Operations, technology and stakeholder value
Operations, technology and stakeholder value

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Operations, technology and stakeholder value

3.5 Internal interfaces

The cross-functional interface between operations and marketing in particular has long been considered of critical importance in the delivery of customer value. Consider this definition of marketing:

Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably.

(The Chartered Institute of Marketing)

and reflect on just how pertinent this is to the operations manager. I think that any operations manager would surely wish to embrace the ‘satisfying customer requirements profitably’ part of this definition, even if the identification and anticipation aspects might sit better elsewhere (at least to some extent). Service operations and marketing have always had a close affinity, as so much marketing actually takes place during service delivery because of the intimate involvement of the customer in the process.

In spite of the evident commonality of aims, some conflict between marketing and operations functions is not unusual. For example, marketing may want to increase product diversity to satisfy customer demands while operations wants to reduce it in order to reduce the cost and complexity of production. In order to achieve balance and resolve the potential conflicts, both functions must work in concert. Marketing must not seek to sell what operations cannot deliver at a cost that allows a profit to be earned, and operations must not seek to provide products that do not give value to customers. Many publications attest to the importance of effective marketing–operations interfaces, and have shown that their effective management enhances customer-perceived value as well as overall organisational performance (Berry et al., 1999; Hausmann et al., 2002; Sawhney and Piper, 2002).

Box 2 describes the main decision-making areas where opportunities for marketing–operations integration exist.

Box 2: The marketing–operations interface

(Source: Malhotra and Sharma, 2002, p. 215)
Figure 10: Marketing operations integration framework within a firm

Figure 10 shows both strategic and tactical decisions associated with the marketing–operations interface.

Strategic planning integration

Marketing and operations strategies must be aligned. Operations systems must be designed to provide the benefits that customers want. For example, if rapid response to orders is needed then operations must organise itself accordingly. If cost leadership is the aim then investments in appropriate process technology need to be made.

Strategic forecasting

Strategic forecasting involves long-term forecasting of markets and technologies, and is required to inform the development process for new products and processes. For example, decisions on which new products to develop need to be informed by anticipation of future market needs and by appreciation of how present and future technologies can contribute to providing for those needs.

New product development

New product development involves several marketing inputs. The success of new product launches has been shown to depend on following a formal development procedure that incorporates market appraisal, market testing and so on. Cross-functional development teams have been found to be very successful in ensuring that both market and technical factors are given due consideration in the concept generation and later stages of product development. Techniques such as quality function deployment (QFD) have been explicitly designed to ensure that market/customer needs are taken into account in the product design process.

Tactical forecasting

Typically, tactical forecasting involves the forecasting of demand in order to inform the planning of operations, including the scheduling of production and of sales/marketing. For example, products such as toys and ice cream have seasonal or weather related demand patterns: production and distribution needs to be planned to suit.

Marketing/sales and operations planning

Marketing/sales and operations planning seeks to balance customer demand and supply resources. This balance may be achieved by making adjustments to pricing and promotion strategies on the one hand (discounting goods in plentiful supply, for example) or production capacity on the other (such as taking on extra staff to cope with peak demand). Clearly, for a balance to be achieved there must be a shared view of future demand and an agreed approach to address it. It would be unfortunate if, in response to the same forecast of high demand for a particular product, marketing reduced promotional activity while operations increased production capacity such that supply exceeded demand and goods were left on the shelf or services went unsold.

Operational integration

Operating-level decisions are often concerned with trade-offs – for example, making a product more easily or quickly available to a customer may increase revenue, but may also increase costs. The appropriate compromise position needs to be agreed between marketing (focused on revenue) and operations (focused on costs).

SAQ 5

Identify or suggest three ways in which the integration of marketing and operations functions can be implemented practically.

Answer

  1. Use of appropriately designed processes, e.g. the new product development process that explicitly incorporates all the necessary steps including inputs from both functions.

  2. Use of cross-functional teams.

  3. Effective communication channels between functions to allow sharing of information, e.g. ERP systems.

To achieve cross-functional integration the organisation must have appropriately designed processes that link functions together seamlessly. In practice, this may involve, for example:

  • use of formal procedures to be followed by everyone engaged in the project (as in new product/process development)

  • use of shared information systems

  • working in cross-functional teams.

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