Chaotics: The Business of Managing and Marketing in the Age of Turbulence

225 Pages·2009·1.36 MB·English

by  Philip Kotler

More Praise for Chaotics from Around the World
“Turbulenceiserratic—andit’sunpredictable.Nevertheless,wemusthandleit.In
Chaotics,KotlerandCaslionedon’tjustremindustopayattentiontoearlysigns;
they give business leaders an outstanding map for how to successfully navigate a
companythroughcrises.”—FriedrichvonMetzler,Member,Partners’Committee,B.
Metzlerseel.Sohn&Co.HoldingAG
“Turbulenceandunpredictabilityaretheinevitablerealitiesof thenextfewyears.
Weareintrulyunchartedwaters,withnogoodmaps.Chaoticswillhelpyourorgan-
ization to navigate without one.This incredibly useful and helpful book provides
clearandpracticalguidancetothemanydifficultdecisionsthatmanagersandlead-
ersneedtomakeinturbulenttimes.Itislikehavingtheauthorsandtheirwisdomat
yoursidewhilehavingtoridethewhitewatersoftherapidsahead.”—PeterSchwartz,
MonitorGlobalBusinessNetwork
“[A]noperationsmanualtohelpmanagementteamsguidetheircompaniesthrough
thisglobaldisaster.Chaoticsisamustreadforthoseseekingalifelinetosavetheir
business.”—EdKaplan,ChairmanEmeritus,ZebraTechnologies
“A very timely and practical book on how to manage and market the enterprise
throughprolongedturbulence.TheChaoticsManagementSystemprovidesanexcel-
lentblueprintformakingeachmajorbusinessfunctionmoreresilient.”—JagdishN.
Sheth,Ph.D.,CharlesH.KellstadtProfessorofMarketing,GoizuetaBusinessSchool,
Emory University, Atlanta, GA; author of The Self-Destructive Habits of Good
Companies:...AndHowtoBreakThem
“Chaoticsisaboutrealeventsinrealtime.Worldauthoritiesonmarketingandstrat-
egyPhilipKotlerandJohnCaslioneaddresstheglobalfinancialcrisiswithexperience,
wisdom,andhands-onadvice.”—Dr.EvertGummesson,ProfessorofMarketing,Stock-
holmUniversitySchoolofBusiness,Sweden;author,TotalRelationshipMarketing
“Chaoticsprovidesrichfoodforthoughtinturbulenttimes.Thisbookhelpsyouto
moredeeplyunderstandthecrisis.Andonlyifyouunderstandwillyouavoidmak-
ingthefatalmistakes,whicharethegreatestdangerinatimeofcrisis.”—Hermann
Simon, Chairman, Simon-Kucher & Partners Strategy & Marketing Consultants;
author,HiddenChampionsofthe21stCentury
“Today,fewbusinessleadersreallyunderstandwhatwillchangeintheirindustries
postthe2008–2009creditcrunch.Everyindustrywillbeplayingbynewrules.Chaotics
is essential reading for those who want to be winners during these turbulent and
uncertaintimes.”—StefanBarden,ChiefExecutiveOfficer,NorthernFoodsplc,UK
“In Chaotics, Philip Kotler and John Caslione make sense of the new turbulent
world order.Chaotics provides a powerful and timely guide to the new realities.”
—StuartCrainer,editorofBusinessStrategyReview;creatoroftheThinkers50,UK
“Chaotics provides business leaders with an invaluable framework to help them
guide their enterprises wisely through the turbulence of contemporary markets.
Thedefinitivenavigationalmapforeverybusinessleadertodayandforourchaotic
future.”—Walter Giorgio Scott, Distinguished Professor, Università Cattolica del
SacroCuore,Milan,Italy
“Chaoticsprovidesanextremelyvaluableguidetohelpmanagerstransformchaosinto
orderandtakeadvantageofmarketturbulencetostrengthencompanyleadership.This
readingisamust.”—FernandoTriasdeBes,economistandwriter,ESADEBusiness
School,Barcelona,Spain;coauthor,LateralMarketing
“Withthefinancialtsunami,KotlerandCaslionekeenlyproposedasignificantnew
theme—Chaotics—to help design more management and marketing resilience in
companies aiming to steer profitably through the turbulence. This book moves
beyondstaticequilibriumeconomictheorytodynamicmanagementandmarketing
theory.”—ProfessorTaihongLu,SunYat-senUniversity;Director,ChinaMarketing
ResearchCenter;coauthor,MarketingManagement—AChinaPerspective
“TheappearanceofChaoticsisextremelyimportantatatimewhenmanyeconomists
andfinancialexpertsareguessing—withmostonlygivingbelatedexplanationsofthe
worldfinancialcrises.KotlerandCaslionehaveaclearviewofthepresenteconomic
situation,emergingtrends,andevenmorevaluable,theygivepracticaladviceonhow
businessleaderscansuccessfullynavigatethroughthenewturbulenteconomy.Chaotics
should be the reference book for every businessman in ‘The Age of Turbulence.’”
