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The Changing Role of Marketing in the CorporationAuthor(s): Frederick E. Webster, Jr.Reviewed work(s):Source: Journal of Marketing, Vol. 56, No. 4 (Oct., 1992), pp. 1-17Published by: American Marketing AssociationStable URL: http://www.jstor.org/stable/1251983.

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Frederick E. Webster, Jr.

T h e Changing o l e o Marketingi n t h e orporation

New organization forms, including strategic partnerships and networks, are replacing simple market-basedtransactions and traditional bureaucratic hierarchical organizations. The historical marketing managementfunction, based on the microeconomic maximization paradigm, must be critically examined for its rele-vance to marketing theory and practice in the 1990s. A new conception of marketing will focus on man-aging strategic partnerships and positioning the firm between vendors and customers in the value chainwith the aim of delivering superior value to customers. Customer relationships will be seen as the keystrategic resource of the business.

FOR the past two decades, some subtle changes inthe concept and practice of marketing have beenfundamentally reshaping the field. Many of thesechanges have been initiated by industry, in the formof new organizational types, without explicit concernfor their underlying theoretical explanation or justi-fication. On the academic side, prophetic voices havebeen speaking (Ardt 1979, 1981, 1983; Thorelli 1986;Van de Ven 1976; Williamson 1975) but seldom heardbecause, representing several different disciplines, theydid not sing as a chorus. More basically, perhaps, fewlisteners were ready to hear the message or to do theintellectual work necessary to pull the several themestogether. Like the Peruvian Indians who thought thesails of the Spanish invaders on the horizon were somephenomenon of the weather and did nothing to pre-pare themselves for attack (Handy 1990), marketersmay ignore some important information in their en-vironment simply because it is not consistent with theirpast experience.Frederick.Webster,r., stheE.B.OsbornrofessorfMarketingndFacultyirectororExecutiveducation,mosTuckchool fBusinessAdministration,artmouthollege. heauthorhanks isTuck choolcolleagues ohitDeshpand6,cottNeslin,ndBrianWansink,swellas threeanonymousMreviewers,orhelpfulommentsndrafts fthisarticle.

Journal of MarketingVol. 56 (October 1992), 1-17

The purpose of this article is to outline both theintellectual and the pragmatic roots of changes that areoccurring in marketing, especially marketing man-agement, as a body of knowledge, theory, and prac-tice and to suggest the need for a new paradigm ofthe marketingfunction within the firm. First, the originsof the marketing management framework, the gen-erally accepted paradigm of the marketing disciplinefor the past three decades, are considered. Then shift-ing managerial practice is examined, especially thedissolution of hierarchical bureaucratic structures infavor of networks of buyer-seller relationships andstrategic alliances. Within those new forms of orga-nization, the changing role of marketing is discussedand a reconceptualization of marketing as a field ofstudy and practice is outlined.

Marketingas a Social andEconomic ProcessIt is sobering to recall that the study of marketing didnot always have a managerial focus. The early rootsof marketingas an area of academic study can be found,beginning around 1910, in midwestern American land-grant universities, where a strong involvement withthe farm sector created a concern for agricultural mar-kets and the processes by which products were brought

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to marketand prices determined.The analysis wascenteredaroundcommoditiesand the institutions n-volved in moving themfromfarm, forest, sea, mine,and factory to industrialprocessors, users, and con-sumers. Within this tradition,three separateschoolsevolved that focused on the commodities themselves,on the marketing nstitutionsthroughwhich productswere broughtto market, especially brokers, whole-salers, and retailers n theirmanyformsandvariations(Breyer 1934; Duddy and Revzan 1953), and finallyon the functions performed by these institutions(McGarry1950;Weld 1917). All of these approachestended to be descriptiveratherthan normative,withthe functionalbeing the most analyticaland leadingto the developmentof a conceptualframework or themarketingdiscipline (Bartels 1962; Rathmell 1965).These early approaches o the study of marketingare interestingbecause of the relative absence of amanagerialorientation.Marketingwas seen as a setof social and economic processes rather hanas a setof managerialactivities and responsibilities.The in-stitutionaland functionalemphasis began to changein 1948, when the AmericanMarketingAssociation(1948, p. 210) defined marketingas:

The performance f businessactivitiesdirected o-ward,and ncident o, the flow of goodsandservicesfromproducero consumeror user.This definition, modified only very slightly in 1960,represented an important shift of emphasis. Though itgrew out of the functional view, it defined marketingfunctions as business activities ratherthan as social oreconomic processes. The managerial approach broughtrelevance and realism to the study of marketing, withan emphasis on problem solving, planning, imple-mentation, and control in a competitive marketplace.

Marketing ManagementThe managerial approachto the study of marketingevolved in the 1950s and 1960s. Several textbooksusing a marketing management perspective appearedduring this period (Alderson 1957; Davis 1961; How-ard 1957; Kotler 1967; McCarthy 1960). These earlymanagerial authors defined marketing management asa decision-making or problem-solving process and re-lied on analyticalframeworksfrom economics, psy-chology, sociology, and statistics. The first marketingcasebook, incorporating a managerial framework bydefinition, had emerged from of the Harvard BusinessSchool very early (Copeland 1920), but without anydescriptive material or analytical frameworkto ac-companythe cases. Marketingmanagementbecameawidely acceptedbusiness function, growing out of amore traditional ales managementapproach,with anemphasis on product planning and development, pric-

ing, promotion,and distribution.Marketingresearchgained prominence in management practice as a ve-hicle for aligning the firm's productive capabilities withthe needs of the marketplace. The articulation of themarketing concept in the mid to late 1950s positedthat marketing was the principal function of the firm(along with innovation) because the main purpose ofany business was to create a satisfied customer (Drucker1954; Levitt 1960; McKitterick 1957). Profit was notthe objective; it was the reward for creating a satisfiedcustomer.The managerial focus was not readily accepted byeveryone in academic circles, nor was the marketingconcept completely adopted by industry (McNamara1972; McGee and Spiro 1988; Webster 1988). In aca-demia, the functionalists and institutionalistsheld theirground well into the 1960s, stressing the value of un-derstanding marketing institutions and functions andviewing marketing from a broader economic and so-cietal perspective.Overthe previous50 years, a sub-stantialbody of theoryand empiricalknowledge hadbeen developed and maturemarketingscholars feltcompelled to defend and protect it. The argumentagainst the managerial point of view centered on itsinabilityto consider the broadersocial and economicfunctions and issues associated with marketing, be-yond the level of the firm. For example, the Beckmanand Davidson (1962) text, built around a functionalistperspective, and the most widely used text in the fieldat the time, was promoted as follows: Balanced treat-mentof the developmentandthe presentstatusof ourmarketing system; Conveys a broad understanding ofthe complete marketing process, its essential eco-nomic functions,and the institutionsperforminghem;Strengthens the social and economic coverage of mar-keting in all its significant implications; Proper em-phasis accorded to the managerial viewpoint (adver-tisement, Journal of Marketing, April 1962, p. 130).It is the last phrase, proper emphasis, that impliesthe criticism that the managerial approach, by itself,is incomplete.The analytical frameworks of the new managerialapproach were drawn from economics, behavioral sci-ence, and quantitative methods. The incorporation ofthe behavioral and quantitative sciences gave impor-tant legitimacy to marketing as a separate academicdiscipline. Such frameworks were consistent with thevery strong thrust of the 1960s toward more rigorousapproaches in management education, encouraged bytwo very influential foundation studies (Gordon andHowell 1959; Pierson 1959). These studies advocatededucation based on a rigorous, analytical approach todecision making as opposed to a descriptive, institu-tional approach which, it was argued, should be heldto an irreducible minimum (Gordon and Howell1959, p. 187). The managerial perspective became the

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dominantpoint of view in marketingtexts andjour-nals, supportedby managementscience and the be-havioralsciences.Marketingas an OptimizationProblem

