MARKET-CENTRED ORGANISATION

Market-Centred Organisation

The principles of organisation apply whether you are designing the entire organisation or a department within it. The three most basic functions necessary for any business organisation are finance, production and marketing. Each of these functions is organised separately. Thus, within the organisation structure of the firm you would have distinct organisations for each function.

Broadly speaking, marketing is concerned with all aspects of the product, pricing, promotion and distribution. All sub-functions or activities relating to these four basic dimensions are included in the marketing function. You have to account for these various activities when designing the marketing organisation.

The structure of a marketing organisation can be studied at different levels, such as overall firm level or divisional level or market level.

There are many ways of organising the marketing department. We shall discuss in detail the four basic methods:

A. Functional Organisation,

B. Product Management Organisation;

C. Market Centred Organisation and

D. Matrix Organisation.

Methods other than these four are either their derivatives or combinations.

MARKET CENTRED ORGANISATION

We have seen that some companies with a product manager organisation have started to group together products which serve similar needs. Thus the basis for differentiation is-shifting from products to customers. A group of customers with similar needs and a common link between them constitute a market. When different markets, rather than functions or products form_, the basis for differentiating marketing roles, the organisation is known as market-centred.

A company marketing building hardware such as door and window handles, window frames and locks has two distinct customers. One, hardware retailers who sell to individual household customers and second, construction companies. These two distinct customer segments represent separate markets each requiring a different marketing mix of advertising, distribution channel, and pricing. Airlines, railways, and road transportation companies have two major distinct markets to serve. They provide transportation for people (passengers) and goods (cargo). Each market (passenger vs. cargo) has its distinct characteristics and needs a suitable marketing strategy and a matching marketing organisation with relevant skill to formulate and implement the strategy.

A market-centred firm seeks its growth by serving new needs in markets where it is already well established. Since knowledge and access to the market is the basis for organising the marketing set-up, the question to be asked is "what other needs of the markets that we know well can we serve profitably?^" For instance, an airlines company, within the passenger markets can further identify markets such as group travel, and charter flights. This constitutes an instance of growth through intensively serving a well establish need (transportation) in a well established market (people). However, a market-centred organisation also has the flexibility to grow extensively by searching out closely related needs and entering new businesses around these. The airlines may enter a new business by providing a courier service. The need is still that of transportation, but the market is not people, or cargo but important documents and parcels. Through the extensive and intensive approach, a market-centred firm seeks to grow by the meeting the greatest number of inter-related needs of every market it serves.

In terms of organisation structure, a market-centred organisation can be organised in the same way as a product management organisation. Instead of product managers, with detailed knowledge of the product you would have market managers each having thorough knowledge about his market. However, we have seen that there are problems of control and authority associated with the product manager organisation. To overcome these, a market-centre should be treated as a profit centre and its manager be assigned the role of a business manager with full accountability for generating profits. The business manager is the chief `line' officer, with full authority overall the other functions supporting and reporting to him.

At this stage, you may like to ask the question "why should I reorganise my marketing organisation to being a market-centred organisation?" There are two specific situations in which a market-centred organisation can be more effective than any other kind of organisation and if you happen to be facing any one of them, a change to a market-centred marketing organisation is advisable.

 

1.   When competitors have developed the same level of product sophistication and quality as the market leader and the leader's supremacy based on price advantage is seriously threatened. In such a situation, market centring can help the leader revive its competitive advantages, detailed knowledge of customer and retailers helps frame creative marketing strategies.

2.   When a firm wants to diversify either to expand the profit base, or gain a total hold on existing customers.  

The first objective can be served by adding on higher margin products and services to the existing product line. The second objective is served by marketing a package or system of correlated products and services, enabling the firm to act as a one-stop supplier for each market.