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Arindam Chaudhuri, Editor-in-Chief, 4Ps B&M Chief Consulting Editor's Desk
Rajita Chaudhuri
A.Sandeep Editor's Desk
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Marketing Vs. Operations: The New Cold War
Owing to The Differences in Vision tussle between Marketing and Operations teams occurs in businesses of all sizes. This must be addressed with a lot of care.
Issue Date - 11/08/2011
The global economic downturn has made it all the more important for companies to internally work together to address sales, costs and productivity priorities. In most businesses, the two largest departments – marketing and operations – show a simmering hostility towards each other that lurks behind a fragile détente. Unless management intervenes now, the pressures of the current economic downturn may turn this cold war into a very real one. At the very time when customer service quality is most important for companies desperate for every sale, internal battles and disagreements could destroy them.

The necessity
Marketing and operational departments are the backbone of any modern organisation. Whether in service or manufacturing, public or private sector, they are collectively responsible for determining what the market wants and what the organisation makes and delivers. Linking these two activities is common sense logic.

Marketing is responsible for the external analysis of customer needs, wants and desires. Operations is responsible for fulfilling them. Sharing information on what the company can actually produce and what the market actually wants is vital to best match business capability with market requirements. There is great interdependence between the departments – operations requires information on sales levels, product or service specifications and forecasts of future demands from marketing, while they in turn require information on costing, product development, new product introduction and customer servicing from operations. Failures here can be catastrophic. One of the issues facing the automotive industry is what to do with billions of dollars of stockpiled cars, produced because marketing wasn’t able to forecast actual demand and operations wasn’t able to produce to it.

The best marketing research in the world is worthless unless it is shared across the organisation. Analysis of market needs determine product specifications which, in turn, determines operational layout, facility design, location, distribution and logistics. Without knowing what the market wants, operations may end up producing outdated or poorly conceived products or services that no-one wants. The ongoing problems of Disneyland Paris can be traced back to the failure of the operational area of the business to capitalise on market research in the original park design, leading to a fundamental misunderstanding of the differences in the European versus American leisure markets. Thus, in all, linkages between marketing and operational areas are key to business success.

In practice, the adversarial and combative relationship between those in the marketing and operational areas of the business has become legendary. The way in which the departments are organised and evaluated has created an unworkable relationship – marketing is rewarded for sales growth while operations is rewarded for cost reduction. Each goal is in itself key for organisational success; but in evaluating each group separately and on only one of these aims, conflict is inevitable as each group pulls away from each other to chase the often mutually exclusive goals of sales growth or cost reduction.

Consider the scenarios: Capacity Planning and Inventory – marketing always wants stock on the shelf and will overestimate demand to ensure it’s there while operations wants to minimise inventory cost and waste so it may underestimate demand; Aggregate Capacity – marketing will accept any order to increase sales even if there is no operational capacity left to meet it; Standardisation, Customisation and Variety – marketing wants as many options or combinations as possible to serve all possible customers while operations wants standardisation for production cost control; and, New Production Introduction – marketing wants as many as possible to boost revenue while operations hates the complexity of new lines.

Cultural problems worsen the situation. Isolated in their departments, each group forms its own sub-culture, with managers and workers who have little appreciation of the requirements of other groups. Marketing people have described operations people as tedious engineers with oily hands and no awareness of the customer. In turn, operations staff have described marketing as shallow and selfish. The paranoia and mistrust marketing and operations personnel display is akin to American-Russian relations in the sixties and seventies. At one leading sportswear company, the battles had grown so fierce that the CEO relocated marketing into a different office complex, 50 miles away from the operations group!

Pulling warring departments apart may provide some relief, but improved performance can only be achieved when marketing and operations start working together. Experience has indicated several basic ways of bringing these battling groups together.
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