Scholars on the leading edge of marketingrespondedwithenthusiasm o the call for greateranalyticalrigor.At the root of most of the new managerial exts andthe evolving researchliteratureof marketingsciencewas'the basic microeconomicparadigm,with its em-phasis on profitmaximization(Anderson1982). Thebasic units of analysiswere transactions n a compet-itive marketandfully integrated irmscontrollingvir-tually all of the factors of production(Ardt 1979;Thorelli1986). Market ransactionsonnected he firmwith its customersand with other firms (JohnstonandLawrence1988).Analysis for marketingmanagementfocused ondemand(revenues),costs, andprofitability ndthe useof traditionaleconomic analysis to find the point atwhichmarginal ost equals marginal evenueandprofitis maximized. Behavioralscience models were usedprimarily o structureproblemdefinition, helping themarket esearcher o define the questions hatareworthasking and to identifyimportantvariablesandthe re-lationshipsamong them (Massy and Webster 1964).Statisticalanalysiswas used to manipulate he datatotest the strengthof the hypothesizedrelationshipsorto look for relationships n the datathat had not beenhypothesizeddirectly.The application of formal, rigorous analyticaltechniquesto marketingproblemsrequiredspecialistsof variouskinds. Marketingdepartmentsypically in-cluded functionalspecialistsin sales, advertisingandpromotion,distribution,and marketingresearch,andperhapsmanagersof customerservice, marketingper-sonnel, and pricing. Early organizationalpioneersofprofessionalmarketingdepartmentsncludedthe con-sumer packaged goods companies with brandman-agement systems, such as Procter& Gamble, Col-gate-Palmolive, General Foods, General Mills, andGillette. In other companies, the marketingprofes-sionals were concentratedat the corporatestaff levelin departmentsof marketresearchand operationsre-search or management cience. Examplesof the latterincludeGeneralElectric,IBM, andRCA. Large, full-service advertising agencies built strongresearchde-partments o support heirnationaladvertiseraccountrelationships.Other large firms, such as Anheuser-BuschandGeneralElectric,also entered ntoresearchpartnershipswith university-basedconsultingorgani-zations.Such specialized and sophisticated professionalmarketingexpertise fit well into the strategy, struc-

ture, and culture of large, divisionalized,hierarchicalorganizations.The Large,Bureaucratic,HierarchicalOrganization

When we thinkof marketingmanagement,we thinkof large, divisionalized,functionalorganizations-thekind depictedby the boxes and lines of an organiza-tion chart. The large, bureaucratic,hierarchicalor-ganization,almostalwaysa corporationn legal terms,was the engine of economic activity in this countryfor more than a century(Miles and Snow 1984). Itwas characterizedby multiple layersof management,functional specialization, integrated operations, andclear distinctionsbetween line and staff responsibili-ties. It had a pyramidshape with increasinglyfewerand more highly paid people from the bottomto thetop.The larger the firm, the more activities it couldundertakeby itself and the fewer it neededto obtainby contractingwith firms and individualsoutside theorganization.The logic of economies of scale equatedefficiency with size. The epitome of the fully inte-gratedfirm was the FordMotorCompany,and mostnotablyits River Rouge plant, which produceda sin-gle, standardizedproduct,the Model A. Ford-ownedlake steamshipsdocked at one end of the plant withcoal and iron ore (from Ford'sown mines) and com-plete automobilesand tractorscame out at the otherend. Molten iron from the blast furnaces was carriedby ladles directly to molds for parts, bypassing thecostly pig iron step. Waste gases from the blast fur-naces became fuel for the powerplantboilers, as didthe sawdustand shavings fromthe body plant. Gasesfromthe cokingovens providedprocessheatforheat-treatmentand paint ovens (Ford 1922, p. 151-153).Elsewhere, Ford owned sheep farms for producingwool, a rubberplantation n Brazil, and its own rail-road to connect its facilities in the Detroit region(Womack,Jones, andRoos 1991, p. 39). Integrationrequired arge size. Largesize begat low cost.Large,hierarchical,ntegrated orporate tructureswere the dominantorganizationform as the mana-gerial approach o marketingdeveloped in the 1950sand 1960s, and firmscreatedmarketingdepartments,often as extensionsof the old sales department.Suchlarge organizationsmoved deliberately, which is tosay slowly, andonly aftercarefulanalysisof all avail-able dataand options for action. The standardmicro-economic profitmaximizationparadigmof marketingmanagementfit well in this analytical culture. Re-sponsible marketingmanagementcalled for carefulproblem definition, followed by the developmentandevaluation f multipledecisionalternatives,romwhicha course of actionwouldultimatelybe chosen that had



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the highestprobability,basedon the analysis, of max-imizing profitability.When the world was changing more slowly thanit is today, such caution was wise in terms of pre-serving valuable assets that had been committed toclearlydefinedtasks,especiallywhenthoseassetswerehuge production facilities designed for maximumeconomies of scale in the manufacture f highly stan-dardizedproducts.The task of the marketing unctionwas first to develop a thoroughunderstanding f themarketplaceo ensure hat hefirmwasproducing oodsand services requiredand desired by the consumer.With an optimalproductmix in place, the marketingfunction throughts sales, advertising,promotion,anddistributionsubfunctions)was responsiblefor gener-atingdemandfor these standardized roducts,for cre-atingconsumerpreference hroughmass andpersonalcommunications, and for managing the channel ofdistributionthrough which products flowed to theconsumer. Sound marketing research and analysisprovidedsupportfor conductingthese activities mostefficientlyandeffectively,fortestingalternativeoursesof action in each and every area.Marketingas a management unctiontendedto becentralizedat the corporate evel well into the 1970s.Marketingorganizationswere often multitiered,withmoreexperiencedseniormanagersreviewingandco-ordinating he work of junior staff and relatingmar-keting to other functions of the business, especiallythrough hebudgetingandfinancialreportingprocess.Corporatecentralizationallowed the developmentofspecializedexpertiseandaffordedeconomies of scalein the purchaseof marketingservices such as marketresearch, advertising, and sales promotion. It alsopermittedtightercontrol of marketingefforts for in-dividual brands and of sales efforts across the entirenationalmarket. This arrangement eganto changeinthe late 1970s and into the 1980s as the concept ofthe strategicbusiness unit (SBU) gained widespreadfavor and corporatemanagementspushed operatingdecisions, andprofitandloss responsibility,out to theoperatingbusinessunits. Thoughmarketingbecame amoredecentralizedunction n manylargecompanies,it is not clear that the result was always heightenedmarketingeffectiveness.The largerthe organization,the largerthe numberof managers, analysts, andplannerswho were not di-rectly involved in making or selling products. Theburdenof administrative osts, mostly in the form ofsalaries for these middle layers of management,be-came an increasinghandicap n the competitiveracesthatshaped up in the global marketplaceof the 1970sand 1980s. Moreandmoreorganizations ound it nec-essary to downsize and delayer, some throughtheirown initiativeand many more throughthreatenedoractual acquisition and restructuringby new owners

whose vision was not cloudedby thecontinuityof ex-perience. Global competitionresulted in increasinglybetterproductperformanceat lower cost to the cus-tomer. Rapidadvancesin telecommunications, rans-portation,and informationprocessing broadenedthechoice set of both industrialbuyersandconsumerstothe point that a product's countryof origin was rel-atively unimportant nd geographicdistancewas sel-dom a barrier,especially in areaswhere non-Ameri-can producershad superior reputationsfor quality,service, andvalue. InmostAmerican ndustries,com-panies had little choice but to reduce costs throughreorganizationand restructuring f assets, as well asthroughtechnological improvements n productsandmanufacturing rocesses.The OrganizationalResponse

