Today’s business and marketing managers are faced with a continuous stream of decisions, each with its own degree of risk, uncertainty, and payoff. These decisions may be categorized into two broad classes: operating and strategic. With reference to marketing, operating decisions are the domain of marketing management. Strategic decisions constitute the field of strategic marketing.

Operating decisions are those dealing with current operations of the business. The typical objective of these decisions in a business firm is profit maximization. During times of business stagnation or recession, as experienced in the early 1990s, efforts at profit maximization have typically encompassed a cost minimization perspective. Under these conditions, managers are pressured into shorter and shorter time horizons.

All too frequently, decisions are made regarding pricing, discounts, promotional expenditures, collection of marketing research information, inventory levels, delivery schedules, and a host of other areas with far too little regard for the long-term impact of the decision. As might be expected, a decision that may be optimal for one time period may not be optimal in the long run. The second category of decision making, strategic decisions, deals with the determination of strategy: the selection of the proper markets and the products that best suit the needs of those markets. Although strategic decisions may represent a very small fraction of the multitude of management decisions, they are truly the most important as they provide the definition of the business and the general relationship between the firm and its environment. Despite their importance, however, the need to make strategic decisions is not always as apparent as the need (sometimes urgency) for successfully completing operating decisions. Strategic decisions are characterized by the following distinctions:

1. They are likely to effect a significant departure from the established product market mix. (This departure might involve branching out technologically or innovating in other ways.)

2. They are likely to hold provisions for undertaking programs with an unusually high degree of risk relative to previous experience (e.g., using untried resources or entering uncertain markets and competitive situations where predictability of success is noticeably limited).

3. They are likely to include a wide range of available alternatives to cope with a major competitive problem, the scope of these alternatives providing for significant differences in both the results and resources required.

4. They are likely to involve important timing options, both for starting development work and for deciding when to make the actual market commitment.

5. They are likely to call for major changes in the competitive “equilibrium,’’ creating a new operating and customer acceptance pattern.

6. They are likely to resolve the choice of either leading or following certain market or competitive advances, based on a trade-off between the costs and risks of innovating and the timing vulnerability of letting others pioneer (in the expectation of catching up and moving ahead at a later date on the strength of a superior marketing force).

This article introduced the concept of strategic marketing and differentiated it from marketing management. Strategic marketing focuses on marketing strategy, which is achieved by identifying markets to serve, competition to be tackled, and the timing of market entry/exit. Marketing management deals with developing a marketing mix to serve a designated market. The complex process of marketing strategy formulation was described. Marketing strategy, which is developed at the SBU level, essentially emerges from the interplay of three forces - customer, competition, and corporation - in a given environment. A variety of internal and external information is needed to formulate marketing strategy. Internal information flows both down from top management (e.g., corporate strategy) and up from operations management (e.g., past performance of products/markets). External information pertains to social, economic, political, and technological trends and product/market environment. The effectiveness of marketing perspectives of the company is another input in strategy formulation. This information is analyzed to identify the SBU’s strengths and weaknesses, which together with competition and customer, define SBU objectives. SBU objectives lead to marketing objectives and strategy formulation. The process of marketing strategy development was illustrated with an example of a health-related product. Finally, this article articulated the plan of this article. Of the two types of business decisions, operating and strategic, this article will concentrate on strategic decision making with reference to marketing.

Corporate Appraisal

One important reason for formulating marketing strategy is to prepare the company to interact with the changing environment in which it operates. Implicit here is the significance of predicting the shape the environment is likely to take in the future. Then, with a perspective of the company’s present position, the task ahead can be determined. Study of the environment is reserved for a later article. This article is devoted to corporate appraisal. An analogy to corporate appraisal is provided by a career counselor’s job. Just as it is relatively easy to make a list of the jobs available to a young person, it is simple to produce a superficial list of investment opportunities open to a company. With the career counselor, the real skill comes in taking stock of each applicant; examining the applicant’s qualifications, personality, and temperament; defining the areas in which some sort of further development or training may be required; and matching these characteristics and the applicant’s aspirations against various options. Well-established techniques can be used to find out most of the necessary information about an individual. Digging deep into the psyche of a company is more complex but no less important. Failure by the company in the area of appraisal can be as stunting to future development in the corporate sense as the misplacement of a young graduate in the personal sense. How should the strategist approach the task of appraising corporate perspectives? What needs to be discovered? These and other similar questions are explored in this article.

