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Posted on September 11th, 2012, by

The development of the contemporary business environment is characterized by consistent changes in approaches and strategies applied by companies to business. In actuality, companies are growing to be more and more concerned with customers. In such a situation, the satisfaction of customer needs and interests remains one of the main priorities of modern companies. At the same time, traditional approaches to management and strategic development of companies do not always work today, because companies need to implement more efficient strategies, which can ensure a better competitive position of companies. In such a context, companies are driven by different forces, such as technologies, distribution or customers. Today, customers play determinant role in the development of modern companies.

As a result, many companies tend to use market-driven approach. In such a way, they attempt to focus on customers as the main priority, while other forces, such as technologies, play secondary role.

In this respect, it is important to lay emphasis on the fact that many companies become market-driven because it is a mainstream trend in the development of companies and, what is more, it is practically impossible to ignore customers in the contemporary business environment, when the competition between companies have increased dramatically. As a result, willing or unwillingly companies need to introduce customer-centered strategies, which actually make them market-driven.

Major driving forces

Traditionally, companies cannot operate in a neutral environment, where they are not affected by any external force. In stark contrast, in the contemporary business environment, companies are affected by multiple external as well as internal forces which influence their performance consistently. In the real world, companies function in an extremely complex environment, where external and internal forces intersect and companies need to take them into consideration in order to maximize their marketing performance and improve their competitive position consistently. The company that manages to adapt to the business environment more effectively, i.e. the company that manages to adapt to both external and internal forces, turns out to be the most successful compared to its rivals. At the same time, to adapt to external and internal forces is only a half way to the overall success of the company, since the latter means that the company should use these forces for its own benefits.

In this respect, it should be said that traditionally companies were concerned with internal forces or forces that could be used efficient directly within companies. At this point, it is possible to distinguish such forces as technologies and distribution. On the ground of these forces, companies could be either technology-driven or distribution-driven depending on the force they were focused on and used as the basis for their marketing strategy. In fact, companies can still use these forces as major driving force for the development of their business since they have already proved their efficiency. However, it should be said that today these forces do not provide companies with strategic advantage over their competitors.

Nevertheless, the aforementioned forces can contribute to the steady development of companies. To put it more precisely, technologies-driven company focus on the development and introduction of technological innovations. In fact, this is a very effective strategy as long as technologies introduced by companies bring positive results and improve the marketing performance of companies. In the late 20th century, technologies-driven companies could accelerate their development consistently and take the leading position in the market due to the introduction of absolutely new technologies. For instance, it is possible to name such companies as Microsoft, IBM and others, which used new technologies as the major driving force of their development. It is due to technologies they have managed to take the leading position in the market and, therefore, define the development of their industry. In such a context, technologies-driven companies did not need to focus on customers, since technologies were the main factor contributing to their success, while customers often did not even have a choice, especially when technologies were innovative and developed by one company only.

Similarly, distribution-driven companies controlled the distribution and they could use the full potential of their network to take the dominant position in the market leaving customers with little opportunities to change the company since there were few competitors.

Basically, today a well-developed network and effective distribution are important for a successful marketing performance of companies but they do not always give a strategic advantage to companies anymore. Instead, customers have a larger choice of distributors. In this respect, the development of new technologies allows customers to have a larger choice than they used to have in the past. For instance, the development of Internet and telecommunication technologies accelerated the development of e-commerce, which, to a significant extent, undermined the position of distribution-driven companies.

Naturally, in such a situation, companies have to focus on new approaches which could be more efficient and contribute to the consistent improvement of their position in the market. In this respect, market-driven companies turn out to be in an advantageous position because they are primarily concerned with the current and prospective demands of the market. The latter means that market-driven companies research and meet interests and needs of customers and, in such a way, they meet their strategic goal the formation of the customer loyalty and positive brand image among customers. In such a way, market-driven companies can count for their loyal customers as the basis for their marketing development.

At the same time, it is worth mentioning the fact that the emergence of market-driven companies does not necessarily mean that other forces, such as technologies, or distribution, can be totally ignored. In fact, they still can be used to back up the main strategy which is the customer-centered strategy. Hence, market-driven companies can take advantageous of their position due to a profound knowledge of the market and customers’ needs and interests. In addition, such companies have a large number of loyal customers.

Characteristics of market-driven companies

In actuality, specialists (Daft and Marcic, 214) argue that market-driven companies can improve their organizational performance, while the shift toward customer needs and interests open unparalleled opportunities for the market expansion because customers prefer brands they know pretty well and they are ready to buy their products and services not only due to their quality but also and mainly due to the popularity of brand. Obviously, it is possible to achieve the popularity of the brand with the help of the implementation of customer-centered approach that makes the company market driven.