Duringthe 1980s, new forms of businessorganizationbecame prominent features of the economic land-scape. Even before the forces of global competitionbecameclearlyvisible, there was a trend owardmoreflexible organization orms, formsthataredifficulttocapturewith a traditional rganizationhart Miles andSnow 1984, 1986; Powell 1990; Thorelli 1986). Thenew organizationsemphasizedpartnershipsbetweenfirms;multiple ypesof ownership ndpartnering ithinthe organization (divisions, wholly owned subsid-iaries, licensees, franchisees, joint ventures, etc.);teamworkamong members of the organization,oftenwith team members from two or more cooperatingfirms; sharing of responsibilityfor developing con-verging and overlappingtechnologies;and often lessemphasis on formal contractingand managerialre-porting,evaluation,andcontrolsystems. The best vi-sual image of these organizationsmay be a wheel in-stead of a pyramid,where the spokesare knowledgelinks betweena coreorganization t the hub andstra-tegic partners round he rim (Badaracco1991). Theseformswere pioneered n suchindustriesas heavycon-struction, fashion, weapon systems contracting,andcomputers, where markets often span geographicboundaries,technology is complex, products changequickly, anddoing everything yourself is impossible.Such organizationstoday are found in businesses asdiverse as glass, chemicals, hospital supplies, bookpublishing,and tourism.These confederationsof specialists are called bymany names including networks Miles and Snow1986; Thorelli 1986), value-adding partnerships(Johnstonand Lawrence 1988), alliances (Ohmae1989), and shamrocks Handy 1990). All are char-acterizedby flexibility, specialization,and an empha-sis on relationship management instead of markettransactions.Theydependon administrative rocessesbut they are not hierarchies Thorelli 1986); they en-

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gage in transactionswithinongoing relationshipsandthey dependon negotiation,rather hanmarket-basedprocesses, as a principalbasis for conductingbusinessand determiningprices, though marketforces almostalways influenceand shape negotiation.The purposeof these new organization ormsis to respondquicklyand flexibly to accelerating change in technology,competition, and customerpreferences.Types of Relationships andAlliances

There is no strongconsensusat the presenttime aboutthe terminologyand typology for describingthe neworganization forms. However, some importantdis-tinctions among types of relationshipsand alliancesare necessarybeforewe can consider the role of mar-ketingwithinthem. We can thinkof a continuumrompure transactionsat one end to fully integratedhier-archical irmsat theotherend (Figure1). As we movealong this continuum,we see that firmsuse more ad-ministrativeand bureaucratic ontrol and less marketcontrol n the pursuitof economicefficiency.One stepaway from pure transactions s repeatedtransactionsbetweenbuyerand seller. The next stepis a long-termrelationshiphat is still adversarial nddependsheavilyon marketcontrol. Then comes a realpartnership, nwhich each partnerapproachestotal dependenceonthe other in a particulararea of activity and mutualtrust replacesthe adversarialassumptions.Prices arenow determinedby negotiation,subjectto some mar-ket pressures, rather than by the marketitself. Thenext step is strategicalliances, which are defined bythe formationof a new entity such as a productde-velopmentteam, a researchproject,or a manufactur-ing facility, to which both partiescommit resourcesandwhich serves clearstrategicpurposes orboth.Jointventures,resulting n the formationof a new firm, are

the epitome of strategicalliances. Like theirparents,joint venturesarefully integrated irmswiththeir owncapitalstructures,somethingthatotherformsof stra-tegic alliance lack. Networkorganizationsarethe cor-porate structures that result from multiple relation-ships, partnerships,and strategicalliances.We can now consider how the role of the mar-ketingfunctionchanges in the focal firm as we movealong the continuum rom transactions o networkor-ganizations.Markets and TransactionsThe startingpoint of this analysis is a transactionbe-tween two economic actors in the competitive mar-ketplace. In a pure marketform of economic orga-nization, all activity is conductedas a set of discrete,market-based ransactionsand virtuallyall necessaryinformation s contained in the price of the productthatis exchanged.The marketing ob is simplyto findbuyers.In the traditionalmicroeconomicprofit-maximi-zation paradigm, the firm engages in markettrans-actions as necessary to secure the resources (labor,capital, raw materials, etc.) it requiresfor the pro-ductionof the goods and services it sells in the com-petitive marketplace.Each transaction s essentiallyindependentof all othertransactions,guidedsolely bythe price mechanism of the free, competitivemarketas the firmseeks to buy at the lowest availableprice.In addition to the costs associatedwith the pricepaid, however, there are costs associated with thetransaction tself, what Coase (1937, p. 390) calledthe cost of using the pricemechanism. These costsinclude hecostsof discoveringwhat the relevantpricesare, of negotiatingandcontracting,and of monitoringsupplierperformance, ncludingqualityand quantityof goods delivered. For Coase, the problemwas toexplain why, given these marketingcosts (as he

FIGURE1The Range of Marketing Relationships~~~1 2

TRANSACTIONS > REPEATEDTRANSACTIONS TRANSACTIONS3>. LONG-TERMRELATIONSHIPS

4 5 6 7BUYER-SELLER STRATEGIC NETWORK VERTICALPARTNERSHIPS > ALLIANCES ORGANIZATIONS > INTEGRATION(MUTUAL, (INC. JOINTTOTAL VENTURES)DEPENDENCE)

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called them, p. 394, not transactionscosts, the phrasewe use today), the firm did not internalizevirtuallyall exchanges of value ratherthan dependingon thecompetitive market. Coase proposedthat the reasonis that costs are also associated with internalperfor-manceof value-creationactivities, includingdecreas-ing returnsto the entrepreneurialunction and mis-allocationof resourcesto activities in which the firmis incapableof creatingvalue to the same extent as aspecialist.It is worthnotingthatthis suggestion,statedin an articlepublishedin 1937, is very similarto thenotion of distinctivecompetency that appeared nthe strategyliteraturemore than 50 years later (Pra-haladand Hamel 1990).Pure transactionsare rare, though they markthebeginning of the continuum for thinkingabout typesof relationshipsand alliances and provide a usefulstartingpointfor theoreticalanalysis. In fact, through-out the 1970s, the marketingliteratureemphasizedtransactionsas a central construct and the basic unitof analysis or the marketing iscipline Bagozzi 1975).Some authorseven advocateda definitionof a trans-action that included any exchange of value betweentwo parties,thusbroadening he conceptof marketingto include virtuallyall humaninteraction KotlerandLevy 1969). A pure transaction is a one-time ex-changeof value between two partieswith no priororsubsequent nteraction.Price, established in the com-petitive marketplace,contains all of the informationnecessaryfor both partiesto conclude the exchange.In a puretransaction, hereis no brandname, no rec-ognition of the customerby the seller, no credit ex-tension, no preference, no loyalty, and no differen-tiation of one producer'soutputfromthat of another.Most transactions n fact takeplace in the contextof ongoing relationshipsbetween marketersand cus-tomers. Nonetheless, there has been a long-standingand clear tendencyfor marketingpracticeand theoryto focus on the sale, the single event of a transaction,as the objective of marketingactivity and the depen-dent variable for analysis. This emphasis on singletransactions fits well with the profit-maximizationparadigmand the relatedanalyticaltechniquesof op-timization.There is no need to considerpeople or so-cial processeswhen the units of analysisareproducts,prices, costs, firms, and transactions.Repeated Transactions-The Precursorsof aRelationshipOne step along the continuum from a pure transactionis the repeated, frequentpurchaseof brandedcon-sumer packaged goods and some industrialcompo-nents, maintenance, and operating supplies. In themarketingof suchproducts,advertisingandsales pro-motion are key activities and each brandspends ag-gressively to try to win the customer's preference,

loyalty, and repeat purchase. Marketing'srole is toguide productdifferentiationand to createpreferenceand loyalty that will earn higher prices and profits.Directcontactbetween customersandthe marketer sunlikely. The sale is the end resultof the marketingprocessand, thoughrepeatpurchasesareimportantothe economics of advertisingand sales promotionac-tivity, there is no meaningful, ongoing relationshipbetweencompanyand customer.Evenhere, however,thepresenceof brandoyaltyandrepeatpurchasemeanswe have moved beyond a pure transaction.The ru-dimentsof trustandcredibilityarepresent,whichcanbe the foundationsof a relationship.Consumerssim-ply find it easier and more convenient to shop in thesame store and to buy a familiarbrand, thus mini-mizing the time and effort needed to obtain and pro-cess informationabout different alternatives. Con-sumerscan negotiatemorefavorable ermsof sale froma vendor who is attracted o the possibility of futuretransactionswith them. Relationshipsmake transac-tions more cost efficient.

