more asset flexibility in a turbulent business environment and can often give a ‘time-to-market’ advantage. Potential downsides include the loss of quality control (see Moment of Truth) and excessive reliance on one key supplier.
Over-engineered The situation where a company’s Value Proposition contains features and attributes which are not valued by the target market segment. Since costs are likely to have been incurred in creating this ‘superior’ value proposition, the price charged is invariably higher than alternative solutions and the offer will be perceived as too expensive by a Price Sensitive customer segment.
Pareto Principle The 80/20 rule, a universal phenomenon with many management implications. It is commonly used in inventory and operations management systems, but it also has many applications in marketing management. Dell, for example, gives the impression that they build custom-made PCs for individual customers (see Mass Customisation). In reality, 80% of the PCs sold by the company come from 20% of the total possible configurations. Dell’s success is underpinned by deep customer insights and intelligent sales forecasting techniques, backed up by an extremely lean supply chain.
Porter’s
5-Forces
As we have seen in the book, Professor Michael Porter of Harvard Business School has introduced many frameworks derived from industrial economics into the marketing and strategic management literature. 5-Forces analysis has many analytical and practical applications, ranging from the assessment of an industry’s attractiveness to guidance on Marketing Strategy development (e.g. regarding Entry Barriers). The five forces (each of which has an entry elsewhere in this BBM Glossary) are: (i) Industry Rivalry; (ii) Bargaining Power of Suppliers; (iii) Bargaining Power of Buyers; (iv) Threat of New Entrants; (v) Threat of Substitutes. Porter also described these forces as ‘extended rivalry’, i.e. the framework can be used not just for analysing industry rivals but also to explore the broader threat to a company’s and an industry’s profitability arising from these Structural Forces.
Positioning Positioning provides the link between Marketing Strategy and Marketing Tactics. It combines the target market decisions which companies take regarding where to compete and the Marketing Mix decisions they take regarding how to compete. It combines Value Proposition creation and effective Marketing Communications programmes. Credibility, clarity and consistency of communications are essential elements of Brand positioning. Put simply, positioning is the customer’s perception of a company’s value proposition compared to those of its segment rivals.
Product Life Cycle
(PLC)
The analogy whereby products follow the same development pattern as humans (or any species, for that matter), from conception through growth and maturity towards ‘inevitable’ decline and ultimate death. With PLC, a product is developed (creation), introduced to a market with relatively low sales which then experience a period of rapid growth. This rate of growth slows down as product sales move into maturity as the market becomes saturated. And, as with humans, death eventually occurs. It is important to distinguish between product form (e.g. photographic film) and the customer need (in this case, capturing images). So, while products do indeed ‘die’, most customer needs are infinite but preferences for solutions to meet them change over time (see Market/Industry Life Cycle; Customer Preferences). Applying the principles of life cycle theory to product management decisions can provide deep insights for Marketing Mix decision making. However, not all product life cycles follow the same pattern, so management judgement remains vital in interpreting PLC sales data.
PVC Psychological Value to the Customer. Describes the emotional motivations underpinning Buyer Behaviour which de-emphasise price and prioritise value (see Price Conscious). For example, status, happy, funny, sexy, friendship, love, empowered, security, safety, healthy, prestige, aspiration and so on. Emotional factors impacting upon decision making can be broadly positive or broadly negative (see F.U.D.) and Marketing Communications will reflect this in the messages conveyed. A key emotional criterion which spans business and consumer markets is relationships. In consumer markets (especially FMCG), customer relationships are primarily managed through brand communications, e.g. advertising, loyalty programmes, sponsorship, promotions, packaging, point-of-sale etc. In organisational (B2B) markets, customer relationships are primarily managed through dedicated key account managers (also see EVC). See Chapter Six, Integrated Marketing Communications.
Relative Market
Share
The Boston Consulting Group demonstrated the economic importance of relative market share, identifying three profit drivers associated with positions of market leadership: (i) greater volumes; (ii) premium Prices (most market leaders charge a higher market price than rivals); (iii) lower relative Total Cost-to-Serve. The latter is perhaps the most significant since it embraces all ‘marketing’ costs, including advertising, salesforce, distribution, product development, product management etc. It is very difficult to build a significant cost advantage on production costs alone because, after a certain level of output is reached, further production doesn’t lead to lower unit costs. But the potential relative cost advantage when marketing costs are considered is huge. Gillette, Wrigley’s, Intel, Microsoft, Cisco Systems, Apple and Kellogg’s enjoy strong market leadership positions and are, indeed, extremely profitable over the long term.
Resource-based
View
A perspective on marketing and strategic management which suggests that a company should seek to leverage its Distinctive Capabilities to find and exploit market opportunities beyond its traditional competitive environment. Can relate to technology or business process capabilities: Bic, for example, serve many global segments (pens, razors, lighters etc.) from its core plastic extrusion capability; Gillette leverages its global supply chain and distribution network to complement sales of shaving systems with a broad range of personal hygiene products for men and women. See Chapter Eight, Implementing Business Strategy.
RTB Reason to Believe. Typical in consumer goods marketing where suppliers know that they are selling an emotional concept (PVC) but provide a rational message (EVC) to allow buyers to justify the purchase to themselves. From cat food (cats prefer Whiskas) to cars (Audi – Vorsprung durch Technik), this approach provides brands with ‘Multiple Selling Propositions’ (MSPs) to strengthen their competitive Positioning. See Chapter Six, Integrated Marketing Communications.
Shake-out Relates to Industry Structure, i.e. the number of firms serving a specific market. In the early stages of a market’s development, there are typically many firms, all attracted by the growth potential it offers. Here, the industry structure is fragmented. In a market’s mature stages Oligopoly is typical, wherein 3-5 firms account for, say, 70% of industry revenues. The industry structure is concentrated. Shake-out is what occurs during this transformation and it happens through a combination of bankruptcies, mergers and acquisitions. The metaphor has its origins in a gold prospecting technique.
Social Networks Nowadays synonymous with ‘friends’ and ‘followers’ and ‘acquaintances’ who engage with each other via the internet on sites provided by companies such as Facebook, Twitter, Instagram, WhatsApp, TikTok and LinkedIn. Social networking as a social phenomenon is not new: consider, for example, the long history of gatherings in Chinese village tea-rooms, London coffee-shops and Irish pubs. These social settings were characterised by geographic proximity whereas contemporary internet-based networks are global in character and built around a wide variety of demographic, social, cultural, economic and political interest groups.
Strategic Alliance A relationship with a business partner often formed to compensate for limitations in a company’s organisational Capabilities & Competencies. Strategic alliances can give access to markets and technologies which would be otherwise too risky and/or expensive to develop. HP and Canon’s long-term relationship in optical technology for laser printers is a good example of such a win-win alliance: HP exploits Canon’s technology, Canon gets access to HP’s extensive global distribution network. Another example of a strategic alliance is Outsourcing, whereby a company frees up resources by engaging another firm to undertake what it deems to be ‘peripheral’ business processes. (See also: Joint Ventures).
 