—Alexander Izhorsky, Ph.D. in economics; CEO of the Association of Marketing
Research,Russia;Editor-in-ChiefoftheinternationalmagazineMarketolog
“Abookthatshouldhavebeenwrittentenyearsagoandismuchinneedtodayhas
finallyarrived.Chaoticsoffersconcreterecommendationsinasystematicway,pro-
viding much needed hope in the midst of the current global economic crisis.”
—WaldemarPfoertsch,ChinaEuropeInternationalBusinessSchool,Shanghai,China
“Chaoticsgivesbusinessleaderscriticalinsightsandaroadmapofsystemsandtools
essential for today’s new conditions—unpredictable turbulence.The authors’evi-
denceiscompelling,theiranalysisincisive,andtheiradvicepricelessforthrivingin
the age of turbulence.”—Linden R.Brown,Chairman,MarketCulture Strategies,
Inc.,Australia
“Liketurningonabrightlightinaroomof darkness,Chaoticsilluminatestoday’s
formidablechallengesandgoesthatextrasteptoprovideaclearandpracticalframe-
workformasteringtheturbulence.Animportantandtimelycontributiontoman-
agementandmarketing.”—RandallRinger,ManagingPartner,VerseGroup,LLC
“With mastery,Kotler and Caslione describe“The New Normality of Turbulence”
and elaborate on its implications for all the functions in business. The Chaotics
ManagementSystemistimelyandwillbealastingcontributiontomanagement.”
—EduardoBraun,CorporateDirector,HSMGlobal
“Themetaphorof turbulenceinnatureis brilliantbecauseitleadsseamlesslyinto
theneedforan‘earlywarningsystem’forbusiness.Weatherforecastershavebeenat
thisalongtime,andwhilewecan’tpreventthetornado,drought,orhurricane,we
canprepareforit.Businesspeoplemustdothesame...andtheauthorshelpyoudo
that with tools and strategies.” —Joe Plummer, Columbia University and Olson
ZaltmanAssociates
Chaotics
The Business of Managing and
Marketing in The Age of Turbulence
PHILIP KOTLER
AND
JOHN A. CASLIONE
AMERICAN MANAGEMENT ASSOCIATION
NEW YORK ❚ ATLANTA ❚ BRUSSELS ❚ CHICAGO ❚ MEXICO CITY
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LibraryofCongressCataloging-in-PublicationData
Kotler,Philip.
Chaotics:thebusinessofmanagingandmarketingintheageofturbulence/Philip
KotlerandJohnA.Caslione.—1sted.
p.cm.
Includesindex.
ISBN-13:978-0-8144-1521-4
ISBN-10:0-8144-1521-0
1. Marketing.2. Management.3.Businesscycles.4.Globalization. I.Caslione,John
A.II.Title.
HF5415.K62442009
658—dc22
2009003055
©2009PhilipKotlerandJohnA.Caslione.
Allrightsreserved.
PrintedintheUnitedStatesofAmerica.
Thispublicationmaynotbereproduced,storedinaretrievalsystem,ortransmit-
tedinwholeorinpart,inanyformorbyanymeans,electronic,mechanical,pho-
tocopying, recording, or otherwise, without the prior written permission of
AMACOM,adivisionofAmericanManagementAssociation,1601Broadway,New
York,NY10019.
Printingnumber
10 9 8 7 6 5 4 3 2 1
ToallMBAstudentsandtothoseMBAstudentsfromtheKellogg
School of Management, Northwestern University, who we have
trained to deal with the “rough and tumble” world of business
where risk and uncertainty rules but can be handled with insight
andpreparedness.
