BU682 Business Marketing Management

1
BU682 Business Marketing Management

• Dr. Hugh Munro

2
Session One Agenda

• Introduction Overview
• Objectives
• Deliverables
• B2B Context Implications
• Look Ahead

3
Objectives

• Understanding, Creating Delivering Value
• Similarities Differences Implications
• Managerial Perspective
• Operational Treatment
• Current Trends Practice

4
Deliverables

• Team Project (40) Case Case Analyses June
  19th
• Individual Research Paper (40) May 29th
• Classroom Contribution 20

5
Useful Sources

• Websites
• AMA www.marketingpower.com
• Business Marketing Association
  www.marketing.org
• European Marketing Academy www.emac-online.or
  g
• Industrial Marketing Purchasing Group
  www.impgroup.org
• Institute for the Study of Business Markets
  www.isbm.org

6
Sources Contd

• Journals
• Industrial Marketing Management
• Journal of Marketing
• Journal of Business-to-Business Marketing
• Journal of Purchasing Materials management
• Harvard Business Review
• Mckinsey Quarterly
• Sloan Management Review

7
Discussion Questions

• Distinguishing characteristics B2B vs B2C
• Derived demand its implications
• Complete product/service value chain
• Competition cooperation
• Commercial enterprises / Governments / Other
  organizations strategy implications
• Globalization of business markets value chain
• New technologies impact on business marketing

8
Business Markets

• Markets for goods and services
• Local and international
• Bought by businesses, governments, institutions
• For consumption, use, and resale

9
Business Market CustomerCommercial Enterprises

• Three categories
• Users
• OEMs
• Dealers and distributors

10
The Supply Chain
11
Classifying Goods for the Business Market
Source Adapted from Philip Kotler, Marketing
Management Analysis, Planning, and Control, 4th
ed. (Englewood Cliffs, N.J. Prentice-Hall,
1980), p. 172, with permission of Prentice-Hall,
Inc.
12
Government Procurement

• Defense-said to be the largest enterprise in the
  world (DOD).
• Nondefense-procurement is administered by world
  wide variety of agencies.

13
Government Contracts Programs

• Compliance- requires government contractors
  maintain affirmative action programs.
• Set-aside- a percentage of the contract is set
  aside for small minority businesses.
• Minority-subcontracting- may require major
  contractors subcontract a certain percentage of
  the contract to minority firms.

14
Two Types of Contracts

• Fixed-price contracts
• A price is agreed to before contract is awarded
  and payment is made at conclusion of work.
• Provides for the greatest profit potential.
• Poses greater risks.
• Cost-reimbursement contracts
• Reimbursement for allowable costs may be allowed
  and sometimes a number of dollars above costs as
  profit is allowed.

15
Two Procurement Strategies

• Formal Advertisingthe government solicits bids
  from suppliers, and usually the lowest bidder is
  awarded the contract.
• Negotiated Contractused to purchase products or
  services that are not differentiated on price
  alone, competition is common.

16
A Framework for Business Marketing Management
Business marketing strategy is formulated within
the boundaries established by the
corporate mission and objectives.
17
Market-Driven Organizations

• Displays a deep and enduring commitment to the
  principle that the purpose of a business is to
  attract and satisfy customers at a profit.

18
Market-Driven Organizations

• Market-Sensing
• Centered on customers.
• Take an outside-in view of strategy.
• Demonstrate an ability to sense market trends.
• Market monitoring is frequent and intensive.
• Customer-Linking
• Possess special skills for creating and managing
  close customer relationships.
• Special attention is given to the choice of
  which. customers to serve collaboratively.
• Develop
• The appropriate structural linkages.
• Information systems.
• Management processes.

19
Dimensions of Market-Driven Management
20
CUSTOMER BENEFITS
COMPANY BOUNDARIES
CONFIGURATION
VALUE NETWORK
STRATEGIC RESOURCES
CUSTOMER INTERFACE
CORE STRATEGY
Suppliers Partners Coalitions
Fulfillment Support Information
Insight Relationship Dynamics Pricing Structure
Business Mission Product/Market Scope Basis for
Differentiation
Core Competencies Strategic Assets Core Processes
EFFICIENT / UNIQUE / FIT / PROFIT BOOSTERS
21
Core StrategyThree Elements

• The business mission describes the overall
  objective of the strategy, sets a course of
  direction, and defines a set of performance
  criteria that will be used to measure progress.

• Product/market scope defines where the firm
  competes.

• Basis for differentiation captures the essence of
  how a firm competes differently than its rivals.

22
Strategic Resources

• Core competencies are the set of skills, systems,
  and technologies that creates uniquely high value
  for customers.
• Strategic assets are the more tangible
  requirements for advantage. Strategic assets are
  brands, customer data, distribution coverage,
  patents.
• Core processes are the methodologies and routines
  that companies use to transform competencies,
  assets, and other inputs into value for customers.

23
Marketing is perhaps best understood as

• The customer-produce connectionlinking the
  customer to the focal offering.
• The customer-service delivery connectionthe
  design and delivery actions involved in providing
  a firms goods and services.
• The customer-financial accountability connection.
  Activities and processes that link customers to
  financial outcomes.

24
Where have you seen this before?
25
Distinguishing Characteristics of B2B

• Derived Demand
• Fluctuating inelastic demand
• Fewer, larger buyers
• Geographic concentration of buyers suppliers
• Professional buyers
• Higher transaction value
• Multiple buying influences
• Longer decision making process
• More direct relationships with suppliers
• Others?

26
Task

• Assess the implications of these characteristics
  on business marketing practice
• Look at the Cisco story and examine how it
  reflects these characteristics.

