chapter 2 - industrial

7/30/2019 Chapter 2 - Industrial

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Prepared:

n

geline B. Reyes, MAEProfessor


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Lesson Objectives

1. Describe the effectiveness of price coordinating businesstransactions to create value.2. Explain how value is determined in exchange.3. Identify conditions that impair the performance of pure markets to

coordinate business exchange.

4. Summarize the range of buyer and seller motivations to develop andmaintain an exchange relationship.

5. Describe a relationship development process for parties able togradually deepen their interdependence.

6. Identify three complimentary mechanisms for coordinating businesstransactions.

7. Describe the network of participants in the value chain.8. Illustrate the marketing efforts one firm might take with each

member of the network.


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Copyright 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Chapter Two

The Character of Business Marketing


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Supply chain

Proactively planning and coordinating theflow of products, services and informationamong connected firms focusing oncreating and delivering value to end users.

Involves information sharing, joint planningand coordination to improve business

performance by eliminating waste,innovating, improving quality and

providing flexibility.


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Relationship Management

Buyer interest in maintaining a high performance relationship often has itscounterpart on the supply side;

Supplier may be attracted by the promise of recurring purchases due to their volume andrelative certainty;

Supplier has some concerns also: set-up,administrative costs, long run pay-offs andvulnerability.


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Does it make sense to assign a team to prepare a bid?

How much managerial attention will this customer require?

Will the company need to dedicate personnel or production systems to this account?

Can the company work with the other firms

people? How much training is involved? What is the long-run promise of this particular

account?


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Transactional Exchange Or Spot Exchange

Money traded for easily measured Ex. General Mills buying wheat and other

grains on commodities markets, a restaurant buyer at a cash-and-carry produce market, etc.

Communication content is quite narrow Identity is hardly relevant Trading terms are simple and clear; Performance is practically immediate.


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Joint Interest in a Relationship

Strategic partnership results when both parties have keen interests in maintainingan ongoing exchange.

> rests on the significance of theresources and long-run consequences of theefforts.


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Key Managerial Implications of Relationship

Buyer participation in the vendors production setup and quality control processes eliminates the costly process of coping with defective inputs (rework,reorder and scrap)

Reducing the number of suppliers reducesnumber of competitive bidders therebydampens the power of marketplace to affect

prices.


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OEM buyers worked with suppliers of component parts and materials to eliminatecostly inventories and frequent handling

costs by establishing JIT. Just-in-time (JIT Relationship) requires

supplier to produce and deliver to the OEM

the necessary quantities at the necessarytime with the objective that products

produced by the supplier conform to performance specification every time.


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BUSINESS TO BUSINESS: WHAT DETERMINESA SUCCESSFUL RELATIONSHIP?

THE SELLERS MOTIVATION

TO RELATE

THE BUYERS MOTIVATION

TO RELATE

IF THEY ARENT EQUALLYMOTIVATED IT WONT BEAN EQUAL RELATIONSHIP

MOTIVATIONMOTIVATION


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BUYE

RSMOTIV

ATION

TO RELATE

BUSINESS TO BUSINESS:THE TYPES OF RELATIONSHIPS

SELLERS MOTIVATION TO RELATE

HIGH

BUYERSADVANTAGE

STRATEGICPARTNERSHIPS

LOW HIGHTRANSACTIONALRELATIONSHIPS

SELLERSADVANTAGE

LOW


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GOING FOR HIGH PERFORMANCERELATIONSHIPS

DEVELOP

A

COMMONGROUND

BUYERS

Want:

Reliable deliverywithoutinterruptions

Reliable productsReliable productswith low rejectionwith low rejectionand defect ratesand defect rates

Efficient leadEfficient leadtimestimes

SELLERS

Want to:

Sell LargeVolumes

Sell similar amounts over time

Manage their Manage their selling andselling andsupportsupportexpensesexpenses


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REQUIREMENTS FOR HIGHPERFORMANCE RELATIONSHIPS

BEYOND THE FINANCIAL CONSIDERATIONS:

INTEGRITY

FAIRNESS

LOYALTY

FLEXIBILITY

INPUT INTO YOUR PARTNERS STRATEGY

PARTNERS INPUT INTO YOUR STRATEGY

COMPLIANCE WITH PROCEDURES ANDAGREEMENT

HONOR COMMITMENTS

STAND BEHIND YOUR PRODUCTS


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TWO CHOICES FOR STAYINGIN A BUSINESS RELATIONSHIP

YOU WANT TO The rewards are financial, strategic

or psychological

YOU HAVE TO The cost to exit is too high or there

are no alternatives


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SUGGESTIONS FOR MAKING B2BRELATIONSHIPS LAST

Make on-site visits to your partner Trade personnel and offices

Manage total dependence with an

alternate supplier Make the pledge of continuous

service

Develop a relational contract Provide ownership by bringing

functions or technology within boundaries of partners firm


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Sellers motivation to relate

High

Low

Buyersmotivation

to relate

HighLow

Sellersmarket

Seller-maintained

relation

Jointrelationshipmaintenance

Buyer-maintainedrelation

Buyers

Market

Discreteexchange

(spot contracts)Noexchange

chapter 2 - industrial

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