Strategic
Objectives
Strategic Objectives summarise the entire orientation of the company towards the global and domestic market(s) it chooses to serve. These objectives relate to segmentation, positioning, innovation, ethics, customer satisfaction targets, market share and so on. Strategic objectives should be focused on long-term goals while accommodating nearer-term ambitions. They should embrace both qualitative and quantitative goals. Effective strategic objectives are: (i) specific; (ii) quantified; (iii) time-specific; (iv) realistic but challenging; (v) well-communicated; (vi) flexible over time. They cover both market and financial goals, including volume, market share, revenues & profitability.
Suggestive
Marketing
Communic-
ations
Uses CRM technologies such as data warehousing and data mining to make targeted purchase suggestions, either from a single customer’s purchase history or, more powerfully, from a complex database of general purchase behaviours. For example, Amazon uses the statement ‘People who bought this, also bought this…’ alongside a range of suggestions generated by algorithms mining its use huge customer-transaction database. Suggestive marketing communications is increasingly linked to social network data, for example, Facebook Friends and Google Account.
The Operational
Go-to-Market Plan
A structured and logical process which begins with a Strategic Audit (including a comprehensive scan of the Business Environment) and a full assessment of the company’s Capabilities & Competencies. The resultant TOWS feeds into a sequence of the following stages of a go-to-market plan: Strategic Objectives; Strategic Focus; Customer Analysis; Competitor Analysis; Differential Advantage Analysis; Marketing Mix Design; Scheduling; Organisation & Operations; Investment Assessment; Evaluation & Control. Since the business environment is constantly changing, the output after Evaluation & Control feeds back into the strategic audit and the whole process starts again. As a rule of thumb, this planning process should take place at least twice a year, dependent upon the intensity of turbulence in the company’s and/or its business units’ business environment(s). Equates with ‘marketing planning’ as presented in some marketing strategy textbooks. See Chapter Seven, A Practical Framework for Business Strategy Success.
TOWS Threats, Opportunities, Weaknesses, Strengths. A reversal of the traditional SWOT framework to emphasise the importance of taking an external perspective first when analysing a company’s market situation (sometimes termed an ‘outside-in’ approach). Strengths and weaknesses should be evaluated with reference to the Business Environment, including Customer Preferences, Porter’s 5-Forces, regulatory conditions etc., i.e. they are not simply internal factors operating in an external vacuum. TOWS analysis is most powerful when evaluated at the product-market segment rather than for a company and its corporate strategy as a whole. It should be regularly updated since contemporary business environments are very dynamic and turbulent (see Strategic Audit and Environment Sensitivity). Sustainability should be assessed and, as with any tool or framework in the company’s strategic auditing process, it should be regularly reviewed. See Chapters One, Scanning the Business Environment and Eight, Implementing Business Strategy.
Value Chain A framework proposed by Michael Porter to allow a company to break down its business processes and analyse how they might be improved, replaced, outsourced, added to etc. Value chain reconfiguration is often the outcome of such analysis; for example, the ‘no frills’ airlines such as Ryanair, Southwest Airlines and EasyJet stripped operational costs to a minimum and opened up a huge new segment for air travel. There are two categories of business process examined in value chain analysis: (i) Primary Activities, including inbound logistics, operations, outbound logistics, marketing & sales, service; (ii) Support Activities, including procurement, technology development, human resource management, firm infrastructure. Although originally formulated as a manufacturing concept, the value chain framework has been adapted for different business sectors and models. In a service industry environment, for example, human resource management should be seen as a primary activity because of the importance of Contact Personnel in service quality. A detailed analysis of the value chain provides powerful insights into sources of a company’s Competitive Advantage and can be used to determine which activities could be Outsourced. Conversely, a B2B company could examine a potential customer’s value chain to determine if there are any activities or business processes it can persuade them to outsource, e.g. fleet logistics (DHL), IT management (IBM) etc.
Vertical Integration A business model where a company owns some or all levels of the supply chain. The oil majors (BP, Exxon, Shell), for example, search for, extract and refine crude oil (upstream activities). They distribute petroleum ‘downstream’ into retail channels which they own or brand via Franchise arrangements. The vertical integration approach is far less common nowadays in an era of Outsourcing and business partnerships such as Strategic Alliances and Joint Ventures. Its logic remains strong, however, in an industry such as oil where there are huge ‘upstream’ fixed costs which must always be fully recovered – in this case, control of the vertical channel from oil extraction through to retail site management secures a guaranteed share of distribution. A similar logic applied with PepsiCo’s ownership of KFC, TGI Friday’s, Taco Bell and Pizza Hut, i.e. over and above the food outlets being successful in their own right, they also provide an additional ‘captive’ channel for the company’s Pepsi-Cola drinks brand.
 