The importanceof relationshipsin marketing smore clearly seen in industrialmarkets,though it isnow also better understood in consumermarkets asresellers have gained increasedpower and as infor-mation echnologyhasput ndividual onsumersn moredirectcontact with resellersandmanufacturers.nter-active databases are making relational marketingarealityfor consumergoods. Forproductssuchas con-sumerdurablegoods, whose benefitsare derivedovera long periodof time rather hanbeing consumedina single use and for which after-sale service is oftenrequired, there is an ongoing relationshipwith thecustomer,thoughresponsibility or the relationshipsoften an issue and a source of conflict between cus-tomer, reseller, and manufacturer.As an historicalfootnote, Henry Ford never hadany doubton this question. He wrote, When one ofmy cars breaksdown I know I am to blame (Ford1922, p. 67) and A manufacturers not throughwithhis customerwhen a sale is completed. He has thenonly startedwith his customer.In the case of an au-tomobilethe sale of the machineis only something nthe nature of an introduction (p. 41). Likewise,L. L. Bean'soriginalpromise o his customers80 yearsago, what he called his GoldenRule, is now held upas a standard or others to follow:Everythingwe sell is backedby a 100%guarantee.We do not wantyou to have anything rom L. L.Beanthat s notcompletely atisfactory.Return ny-thing you buy fromus at any time for anyreason fit provesotherwise.

These quotations help to underscore the fact thatrelationship marketing is not new in managementthinking. However, there appears to have been a fairlylong period of time when it was not a top priority for

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most companies, and it was not partof the basic con-ceptual structureof the field as an academic disci-pline.Long-Term RelationshipsIn industrialmarkets,buyer-sellerrelationshipshavetypically involved relatively long-term contractualcommitments,but even herethe relationshipwas oftenarm's-length and adversarial, pitting the customeragainst the vendor in a battle focused on low price.It was commonpracticefor a buyerto maintaina listof qualifiedvendorswho would be invited to submitbids for a particularprocurementon a productwithspecifications drawn in a way to attract maximumcompetition (Corey 1978; Spekman1988).The importanceof managing hese buyer-sellerre-lationshipsas strategicassets began to be recognizedin the marketingiterature f the 1980s (Jackson1985;Webster 1984). Jacksonproposedthatindustrialmar-keters characterizefirms as either transactionor re-lationshipcustomers and scale the commitmentof re-sourcesaccordingly.In these longertermbuyer-sellerrelationships, prices are an outcome of a negotiationprocess based on mutualdependence,not determinedsolely by marketforces, and quality, delivery, andtechnical supportbecome more important.Competi-tive forces in theglobalmarketplacef the 1980sforcedmanyfirms to move significantlyalongthecontinuumfromarm's-lengthrelationshipswithvendorsandcus-tomers to muchstrongerpartnershipsharacterizedbymuch greater interdependence.In traditionalmanu-facturingbusinesses such as those in the automobileindustry,the world was changingso fast thatthe stan-dardways of doing business were passe.In the 1980s, the automobileindustrybecamethebellwetherfor new forms of relationshipwith indus-trialsuppliers(Womack, Jones, andRoos 1991), andit is instructiveto look briefly at the auto businessspecifically. Ford's RiverRouge plantwas an excep-tionto the way the industry rganizedproduction.Fordgot into trouble soon after the plant was opened asAlfred Sloan's General Motors began to offer con-sumers a much wider range of models, colors, andfeatures, and the Model A fell from favor with cus-tomers. GM dependedheavily on other vendors, in-cluding its own wholly owned but independentsub-sidiaries such as HarrisonRadiator,AC SparkPlug,andSaginawSteering Womack,Jones,andRoos 1991,p. 138-139), for almost 70% of the value of produc-tion. The automobilemanufacturersor decades haddependedon thousands of vendors, with many ven-dors for each item, in a system that was fundamen-tally andintentionallyadversarial.Relationshipswereshort-term.Supplierswere adversariesfor their cus-tomers, competing for an unfair share of the eco-nomic value createdby the use of their productsin

the customer's manufacturingprocess. They foughtover price. Competitionamongvendors,throughsys-tems of competitive bidding aroundextremely tightproductspecifications,was the methodby whichven-dorgreedandopportunismwerecontrolled.The larg-est share of the business usually went to the vendorwiththe lowest price,thoughseveralothersweregivensmaller shares to keep them involved, to keep pres-sure on the low price supplier, and to providealter-native sources of supply in the event of delivery orqualityproblems.Incoming nspectionwas thekey stepin qualitycontroland rejectratestendedto be high.Mutual, Total-Dependence Buyer-SellerPartnershipsGlobal competitorssaw an opportunityn all of this.The Japanesemanufacturers,n particular, trivingtocompete in the NorthAmericanmarketthousandsofmiles fromhome, hadlearneda valuable esson:qual-ity does not just sell better, it also costs less. De-signing products or manufacturabilitys well as per-formance and doing it right the first time costs lessthandetectingandremovingdefectslater.Qualityandlow cost dependheavily on a systemof strategicpart-nershipswith a small numberof vendorsthat are in-corporatedn theearlystagesof productdevelopment,a patternof cooperationvirtuallyunknown n the ad-versarialsourcingsystems of the U.S. manufacturers(Womack, Jones, and Roos 1991). Japanesekanbanor just-in-time systems provided a new model forAmerican manufacturers: eliance on one or a fewvendors for a particularpartwho promise to deliver100% usable product, usually in quantities ust suf-ficient for one eight-hourproductionshift, on an in-credibly tight schedule whereby trucks must arrivewithin a very few minutes of the programmed ime.Higher quality and lower inventorycosts and otherrelatedcosts resultedfromtotalreliance on a networkof sole-source vendors in a system of total interde-pendence(Frazier,Spekman,and O'Neal 1988).Firms in the Americanautomobileindustrystud-ied their Japanesecompetitorsand attemptedto in-corporate he lessons learned in theirmanagementofprocurementand relationshipswith vendors. The restof Americabegan to learnfrom what was happeningin the automobile industry, as well as in telecom-munications,computers,office equipment,and otherfields. Americanmarketersbeganto see the necessityof moving away from a focus on the individualsale,the transactionas a conquest, and toward an under-standingof the need to develop long-term, mutuallysupportiverelationshipswith their customers. Manyof America'spremierndustrialirmssuchas GE, IBM,DuPont, Monsanto, and Honeywell restructuredthemselves aroundthe fundamentalconcept of stra-tegic customer partnershipswith customers such as



