International Journal of Applied Finance For Non-Financial Managers (ISSN: 1742-528X) Volume 1 Issue 2
Southampton Business School
"There's an awful lot of business leaders who don't understand business."
Sir John Egan, Chairman CBI, Radio 4 'Today', 26 November 02
In this series of articles the relationship between marketing and finance is being explored. It has been stated that true marketing is strategic in nature and lies at the very heart of the organisation in providing a range of planning tools to help the organisation meet its customers' needs and grow in competitive markets.
A marketing plan should always support the corporate plan. Marketing can help shape corporate direction by providing a series of tools and analytical models to help position the organisation in the context of its external environment in terms of competitors, stakeholder expectations and the econo-political spectrum.
The corporate plan itself should always be written in response to knowledge taken from internal sources - the organisation's core business and capabilities - and external trends in economics, market trends and customer needs.
In particular, marketing should always support the financial goals of the organisation. Sometimes, however, there is a conflict between long-term and short-term objectives. Whereas long-term objectives may be an integral aspect of planning for the next five years, short-term objectives drive operational priorities for the next year or so.
Short-term financial measures such as sales, ROI and market share are the dominant objectives in business (Aaker, 1995). Returns to shareholders are another important measure of performance. Executives can become obsessed with market share, particularly being close to a market leader, even when the organisation does not have the resources or capabilities to sustain such a position. Chasing such objectives can lead organisations to pursue radical cost-cutting and investment-depleting strategies, which improve short-term performance but damage long-term growth. Her Majesty's Treasury often pursues such policies in its management of UK plc. The Enron Effect characterises those companies that have lost sight of ethical practices in the drive for short-term profitability and capitalisation value.