At the same time, it should be said that market-driven companies should implement their marketing strategy carefully in order to avoid the risk of error. In this respect, it is possible to define several characteristics which are typical for a successful market-driven company. First of all, a successful market-driven company is focused on specific target markets, which the company to define and select before the introduction of new products or services, or before entering the market. In fact, the definition of the target market is crucial for the overall success and this is a preparatory stage for market-driven companies to implement successfully their strategy. To define and select the target market, companies need to conduct the market research as well as analyze their potential and product or service they can offer to customers.

Secondly, the market-driven company should thoroughly understand the current needs of its customers in its chosen market segments.

Moreover, the company should foresee the potential development of the market to meet the future needs and expectations of customers. In such a way, the market-driven company can benefit from customer satisfaction and stimulate the formation of customer loyalty to the company and its brand. In such a way, the understanding of needs of customers is an essential condition of a successful marketing performance of the market-driven company.

At the same time, in order to correspond the facilities and potential of the market-driven company to needs and interests of customers, the company needs to build a compelling value proposition and solution offering to meet these needs and desired outcomes. In such a way, the company assesses its resources and ability to meet the needs of customers, but, what is more, it can also develop a long-run strategy. The company has to define the desired outcomes that means that the company should clearly understand toward which ends it is moving. The latter is crucial for the development of strategic plans of the company because it is impossible to develop an effective strategic plan without understanding of ultimate goals which are supposed to be achieved.

Furthermore, the market-driven company should allow market and customer needs to guide decision making and resource allocation. In fact, the decision making process in the market-driven company is determined by the market and customer needs. It is obvious that the market-driven company cannot ignore these needs because it can undermine its position in the market. If the company takes decision irrelevant to needs of customers and the market, it is not the market-driven company anymore. At the same time, the understanding of market and customer needs facilitates consistently the strengthening of the position of the company in the market. In fact, the more efficient the company meets needs of market and customers the more successfully the company will be, especially today, when the customer satisfaction and loyalty play determinant role in the successful marketing performance of the company.

In addition, it is necessary to take into consideration the fact that modern companies are operating worldwide. Hence, the market-driven company needs to take into consideration the specificity of local market, cultural environment, tastes and preferences of customers. What is meant here is the fact that the market-driven company is oriented on the market that means that it meets needs of the market, including needs and interests of customers. Naturally, the company cannot meet needs and interests of customers if it does not have information on the local culture, tastes and preferences of local customers and traditions which influence the customer behavior. The local culture influences consistently the marketing strategy the market-driven company should implement because one and the same strategy cannot work efficiently in a different cultural environment. For instance, a food retailer company cannot sell pork in a Muslim country and succeed, because local customers do not use this food product, while in Europe or America this product can be consumed successfully. The same trend can be traced in promotional strategy, distribution, etc. The key to success is a profound knowledge of the local market and its specificities.

In fact, the market-driven company should focus on taking the leading position in the market since it is important for attraction of a larger number of customers. In this respect, it is important to understand that customers are strategically important for market-driven companies. The number of customers proves the efficiency of the market-driven company, while the decrease of the number of customers clearly indicates to the deterioration of the position of the market-driven company. In actuality, market-driven companies need to expand its market share in order to gain a larger number of customers because it is customers who give them strategic advantage over its competitors, which may also become market-driven companies. At this point, it is important to lay emphasis on the fact that the customer loyalty is crucial for the market-driven company because customers provide the company with the opportunity to keep growing, even if the products or services of the company will be similar to those of its competitors. In fact, the popularity of the company among customers allows the company to maintain the leading position in the market as long as the company manages to attract the majority of customers. If the customer loyalty decreases the company starts to lose its market share.

In such a way, it is obvious that the market-driven company is based on the profound knowledge of customers and market. At the same time, the market-driven company should not only know the market and customers interests and needs, but it also needs to conduct marketing research and take decisions based on needs and interests of customers. In actuality, such a focus on customer needs and interests can be highly efficient in terms of a long-run marketing strategy because today the role of customers has increased consistently compared to the past epochs. In fact, it is customers who determine the marketing strategies of modern companies, because companies cannot ignore interests of customer anymore as they could have done in the past. The major reason for such a consistent change is the change of the modern business environment. To put it more precisely, the process of globalization, the liberalization of economy and elimination of fiscal barriers along with the rapid progress of free trade contribute to the consistent growth of competition. As a result, companies can enter new markets and compete with new rivals. On the other hand, the market expansion raises the problem of the lack of customer confidence in the reliability of products and services of new companies. Hence, the popularity of the brand contributes to the customer loyalty on the condition that the company manages to meet customer needs and interests. Such customer satisfaction can be achieved through the careful research of the market and needs and interests of customers. In such a situation, market-driven companies turn out to be in an advantageous position because they implement customer-centered strategy, which contributes to the customer satisfaction and, therefore, to the customer loyalty.