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AmericanAirlines, Ford, Milliken, Procter& Gam-ble, and the federalgovernment.Another Japanese institution, the keiretsu, pro-vides yet anothermodel that s shapingthenew Amer-ican organizational andscape (Gerlach 1987). Kan-ban systems depend on the close relationship ofsuppliers and subcontractorswithin the keiretsu. Inmanyrespects,the keiretsuare thepredecessorsof thenetworks and alliancesnow emergingin the Westernworld (not to mention the obvious fact thatmany al-liance partnersare, in fact, Japanesefirms). The kei-retsu arecomplex groupingsof firmswith interlinkedownershipand tradingrelationships.They areneitherformalorganizationswith clearlydefinedhierarchicalstructures or impersonal,decentralizedmarkets.Theyare boundtogether n long-termrelationshipsbased onreciprocity.The tradingpartnersmay hold small own-ershippositionsin one another,butprimarily o sym-bolize the long-termcommitment of the relationshiprather hanstrictlyfor financialgain. A key outcomeof this arrangements great stability n these long-termrelationships.Such stability contributes to a sharingof informationamong the companies and promotesaggressive, long-termgrowthpolicies (Gerlach1987).The experience of Japanese managerswith keiretsuand similar forms of interfirmcooperation s a majorreason for theirgreaterskill and comfort level in themanagementof strategicalliancesin comparisonwithAmericanmanagers (Montgomeryand Weiss 1991).Strategic AlliancesIn some cases, the partnership etween a supplierandits customer takes the form of an entirely new ven-ture, a truestrategicalliance. One of the essential fea-tures of a truestrategicalliance is that it is intendedto move each of the partners owardthe achievementof some long-term, strategic, goal. This strategicob-jective is one distinguishing feature that separatesstrategic alliances from previous forms of interfirmcooperation.According o Devlin and Bleakley(1988,p. 18), Strategicalliances take place in the contextof a company's long-termstrategic plan and seek toimprove or dramaticallychange a company's com-petitive position. This definition of strategic alli-ances, with its emphasison improvinga firm's com-petitive position, supports he notion that they are animportantmarketingphenomenon.Another mportantcharacteristicof strategic alliances is shared objec-tives and a commitmentof resourcesby both parties.There aremultiple types of strategicalliances;vir-tually all are within the theoreticaldomain of mar-keting as they involve partnershipswith customers orresellers or with real or potentialcompetitorsfor thedevelopmentof new technology, new products, andnew markets.Some arenew ventures ormedbetweenvendorsandcustomers o ensure a smoothflow of raw

materials, components, or services into the cus-tomers' manufacturing perations.Others are formedbetweenpotentialcompetitors n order o cooperate nthe development of related or convergent technolo-gies, in the developmentof a new productor class ofproducts,or in thedevelopment f a new market.Somealliances are formed between manufacturers nd re-sellers. All strategicalliancesare collaborations mongpartnersinvolving the commitment of capital andmanagementresources with the objective of enhanc-ing the partners'competitive positions. Strategical-liances are much closer to the hierarchyend of thetransactions market)-hierarchycontinuum,but theystopshortof internalizinghe functionswithinthe firmitself. Instead,theycreatea separateentityto be man-aged by bureaucratic nd administrative ontrols.Joint VenturesJointventures,as the term is used here, areonly onekind of strategicalliance, thoughthe terms are oftenused interchangeably.The unique featureof a jointventure is that a new firm is created, with its owncapital structure,as well as the sharingof other re-sources.Jointventuresaretypicallyestablishedto ex-ist in perpetuity, though the founding partnersmaysubsequently change their ownership participation.Othertypes of strategicalliances, such as a productdevelopmentproject,have a finite life by definition.In fact, this finiteness with its inherentflexibility isone of the advantagesof strategicalliances in com-parisonwith more traditionalorganization orms. In-terestingly, the joint venture soon faces all of theproblemsof its parent irms in terms of creatingmul-tiplepartnershipsndalliancesanddeterminingts corecompetenceand tsuniquepositioningn thevaluechainbetween vendorsand customers.NetworksNetworks are the complex, multifacetedorganizationstructureshatresultfrommultiple strategicalliances,usuallycombined with otherforms of organizationn-cluding divisions, subsidiaries, and value-addedre-sellers. (Some authorshave mistakenlyused the termsstrategic alliances and networks interchange-ably.) The alliancesare the individualagreementsandcollaborationsbetween partners, such as Ford andMazdain the creationof the new Escort andExplorerautomobilesor GeneralMotors andToyota in the for-mationof the NUMMIjoint venture.GeneralMotors,though still a classic example of a traditional,hier-archical,bureaucratic,multidivisional rganization ndcurrently n the throes of a majordownsizing(Taylor1992), is evolving towarda networkorganizationwithmultiplejoint-venturepartners ncluding global com-petitorsToyota, Daewoo, Volvo, Suzuki, and Isuzu,as well as a host of strategicpartnershipswith ven-



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dors. Ford ikewise has a largenumberof partnershipsand alliances and is evolving into a networkorgani-zation.The basic characteristic f a networkorganizationis confederation,a loose and flexible coalitionguidedfrom a hub where the key functions include devel-opmentand managementof the alliancesthemselves,coordinationof financial resources and technology,definition and managementof core competence andstrategy, developingrelationshipswith customers,andmanaging information resources that bind the net-work. In the context of the network organization,marketing s the function responsiblefor keeping allof the partners ocused on the customerandinformedaboutcompetitorproductofferingsandchangingcus-tomer needs and expectations.James Houghton, Chairmanof Coming, Incor-porated,for example, describeshis companyas a net-work with alliances as a key part of its structure(Houghton1989). At the hubof the wheel (Figure2)is a set of functionalspecialitiessuch as contractne-gotiation, legal services, and financial coordinationthat provide the linkages that bind togethertechnol-ogy, sharedvalues, and sharedresources.The centeris also responsibleforestablishingprioritiesandman-aging the linkages that define the network;informa-tion managementis a central strategicfunction andinformationtechnology has been a key facilitator ofthese new organizational orms. Anotherkey respon-sibility of the center is to define, develop, and main-tain the core competenciesthatare at the heart of thefirm's ability to compete successfully in the global

FIGURENetwork Organizations

CUSTOMERPARTNERING

marketplace PrahaladandHamel 1990). In fact, oneof the key core competenciesof a networkorganiza-tion may be the abilityto design, manage,andcontrolstrategicpartnershipswith customers, vendors, dis-tributors,and others.There is an interestingparadoxhere: in the movetowardstrategicalliances, even the largestfirms be-come more focused and specialized in theircore ac-tivities.Theyrealize hat here s an increasinglymallerset of activities that representtrue distinctive com-petence on their part. The trick is to avoid tryingtodo everything, especially the things they cannot dowell, and to find otherfirms that also need a partnerthatcan do the things the large firm does best. Stra-tegic alliances become a primarytool in developingthe firm's core competence and competitive advan-tage.Insteadof vertical integrationbeing the preferredmodel, the networkparadigm s built aroundthe as-sumption hatsmall is better, thateachpartor processor functionshould be the responsibilityof a special-ized, independententity, efficiently organized andmanaged, hathas worldclass competence.Acrosstheboard-for all factors of production including partsand subassemblies, ervices such as transportationndmaintenance,and professionalmarketing ervicessuchas marketingesearch, ome sellingfunctions,and mostdistribution functions-the bias has shifted frommake o buy, romownership o partnership,romfixed cost to variablecost, but in the contextof stable,long-termrelationships.A firmmustdefine ever morenarrowly hose core competenciesto which it will de-vote scarceresources in order to develop new knowl-edge andskills. For all otherareas, it mustdependonstrategicpartnerswho have placedtheir own focusedbets in the gameof becomingworld class competitors.IBM is anotherexample of a firm that is rein-ventingitself as a networkorganization.As one of thefirststeps in this direction,the personalcomputerwasdesigned over a long weekend by an IBM manage-ment taskforce gathered informally at a Floridare-treat. Actual manufacturingrelied on a network ofhardwareand softwaresuppliersfor all components.Besides the design work, IBM's own contribution othe manufacturing rocess was an assembly plantandseveralminutesof assemblyandtestingtime per ma-chine. Gradually,some of the vendorpartnerships ndallianceswere terminatedas IBM broughtsome man-ufacturingactivitiesbackinto the firm. Subsequently,IBM committed tself to openarchitecture, makingIBM's technology widely available to all softwarewriterswho wantedto developapplicationsprograms,in recognitionof the fact that not even IBM had theresourcesnecessaryto do thejob of writingsoftwarefor thousandsof distinctapplications egments.(Someobservershave arguedthat open architectureand re-



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liance on outside vendors meant that IBM itself nolonger had any distinctive competitive advantage ofits own.) Most recently, IBM has announced a majorstrategic alliance with Apple Computer and a sub-stantialdownsizing and restructuring nto a set of moreautonomous, independent businesses (Carey and Coy1991). A key strategic issue for IBM management isto define the set of skills and resources that representthe distinctive competencies of IBM per se and a setof technical and strategic challenges and opportunitiesthat require the scope and scale of an IBM.To sum up, there is a clear evolution away fromarm's-length transactions and traditional hierarchical,bureaucratic forms of organization toward more flex-ible types of partnerships, alliances, and networks.Within these new types of organizations, traditionalways of organizing the marketing function and ofthinking about the purpose of marketing activity mustbe reexamined, with focus on long-term customer re-lationships, partnerships, and strategic alliances.