PhilipKotler
To my guiding light, Donatella: my most cherished friend and
dedicated partner in all that I do in my life, whom I so proudly
call my lovely, beautiful, and tremendously gifted wife, for her
boundless patience and unwavering commitment to me, which
hasinspiredmetowritethethoughtfulchaptersofthisbook,and
to write the most inspiring and joyous chapters of my life.
JohnA.Caslione
This page intentionally left blank
C O N T E N T S
Preface ......................................................IX
Introduction..................................................1
1 THEWORLD HAS ENTEREDA NEW ECONOMIC STAGE:
FROM NORMALITYTOTURBULENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
WhatIsMarketTurbulence? .................................12
FactorsThatCanCauseChaos ...............................18
Conclusion ...............................................41
2 MANAGEMENT’SWRONG RESPONSESTOTURBULENCE
NOW BECOME DANGEROUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ResourceAllocationDecisionsThat
UndermineCoreStrategyandCulture.........................49
Across-the-BoardSpendingCutsversus
FocusedandMeasuredActions...............................51
QuickFixestoPreserveCashFlow,
PuttingKeyStakeholdersatRisk..............................54
ReducingMarketing,Brand,and
NewProductDevelopmentExpenses..........................55
DecliningSalesandPriceDiscounting.........................58
DecouplingfromCustomersby
ReducingSales-RelatedExpenses..............................60
CuttingBackonTrainingandDevelopment
ExpensesinEconomicCrises ................................61
UndervaluingSuppliersandDistributors.......................62
Conclusion................................................67
3 THE CHAOTICS MODEL: MANAGINGVULNERABILITYAND OPPORTUNITY . . 69
ConstructinganEarly-WarningSystem(EWS) .................79
ConstructionofKeyScenarios................................87
ScenarioandStrategySelection...............................96
Conclusion...............................................100
4 DESIGNING MANAGEMENT SYSTEMS FOR RESILIENCE. . . . . . . . . . . . . . 101
TheChaoticsManagementSystem...........................106
FinanceandInformationTechnology.........................110
Manufacturing/Operations .................................120
Purchasing/Procurement ...................................127
HumanResources.........................................132
Conclusion...............................................136
5 DESIGNING MARKETING SYSTEMS FOR RESILIENCE . . . . . . . . . . . . . . . 139
CommonMarketingReactionstoCrises ......................143
StrategicMarketingResponsestoCrises.......................148
OperationalIssuesFacingtheMarketingDepartment...........155
OperationalIssuesFacingtheSalesDepartment................160
Conclusion...............................................165
6 THRIVING INTHEAGE OFTURBULENCE:
ACHIEVING BUSINESS ENTERPRISE SUSTAINABILITY. . . . . . . . . . . . . . . 167
BusinessEnterpriseSustainability(BES) ......................170
Conclusion...............................................188
Notes ......................................................191
Index ......................................................201
AbouttheAuthors ...........................................207
P R E F A C E
When the U.S. financial meltdown struck in 2008, with the seeds
laid much earlier,we were asked by our clients and friends,“How
deep will it be? How long will it last?”They wanted to know if it
would be a short-run recession, a deep recession, or even a great
depression.When asked the same question in October 2008,Gary
Becker,theNobelPrize–winningeconomist,said,“Nobodyknows.
I certainly don’t know.”The message:Don’t trust economists who
saytheyknow.
The fact is that we are entering a new age of turbulence, and
moreover, heightenedturbulence.InhisbookTheAgeofTurbulence
(PenguinPress,2007),AlanGreenspandescribeshisdiverseexperi-
enceastheFederalReservechairmanandoneofthemostpowerful
menintheworld.Greenspanhadtodealwithagreatnumberofeco-
nomic disturbances and shocks for which the only recourse was to
muddlethroughandpray.Hewasconfrontedwithmajorissuesfac-
ing the United States,such as burgeoning trade deficits and retire-
mentfunding,aswellastheproperroleofgovernmentregulation.
Theworldismoreinterconnectedandinterdependentthanever
before.Globalization and technology are the two main forces that
helpedcreateanewlevelof interlockingfragilityintheworldecon-
omy. Globalization means that producers in one country are
increasinglyimportingresourcesfromothercountriesandincreas-
inglyexportingtheiroutputtoothercountries.Technology—inthe