On gaining customer loyalty, market-driven companies can take the leading position in the market and using their popularity expand their markets and increase their market share because customers prefer renowned brands, while unknown companies have little opportunities to gain a larger share of the market even if the quality of their products and services are of the same quality as products and services of renowned companies.

Reasons for being market-driven companies

The efficient performance of market-driven companies is based on the profound knowledge of the market and customers’ needs and interests. In this respect, it should be said that the knowledge and understanding of the market and customers is crucial for the success of modern companies. Market-driven companies have a competitive advantage over their competitors due to the better understanding of the market and customer needs and interests. In the contemporary business environment, this advantage can play determinant role in the overall success or failure of a company.

At the same time, it is worth mentioning the fact that understanding of the market and customers is based on the research of fundamental marketing concepts, which often remain unimportant for technology-driven or distribution-driven companies, since these companies are not concerned so significantly with customers and markets. The market-driven companies focus on such concepts as market segmentation which allows them to identify their target market segments. The market segmentation allows companies to optimize the marketing performance of companies. The market segmentation contributes to the precise definition of the target customer group and development of products and services which meet interests and needs of the target customer group.

Furthermore, market-driven companies can benefit from needs identification, which is a consistent advantage in the contemporary business environment. To put it more precisely, technology-driven companies, for instance, are more concerned with the development and introduction of new technologies which are supposed to provide companies with strategic advantage over their competitors. In this regard, it should be said that the introduction of a new technologies means the creation of a new market and needs identification seems to be unnecessary. However, such a view on technology-driven companies is erroneous because such companies need to invest into the development of a new technology and, before its introduction, they need to promote this technology and create the demand for this technology. In such a context, market-driven companies are in an advantageous position because the clearly identify needs of customers and create products and services to meet the existing or expected needs. In actuality, this means that market-driven companies can be certain that they will have the target customer group that will consume the product or service they create, while technology-driven companies cannot be sure that the technology they introduce in the market will be popular and that customers will buy this product or service at all.

Another advantage of market-driven companies compared to technology-driven companies is the costs of the introduction of products and services. As it has been just mentioned above, technology-driven companies often need to promote aggressively their products and services or even create the demand for their products and services. Naturally, all this needs substantial financial resources and, if the company is not well-known to the public, the company needs to spend even more. In stark contrast, market-driven companies identify needs of customers and they offer customers what they need being certain that customers will buy this product or service because they need it and they are confident in the reliability of the company.

In fact, market-driven companies are more popular and have a larger number of customers because they are customer-centered. This popularity is explained by the nature of market-driven companies and their concern with customers, their needs and interests. In the contemporary business environment the popularity of the company is a key to success that naturally stimulates companies to become market-driven.

Finally, it is important to lay emphasis on the fact that the rapid progress of open market economy and the process of globalization have increased the role of market in the contemporary business environment. Today, international market expansion is the major goal of practically all leading companies of the world because this is the only way to gain a larger share of the market and strengthen the position of the company taking the leading position or, at least, taking a stable position, which cannot be challenged by minor rivals. The development of international cooperation and expansion of markets naturally implies the marketing research and focus on specificities of local markets since without the knowledge of the local specificities the company cannot count for successful market penetration. In such a way, market-driven companies can easily implement international market expansion strategy and adapt to local markets more efficiently than other companies.

Conclusion

Thus, taking into account all above mentioned, it is possible to conclude that the market-driven company is apparently highly prospective in the contemporary business environment. In fact, market-driven companies tend to take the advantageous position compared to companies driven by other forces, such as technology-driven or distribution-driven companies. Market-driven companies focus on the market and customers, their needs and interests. They implement customer-centered strategy, which contributed to the improvement of the customer loyalty, increased customer satisfaction and lead to the growing popularity of market-driven companies. Today, all these factors are crucial for the overall success of companies. In addition, market-driven companies conduct a profound research of the market and develop their marketing strategies to meet needs, interests and expectations of customers. Hence, they work for customers and they can forecast customers’ needs in the future. Moreover, they can save costs on the introduction of new products or services because they can use their popularity and customer loyalty to save costs on promotion and, what is more, the products and services they introduce are sold better because they are based on the identified needs of customers of the companies. In such a context, market-driven companies can take the leading position in the market and facilitate their international market expansion.

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