Redefining Marketing's RoleFrom an academic or theoretical perspective, the rel-atively narrow conceptualization of marketing as aprofit-maximization problem, focused on markettransactions or a series of transactions, seems increas-ingly out of touch with an emphasis on long-term cus-tomer relationships and the formation and manage-ment of strategic alliances. The intellectual core ofmarketing management needs to be expanded beyondthe conceptual framework of microeconomics in orderto address more fully the set of organizational andstrategic issues inherent in relationships and alliances.In focusing on relationships-though we are still talk-ing about buying and selling, the fundamental activ-ities of interest to marketing-we are now consider-ing phenomena that have traditionally been the subjectof study by psychologists, organizational behavior-ists, political economists, and sociologists. The focusshifts from products and firms as units of analysis topeople, organizations, and the social processes thatbind actors together in ongoing relationships.In the following sections, the changing role ofmarketing within the organization is examined moreclosely. Then suggestions are made for how the con-ceptual base of marketing must be expanded. Finally,some implications for management action are dis-cussed and suggestions are made for the research areasthat should be given highest priority if marketing'sknowledge and theory base is to address the most im-portant issues facing managers and organizations.In the new organization environment, the market-ing function as we know it is undergoing radical trans-formation and, in some cases, has disappeared alto-gether as a distinct management function at the

corporate level. Just as the distinction between the firmand its market environment (both suppliers and cus-tomers) becomes blurredin network organizations builtaround long-term strategic partnerships, so do tradi-tional functional boundaries within the firm becomeless distinct.To consider the new role of marketing within theevolving corporation, we must recognize that mar-keting really operates at three distinct levels, reflect-ing three levels of strategy. These can be defined asthe corporate, business or SBU, and functional or op-erating levels (Boyd and Walker 1990; Hofer andSchendel 1978). Much of the confusion over the yearsabout a definition of marketing and an understandingof the marketing concept can be traced to a failure tomake these distinctions (Houston 1986; McGee andSpiro 1988; McNamara 1972: Shapiro 1988). One ofthe results of the movement toward new organiza-tional forms will be to make these distinct roles moreexplicit.In addition to the three levels of strategy, we canidentify three distinct dimensions of marketing-mar-keting as culture, marketing as strategy, and market-ing as tactics. Though each marketing dimension isfound at each level of strategy, the emphasis accordedthe separate dimensions of marketing varies with thelevel of strategy and the level within the hierarchy ofthe organization.

Marketing as culture, a basic set of values and be-liefs about the central importance of the customer thatguide the organization (as articulated by the marketingconcept), is primarily the responsibility of the cor-porate and SBU-level managers. Marketing as strat-egy is the emphasis at the SBU level, where the focusis on market segmentation, targeting, and positioningin defining how the firm is to compete in its chosenbusinesses. At the operating level, marketing man-agers must focus on marketing tactics, the 4Ps ofproduct, price, promotion, and place/distribution, theelements of the marketing mix. Each level of strategy,and each dimension of marketing, must be developedin the context of the preceding level. As we movedown the levels of strategy, we move from strategyformulation to strategy implementation.At the Corporate Level: Market StructureAnalysis, Customer Orientation and Advocacy,and Positioning the Firm in the Value ChainAt the corporate level, the strategic problem is to de-fine what business the company is in and to determinethe mission, scope, shape, and structure of the firm.Increasingly, firms are paying specific attention to thequestion of firm scope and shape, as seen in the de-cision to enter into strategic alliances. In other words,the question of whether to depend on markets, long-term relationships, strategic alliances, or integrated



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multifunctionalhierarchyis seen to requirespecificmanagementanalysisandjudgment.The firstorderofbusiness in the strategicpuzzle, then, is to determinethe firm's position in the value chain: What will itbuy?Whatwill it make?What will it sell? These de-cisions requirecareful assessment of the firm's dis-tinctivecompetencies(Prahaladand Hamel 1990) anda decision to focus on the things the firm does best.As mentionedpreviously, this is the question raisedtheoreticallyin 1937 by Ronald Coase, whose workreceived the Nobel Prize in Economics in 1991:WhenShould he firmdependon outsidesuppliersandwhenshould it performactivities and functions internally?Today'sanalysispermitsconsiderationf a muchmoreflexible set of organization orms-relationships andalliances of variouskinds.At this level of strategy,the role of marketing sthreefold:(1) to assess marketattractivenessby ana-lyzing customer needs and requirementsand compet-itive offerings in the marketspotentiallyavailable tothe firm, and to assess its potentialcompetitiveeffec-tiveness, (2) to promotecustomerorientationby beinga strong advocate for the customer's point of viewversus thatof otherconstituencies n managementde-cision making,as called for by the marketingconcept(Anderson1982), and(3) to developthe firm'soverallvalue proposition (as a reflection of its distinctivecompetence, in terms reflecting customerneeds andwants) and to articulate it to the marketplaceandthroughout he organization.A majorfunctionof thestatement of mission, distinctive competence, andoverall value propositionis to make clear what thefirm will not do, as well as what it will do as statedby corporateobjectives and goals. At the corporatelevel, marketingmanagershave a criticalrole to playas advocates, for the customerandfor a set of valuesand beliefs that put the customer first in the firm'sdecision making,and to communicate he value prop-osition as partof that culturethroughout he organi-zationboth internallyand in its multiplerelationshipsand alliances.In networkorganizations,the marketingfunctionhas a uniquerole that is different from its role in tra-ditional hierarchicalstructures-to help design andnegotiate the strategicpartnershipswith vendors andtechnology partnersthroughwhich the firm deploysits distinctivecompetenceto serve particularmarketopportunities.Thus, marketingmaybe involved in re-lationshipswith vendors at least as much as, if notmorethan,relationshipswithcustomersas partof theprocessof delivering superiorvalue to customers.Ne-gotiatingskills traditionallyassociatedwith managingmajorcustomeraccountsmay be equally valuable inmanaging vendor relationships. Some firms are al-readymoving managersbetween sales/marketingand

procurementresponsibilities, recognizing the trans-ferabilityof these skills.At the Business (SBU)Level: MarketSegmentation and Targeting,Positioning theProduct, and Deciding When and How toPartnerAt the business unit or SBU level, the key strategyquestionis how to compete in the firm's chosen busi-nesses. This level of competitive strategy s developedby managers n the individualbusinessunits. Businessstrategy s based on a moredetailedandcarefulanal-ysis of customers and competitorsand of the firm'sresources and skills for competingin specific marketsegments (Day and Wensley 1988). The key out-comes of this planning process are marketsegmen-tation, markettargeting,andpositioningin the targetsegments. A trend of the last decade was to delegatemoreof the strategicplanningprocessfromcorporateheadquartersout to the individual business units,helpingto clarifythe distinctionbetweencorporate ndbusiness-levelstrategy.Theseplanningactivitieswerehistoricallyassociatedwith marketingstrategyat thecorporate evel in hierarchicalorganizations.Clearly,in network organizations, these responsibilitiesde-volve to the business unit level. In fact, at the SBUlevel, the distinctionbetween marketingandstrategicplanning can become blurred;in some firms thesefunctionsare likely to be performedby the same peo-ple.In networkorganizations,marketingmanagersatthe businessunit level also have a new responsibilityfor decidingwhich marketing unctions and activitiesare to be purchasedin the market, which are to beperformedby strategicpartners,and which are to beperformednternally.This responsibility ppliesto thewhole range of professional services (marketingre-search, telemarketing,advertising, sales promotion,package design, etc.) as well as to suppliersof rawmaterials,components,and subassembliesand to re-sellers. When is a vendormerely a vendor and whenis it a strategicpartnercommittedto a mutuallyde-pendentlong-termrelationship n deliveringsolutionsto customerproblems?Similarquestionsmust be askedaboutchannelmembers.In a customer-oriented om-pany, committedto the marketingconceptat the cor-porate level, marketingmanagementat the businessunit level has a critical role in guiding the analysisthatleads to answersto these questions. In all cases,the answerwill be thatwhich enables the business todeliversuperiorvalue to customers n comparisonwithits competitors.It is the uniquecharacteristicof net-workorganizations hatthese questionsareaskedandthat the organizationform-transaction versus rela-tionshipsversushierarchy-remains flexible, depend-ing on what the marketrequires. In this sense, net-