27
Some Trends/Issues in B2B

• Purchasing sophistication
• Value Based
• Customer relationships
• Networks of relationships
• Technology embodied, enabler
• Globalization sourcing opportunities
• Industry transformation consolidation
• Others

28
Procurement Trends

• Longer term and closer relationships.
• Closer interactions among multiple functions.
• Supplier proximity considerations.

29
Purchasing Function Goals
30
Levels of Procurement Development and Pathways
to Savings/Revenue Enhancement
31
Segmenting Purchase Categories
1st Point, each firm has a unique portfolio. 2nd
Point, more attention on purchases having the
greatest impact on revenue generation or the
greatest risk to performance.
Segmenting the Buy
32
Procurement Complexity Considerations

• Technical complexity.
• Scope of supply chain coordination required.
• Degree to which life cycle costs are relevant.

33
Value Based Drilling Down to Worth

• Economic Benefits
• Demonstrate document the superiority of
  offerings
• From features advantages to benefits to
  monetary worth
• Implications?

34
Networks Relationships
35
Creating Value in a Networked WorldThe
Industrial Model Versus the Networked Model
Capital-based
Network-based

• Mass production logic
• Customer opaque/outside
• Asset/sales oriented
• Economies of scale
• Concentrated capital
• High fixed costs component
• Computing-centric
• Do-it-all-yourself
• Control by ownership

• Networked mass customization
• Customer transparent/inside
• Brand oriented
• Economies of network
• Dispersed capital across network
• Largely variable cost
• Connectivity-centric
• Networked key capabilities
• Control by shared interest

36
Business Points of View Have Shifted...

• Commodity supplier
• Build to inventory
• Customer-opaque supply chain
• Low slow innovation
• Vertically integrated - capital intense

• Customer value delivery
• Build custom to order
• Customer integration into the supply chain
• High innovation
• Intensely networked - low capital intensity

37
As Have Business Values

• Sales push orientation
• Manufacturing culture
• Copy for volume
• Cooperation but inward focus (do it ourselves)
• Grow our own talent

• Brand orientation
• Customer culture
• Innovate for margin
• Network collaboration - Value Add Community
• World talent pool

38
Technology Embodiment Enabling
39
B2B eCommerce Introduces Powerful Benefits to
Both Buyers and Sellers
Lower Cost of Doing Business
Network Scale
Improved Service Levels

• Compete globally
• Target lucrative markets
• More buyers create larger market for suppliers
• More suppliers mean more choices for buyers

• Provide better information faster
• Offer more products and services
• Shorten delivery time
• Improve ability to compare options
• Improve supplier management

• Lower product and procurement costs
• Speed time-to-market
• Streamline transactions
• Lower inventory carry
• Shorten sales cycle
• Increase pricing flexibility

40
Paradoxical Effects of Technology on Customers
41
10 Summary Observations on Technology Marketing

• Managers over estimate rate of market acceptance
• People issues likely to be more of a hurdle than
  technology
• Customers Learning - paradoxes
• Value proposition not technology merits
• Making the business case is critical to adoption
• Technology market dynamics transform business
  models
• Time to market time on market - pace of
  business
• Growth through partnerships versus integration
• Technology - Market - Organizational evolution
• Integration - Financing, strategy, technology,
  people, process

42
Globalization
43
External Drivers of Globalization
44
Framework For Global Strategy
Build on the Foundation of a Unique Competitive
Position.
Emphasize a Consistent Positioning Strategy
across International Markets.
Establish a Clear Home Base for Each Distinct
Business.
Global Strategy
Leverage Product-Line Home Bases at Different
Locations.
Disperse Activities to Extend Home Base
Advantages.
Source Adapted from Michael E. Porter,
Competing Across Locations Enhancing
Competitive Advantage through a Global Strategy,
in Michael E. Porter (ed.), On Competition
(Boston Harvard Business School Press, 1998),
pp. 309-350.
Coordinate and Integrate Dispersed Activities.
45
Extending the Firms Competitive Position

• Capturing competitive advantages in purchasing.
• Securing or improving market access.
• Selectively tapping competitive advantages at
  other locations.

46
Spectrum of Involvement in International Marketing
47

• The Value Chain Upstream and Downstream
  Activities

A firm that competes in the international market
must decide how to spread the activities among
countries. Central to this decision is the need
to distinguish upstream from downstream
activities.
Developed by Cool Pictures and MultiMedia
Presentations
48
Canadian Industry Punching Out Stronger Dollar
and Low-cost Alternatives are sending Jobs
Offshore GM Jan23, 2004

• Nortel 1500 jobs
• Levis Strauss Company 1200 jobs
• Bauer Nike Hockey 321 jobs
• Camco (refrigerators stoves) 800 jobs
• Roots 200 jobs
• Swift Denim 600 jobs
• International - Multi-foods 135 jobs
• Canam Manac (truck trailers) 245 jobs

49
(No Transcript)
50
(No Transcript)
51
Offshorings Value to India

• Benefit per 1 of U.S. off-shore Spending in 2002
• Offshoring Sector Labour 0.10
• Profits 0.10
• Local Suppliers 0.09
• Government Taxes Central 0.03
• State 0.01
• Net Benefit 0.33

52
(No Transcript)
53
Coincident Cumulative Trends
2000
1990
1980
1970
Communications and Computing
MainframeGlasshouse
PC
Ubiquitous, instant, low cost communication
Globalisation
30x increase in world trade
Other 4/5ths of population joins the world economy
Release of Regulation
The questioning?
Triumph of private enterprise
Management Ideas
Single Fads Packaged
Solutions Process/Technology
Integration
Networked Enterprise
54
To what extent do the Cisco initiatives reflect
these trends?
55
A Look Ahead