MEANING OF CORPORATE APPRAISAL Broadly, corporate appraisal refers to an examination of the entire organization from different angles. It is a measurement of the readiness of the internal culture of the corporation to interact with the external environment. Marketing strategists are concerned with those aspects of the corporation that have a direct bearing on corporate-wide strategy because that must be referred in defining the business unit mission, the level at which marketing strategy is formulated. Of these, the first four factors are examined in this article. Two important characteristics of strategic marketing are its concern with issues having far-reaching effects on the entire organization and change as an essential ingredient in its conduct. These characteristics make the process of marketing strategy formulation a difficult job and demand creativity and adaptability on the part of the organization. Creativity, however, is not common among all organizations. By the same token, adaptation to changing conditions is not easy. As has been said: Success in the past always becomes enshrined in the present by the over-valuation of the policies and attitudes which accompanied that success. . . . With time these attitudes become embedded in a system of beliefs, traditions, taboos, habits, customs, and inhibitions which constitute the distinctive culture of that firm. Such cultures are as distinctive as the cultural differences between nationalities or the personality differences between individuals. They do not adapt to change very easily.

Human history is full of instances of communities and cultures being wiped out over time for the apparent reason of failing to change with the times. In the context of business, why is it that organizations such as Xerox, Wal-Mart, Hewlett- Packard, and Microsoft, comparative newcomers among large organizations, are considered blue-chip companies? Why should United States Rubber, American Tobacco, and General Motors lag behind? Why are General Electric, Walt Disney, Citicorp, Du Pont, and 3M continually ranked as “successful” companies? The outstanding common denominator in the success of companies is the element of change. When time demands that the perspective of an organization change, and the company makes an appropriate response, success is the outcome. Obviously, marketing strategists must take a close look at the perspectives of the organization before formulating future strategy. Strategies must bear a close relationship to the internal culture of the corporation if they are to be successfully implemented.

FACTORS IN APPRAISAL: CORPORATE PUBLICS Business exists for people. Thus, the first consideration in the strategic process is to recognize the individuals and groups who have an interest in the fate of the corporation and the extent and nature of their expectations.

Meaning of Corporate Public The following groups generally constitute the interest-holders in business organizations:

    1.  Owners
    2.  Employees
    3.  Customers
    4.  Suppliers
    5.  Banking community and other lenders
    6.  Government
    7.  Community in which the company does business
    8.  Society at large

For the healthy growth of the organization, all eight groups must be served adequately. Of all the stakeholders, in the past corporations paid little attention to the communities in which they operated; today, however, the importance of service to community and to society is widely acknowledged. The community may force a company to refrain from activities that are detrimental to the environment. For example, the Boise Cascade Company was once denounced as harsh, stingy, socially insensitive, and considerably short of the highest ethical standards because of its unplanned land development. Community interests ultimately prevailed, forcing the company to either give up its land development activities or make proper arrangements for the disposal of waste and to introduce other environmental safeguards. Similarly, social concern may prevent a company from becoming involved in certain types of business. A publishing company responsive to community standards may refuse to publish pornographic material. Johnson & Johnson exemplified responsible corporate behavior when it resolved the contingency created by the deaths of seven individuals who had consumed contaminated Tylenol capsules.

Within a few days, the company instituted a total product recall at a cost of $50 million after taxes, despite the fact that the problem did not occur because of negligence on the part of the company. Subsequently, the company took the initiative to develop more effective packaging to prevent tampering in the future. The company’s commitment to socially responsible behavior was reaffirmed when it quit producing capsules entirely after the tampering occurred again. Johnson & Johnson put the well-being of the customer ahead of profitability in resolving this tampering problem. In brief, the requirements and expectations of today’s society must serve as basic ingredients in the development of strategy: Though profit and efficiency must remain central values within the culture, they must be balanced by other values that help define the limits of activities designed to achieve those objectives and by values describing other important ethical and socially responsible behaviors. Without the integration of concerns about ethics and social responsibility at the very beginning of the marketing planning process, as well as throughout the process, the organizational culture may not provide the checks and balances needed to develop ethical and socially responsible marketing programs.