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work organizations are by definition market-drivenand represent a maturation of the marketing concept.At the Operating Level: The Marketing Mixand Managing Customer and ResellerRelationshipsAt the operating or tactical level, we are back on themore familiar ground of the marketing mix-deci-sions about products, pricing, promotion, and distri-bution that implement the business strategy. This isthe level of strategy normally called functional strat-egy, and in our case marketing strategy, as distinctfrom corporate and business strategies. It, too, is theresponsibility of business-level managers, but at theoperating level it is delegated to functional specialists,the marketing managers. This is where the tools ofmanagement science and the optimization paradigmapply, as the business attempts to allocate its finan-cial, human, and production resources to markets,customers, and products in the most productive fash-ion. But even here, marketing is taking on a new form,in both consumer goods and industrial products andservices companies, as market forces compel com-panies to do a more thorough job of responding tocustomer needs and developing long-term customerrelationships.Regis McKenna, a popular marketing consultantand writer, has described well the new requirementsfor the marketing function (at both the SBU and op-erating levels) in a recent Harvard Business Reviewarticle (McKenna 1991, p. 148):

The marketer must be the integrator, both inter-nally-synthesizing technological capability withmarket needs-and externally-bringing the cus-tomer into the company as a participant in the de-velopment and adaptation of goods and services. Itis a fundamental shift in the role and purpose of mar-keting: from manipulationof the customer to genuinecustomer involvement; from telling and selling tocommunicating and sharing knowledge; from last-in-line function to corporate-credibilitychampion ....The relationships are the key, the basis of customerchoice and company adaptation. After all, what is asuccessful brand but a special relationship?And whobetter than a company's marketing people to create,sustain, and interpret the relationship between thecompany, its suppliers, and its customers?For firms like Corning and IBM that are redefin-ing themselves as networks of strategic alliances, thekey activities in the core organization have to do withstrategy, coordination, and relationship management.These activities are essentially knowledge-based andinvolve the management of information. CEOs man-age the central cores of worldwide webs of productand knowledge links (Badaracco 1991, p. 148).To summarize, there is a clear evolution toward

entirely new forms of organization for conducting

business affairs in the global marketplace and it re-quires reconceptualization of the role of the marketingfunction within the organization. In the traditionalview,the firm was a distinct entity whose borders were de-fined by an organization chart, which clearly delin-eated the boundary between the firm and the externalenvironment. The external environment consisted ofmarkets, in which firms engaged in transactions withvendors for the resources needed to conduct their af-fairs and with customers who purchased their productsand services. The fundamental difference in the neweconomic order is that this clear distinction betweenfirms and markets, between the company and its ex-ternal environment, has disappeared (Badaracco 1991).It is highly significant, for example, that the manage-ment of General Electric Company, the sixth largestAmerican firm in terms of sales and assets, and thecountry's leading exporter after Boeing, has articu-lated a vision of GE as a boundary-less companyfor the 1990s. According to the 1990 GE Annual Re-port:

In a boundary-less company, suppliers aren't out-siders. They are drawn closer and become trustedpartnersin the total business process. Customers areseen for what they are-the lifeblood of a company.Customers' vision of their needs and the company'sview become identical, and every effort of every manand woman in the company is focused on satisfyingthose needs.In a boundary-less company, internal functions beginto blur. Engineeringdoesn't design a productand thenhand if off to manufacturing. They form a team,along with marketingand sales, finance, and the rest.Customer service? It's not somebody's job. It'severybody's job.Clearly, evolving organization forms, emphasiz-ing flexibility in responding to changing customerneeds, create new definitions of marketing's role andresponsibilities. We have examined how these new re-sponsibilities differ at the corporate, business, and op-erating levels. In each instance, the new emphasis onlong-term relationships and ongoing assessment ofwhich functions and activities to purchase, to performinternally, or to engage in with a strategic partnercre-ates new dimensions to the marketing task. These newresponsibilities and tasks cannot be well understoodby using only the traditional profit-maximizing opti-

mization framework that has been the core of mar-keting theory for the past four decades.The Need for an ExpandedConceptual Framework

The marketer must manage three sets of relation-ships-with customers, with suppliers, and with re-sellers. In both industrialbuyer-seller relationships andin manufacturer-reseller relationships, we are talking



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about interorganizational relationships. In the micro-economic paradigm,the units of analysis are prod-ucts, prices, firms, andtransactions. n the new worldof marketingmanagement,we must also look at peo-ple, processes, and organizations.Marketing scholars face two mandates for the1990s. The first is to develop an expanded view ofthe marketing unctionwithin the firm, one thatspe-cifically addresses the role of marketing n firms thatgo to market hroughmultiple partnerships ndthatissensitive to the multiplelevels of strategywithin theorganization.The second is to develop a base of em-piricalresearch hat broadensourunderstandingf theforces leading to the developmentof long-termcus-tomer relationships,strategicpartnershipswith ven-dors, alliancesforthecodevelopmentof technologies,and the issues involved in creating, managing, anddissolving these partnerships ver time. Whereasthehistoricalmarketingmanagementmodelhasdependedmost heavily on economics, statistics, mathematics,psychology,and socialpsychology,thebroadened iewof the marketing unctioncalls for workthatspansthedisciplines of political economy, organizationalpsy-chology, legal analysis, political science (govern-ment), and culturalanthropology.In contrast o the microeconomicparadigmanditsemphasis on prices, the political economy paradigmis better suitedto understandinghese firm-to-firm e-lationships.This is theargument irstpresentedby Jo-han Ardt in articles published in 1979, 1981, and1983. The political economy paradigm ooks at mar-keting organizations as social systems- dynamic,adapting, and internallydifferentiated.Importantdi-mensions of marketingbehavior are authorityandcontrolpatterns,distributionsof power, conflict andconflict management,andexternal and internaldeter-minants of institutionalchange (Arndt1983, p. 52).Politicaleconomyhas obviouspotential o help us un-derstandthe role of marketing n managingrelation-ships with otherorganizationsand in developingsup-portwithinthe firmforactivitiesnecessaryto respondto the changing marketplace.The political economymodel has recentlybeen appliedmost aggressively inthe studyof channelconflict (Dwyer, Schurr,andOh1987; Frazier1983), but it offers solid potential forbetterunderstanding f all types of relationshipsandalliances n marketingDay andKlein 1987). It is citedhere as evidence of the availabilityof alternativecon-ceptualizationsof the functionsof marketing o movethe field beyondits historicallynarrow ocus on trans-actions and prices based on the traditionalmicroeco-nomic paradigm.The field of organizationalbehavior also offersmany opportunitiesfor productive partnershipsformarketing cholarswho wantto addresssuch areasasnegotiation, coalitions, team-building,conflict reso-