Zero-Sum A distinguishing characteristic of mature markets where for one company to gain market share another company must lose it since there is no ‘market space’ for growth, i.e. there is a cap on the number of units sold. Another term often used to describe this condition is ‘saturated market’. In some categories, for example, kitchens, carpets, TVs, a zero-sum condition creates a ‘replacement market’. Since the number of units is fixed and market shares are typically stable, many companies maintain marketing investments in line with their existing market position while seeking growth opportunities elsewhere; for example, PepsiCo’s development of its fast-growing food chains Pizza Hut, Taco Bell, KFC, TGI Friday’s. Another approach is to seek more ‘value-per-unit’, as Gillette achieves with their strategy of shaving systems’ Brand Cannibalization. See also: Diminishing Returns; Opportunity Cost; Portfolio Management; Market/Industry Life Cycle; PLC.

Concluding Remarks

A major challenge of composing a glossary of concepts and terms in the social sciences is being sensitive to international translations, e.g. advertising is publicité in French textbooks whereas publicity has a completely different meaning in the English language marketing literature.

There are also the many issues with British English and American English usage and it is worth noting here that most of the early textbooks relating to international business, strategic management, branding, innovation and marketing were written by American academics and practitioners.

Finally, with many principles already well-established, newcomers to the managerial discipline seek to distinguish their ‘own’ ideas as being original, often by relying on semantics to add new labels to age-old concepts. The management consultancy profession is notorious for doing this, but academics have also been known to play word-games to make their mark. In this BBM Glossary of Strategic Management Concepts & Terms, the aim has been to clarify, not confuse, and ‘mainstream’ labels and accepted acronyms have been used wherever possible.

 


Please click/tap your browser ‘Back’ button to return to the location navigated from. Alternatively, click/tap the ‘Bookshelf & Typewriter’ graphic below to navigate to the British Business Manifesto: The Book page.

All content © Colin Edward Egan, 2021