lution, and group processes relatedto such activitiesas new productdevelopment hatarepartof managingmarketingpartnerships.At the intersectionof the or-ganizationalbehavior, economics, and strategicman-agement disciplines, there is an effort to develop aresource-basedheoryof the firm, one thatmoves be-yond traditional mphasesof the microeconomicpar-adigm. This integrativeapproachhas potentialto ad-dressthe issues of developingdistinctivecompetenceand defining the firm's position in the value chain,finding those sources of competitive advantagethatareknowledge-basedand costly to copy and there-fore the raisond'e^tref the firm(Conner1991;Grant1991). Customerknowledgeanda cultureof customerorientationare two importantexamples of such re-sources.The focus of the political economy and organi-zationalbehaviormodels seems to be more appropri-ate for a strategic view of the marketing function asdistinct from the sales or demand stimulationfunc-tion, for which the microeconomicparadigm s stillmorefitting. Whereasthe microeconomicmodel cen-ters on consumersandtransactions, he politicalecon-omy and organizationalbehavior models are moreuseful in analyzing relationshipswith industrialcus-tomers,suppliers, oint venturepartners, esellers,andotherstakeholders Anderson1982). It shouldhelp usto understandbetterthe changingrole of marketingnthe corporation.The conceptualfoundationsof mar-keting must be enriched, blending economics, polit-ical science, and organizationalbehavior as well asappropriate rameworksfrom legal analysis, sociol-ogy, anthropology,and social psychology to enhanceourunderstanding f the processesof negotiation,co-ordination,and cooperationthat define marketingre-lationships. Just as we know that most marketingtransactions ake place in the context of longer termrelationships, so we need models that focus on therelationshipsthemselves, not just on the marketex-changesthatare the subjectof the microeconomicpar-adigm.Theorydevelopmentmust be accompaniedby ag-gressive programsof empirical research for under-standingstrategicmarketingrelationshipsmore com-pletely.Programs f clinicalandsurveyresearch houldbe guided by strongtheoreticalframeworks rom al-lied social science disciplines. Top priorityshouldbegiven to analysis of the forces and factors that causefirms to move along the continuumfrom transactionsto long-termrelationshipsto strategicalliances and,perhaps,back again.Some studieshave shownmodestsuccess ratesforstrategicalliances, especially those that involve part-nersof differentnationalitiesandcultures(Bleeke andErnst 1991; Harrigan1986). Marketers n collabora-tion with scholarsin the field of culturalanthropology

TheChangingole fMarketing13


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couldproductively urn heir attention o analyzingthedifferences in values, beliefs, decision making, in-formation processing, and teamwork, among othervariables,that must be managedto achieve success intransnationalpartnerships Montgomery1991; Mont-gomery and Weiss 1991; Webster and Deshpande1990).More careful analysis is needed of the forces re-shapingthe marketing unctionat both the corporateand the SBU levels. In collaborationwith organiza-tional behaviorresearchers,marketersneedto get intocompaniesandexamine the multiplenew forms mar-keting is taking. What is the relationshipbetweenmarketingand the strategic planningfunction?Howdo marketingand purchasingwork together in de-signing and managingstrategicvendorpartnerships?What issues arise in blendingthese functions?In consumergoods marketing,research s neededto understand he factors that lead consumersto seekout and value ongoing relationshipswithbrands,man-ufacturers,and resellers of various kinds. What arethe factors that consumers find attractive n dealingwith directmarketers?How can marketers evelopandmanagethese long-termrelationships, iven the powerof databasesand interactivemarketing?What is themarketing potential inherent in such new develop-ments as the Prodigynetworkand otherextensionsofinformation echnologyinto the household?How willcustomerexpectationsabout their relationshipswithmarketersbe shapedby these new capabilities?A successfulprogramof researchwill develop andrefine models of the marketing unction, incorporat-ing concepts and propositionsfrom multiple behav-ioral and organizationalscience disciplines. The netresult will be a much richerunderstandingof thoseactivities we call marketingandhave defined as a dis-tinct field of inquiry.Marketing s morethanan eco-nomicoptimizationproblem; t is a centralcomponentof the guidance system of the firm and we need tounderstand ts functioningin much richerdetail, es-pecially withinthe complicatedstructuresof networkorganizations.

ConclusionsMarketing s responsiblefor more thanthe sale, andits responsibilitiesdifferdependingon the level of or-ganizationandstrategy.It is themanagement unctionresponsiblefor making sure that every aspect of thebusiness is focused on delivering superiorvalue tocustomers in the competitivemarketplace.The busi-ness is increasingly ikely to be a networkof strategicpartnershipsamong designers, technology providers,manufacturers,distributors,and informationspecial-ists. The business will be defined by its customers,not its productsor factories or offices. This is a crit-

ical point:in networkorganizations, t is the ongoingrelationshipwith a set of customers hatrepresentshemost importantbusinessasset. Marketingas a distinctmanagementfunction will be responsible for beingexpert on the customer and keeping the rest of thenetwork organizationinformed about the customer.At the corporateand business unit levels, marketingmay merge with strategicplanning or, more gener-ally, the strategydevelopmentfunction, with sharedresponsibilityfor informationmanagement,environ-mentalscanning, andcoordinationof the networkac-tivities.There has been a shift from a transactions o a re-lationshipfocus. Customersbecome partnersand thefirm must make long-termcommitments o maintain-ing those relationshipswith quality, service, and in-novation (Andersonand Narus 1991). Given the in-creased mportance f long-term, trategic elationshipswith both customersand vendors,organizationsmustplace increasedemphasison relationshipmanagementskills. As these skills reside in people, rather hanor-ganizationstructuresor roles or tasks, key marketingpersonnelwho have these skills will become increas-ingly valuableas businessassets(Thorelli1986). Theseskills may define the core competence of some or-ganizations as links between their vendors and cus-tomersin the value chain. Thiscommonfocus on cus-tomervalue and relationshipmanagementmay resultin much strongercoordination of the procurement,sales, andmarketing unctionsin a manneranalogousto the merchandisingunction in retailingfirms. Suchcoordinationwould be consistent with the two majortrends of eliminationof boundariesbetweenmanage-ment functionswithinorganizationsand a blurringofthe boundariesbetween the firm and its marketen-vironment. In a world of strategicpartnerships, t isnot uncommonfor a partnero be simultaneouslycus-tomer, competitor, and vendor, as well as partner.Consequently, it is difficult to keep the traditionalmanagementfunctions distinct in dealing with stra-tegic partners.Marketing an no longerbe the sole responsibilityof a few specialists.Rather,everyonein the firm mustbe chargedwith responsibilityfor understanding us-tomersand contributing o developing and deliveringvalue for them (Webster 1988). It must be part ofeveryone's job descriptionand partof the organiza-tionculture.Organization ulture,focused on the cus-tomer, will be increasinglyseen as a key strategicre-sourcedefiningthenetworkorganization'suniquenessand coordinating its several parts toward commonmission and objectives (Conner1991; Fiol 1991).Firmsthatare unableto achieve this focus on thecustomerwill eitherdisappearor become highly spe-cialized players, taking strategicdirectionfrom oth-ers, in a networkorganization.Customer focus may

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require increasingly large investments in informationand information technology, giving some advantageto firms large enough to make pre-emptive invest-ments in these areas.Impersonal, mass communications, especially me-dia advertising, are becoming less effective, whereaspersonal, targeted, special purpose communicationshave become more important. This change is reflectedin the decline of the traditional advertising business-independent advertising agencies developing ads and

placing them in broadcast and print media. In theirplace have emerged global communication compa-nies, international networks of specialists and inte-grated marketing communications mega-agenciesworking with their multinational clients on specificprojects.Distributors must be treated as strategic partners(Anderson and Narus 1990), linked to the manufac-turing firm with sophisticated telecommunications and

data-processing systems that afford seamless integra-tion of manufacturing, distribution, and marketing ac-tivities throughout the network. Consumer marketerscontinue to shift resources toward the trade and awayfrom the consumer per se, and traditional selling func-tions for the field sales organization are evolvingtoward a broader definition of responsibilities forrelationship management, assisted by interactiveinformation management capability.The implementation of market-driven strategy willrequire skills in designing, developing, managing, andcontrolling strategic alliances with partnersof all kinds,and keeping them all focused on the ever-changingcustomer in the global marketplace. The core firm willbe defined by its end-use markets and its knowledgebase, as well as its technical competence, not by itsfactories and its office buildings. Customer focus,market segmentation, targeting, and positioning, as-sisted by information technology, will be the flexiblebonds that hold the whole thing together.

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