our strategy race: leg 2 - from lisbon to cape town ... · pdf fileleg 2. from lisbon to cape...

Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services

© 2017 Eleonora Escalante-all rights reserved 1

Our Strategy Race:

Leg 2 - From Lisbon to Cape Town. Segmentation

Business to Business Buying Process.

Stages

“Everything goes each step at a time”.

Eleonora Escalante

Leg 2. From Lisbon to Cape Town. Segmentation Road Map

1.Why an Intra-Industry

Segmentation

Analysis?

2.Stages in Industry

Segmentation

Analysis

6.Summary and

Conclusions

THEME 2. Intra-Industry Segmentation Analysis and Business-Government Segmentation


© 2017 Eleonora Escalante-all rights reserved

3.Strategic Group

Industry Analysis

4.Industry

Competitor

Analysis

5.

Bases for Segmenting

Business and

Government Markets

2

https://support.office.com/es-ES/article/b89770f1-deb1-4a19-94ef-342aa15a4689





Business to Business Buying Process5.Bases for

Segmenting Business

and Government

Markets

Source: Kotler & Keller. Marketing Management 14th edition. Page 195.

3







Segmenting Business

and Government

Markets

1. Problem

Recognition

2. General Need

Description and

Product

Specification

3. Supplier Search

4. Suppliers

Filtering. Short

List Selection

5. Proposal

Solicitation

6. Supplier

Selection

7. Order Routine

Specification

8. Performance

Review







Segmenting Business

and Government

Markets

1. Problem Recognition

• There is a problem or a need that can be met by buying a good or service

from suppliers

• This recognition can be triggered internally or externally.

Internally: the Company is developing a new product and requires new

materials, new equipment or replacement for an obsolete machine.

Externally: For example, the buyer has found the Industrial Internet of

Things (IIoT) may help the Company to reduce costs if applied to the

systems buying of the company. Or the buyer has visited a trade show

and has new ideas from suppliers.

Source: Kotler & Keller. Marketing Management 14th edition. Page 195-201.






5.Bases for

Segmenting Business

and Government

Markets

Business to Business Buying Process

2. General Need Description and Product Specification

• Next, the buyer determines the needed item’s general characteristics and

required quantity. For standard items, this is simple. For complex items,

the buyer will work with others—engineers, IT specialists, users—to define

characteristics such as reliability, durability, or price. Business suppliers can

help by describing how their products meet or even exceed the buyer’s

needs.

• The buying organization now develops the item’s technical specifications.

• A Product value analysis (PVA) is realized. PVA is an approach to cost

reduction that studies whether components can be redesigned or

standardized or made by cheaper methods of production without

adversely impacting product performance.







5.Bases for

Segmenting Business

and Government

Markets


Continue… 2. General Need Description and

Product Specification

• Product Value Analysis (PVA) can help vendors better

understand what new product capabilities should be

added to maximize customer value and increase sales.

CIOs can use PVA to partner with vendors to develop and

demand more rigorous product benefits data.

• .IIoT opens new opportunities in the supply chain

management.







5.Bases for

Segmenting Business

and Government

Markets


3. Supplier Search

The buyer tries to identify the most appropriate suppliers through trade directories,

contacts with other companies, trade advertisements, trade shows, and the Internet.

The move to Internet purchasing has far-reaching implications for suppliers and will

change the shape of purchasing for years to come. This is where the IIoT (Industrial

Internet of Things) will have a huge impact in the future.

Online business buying offers several advantages: It shaves transaction costs for both

buyers and suppliers, reduces time between order and delivery, consolidates

purchasing systems, and forges more direct relationships between partners and

buyers. On the downside, it may help to erode supplier–buyer loyalty and create

potential security problems.

Companies that purchase over the Internet are utilizing electronic marketplaces in

several forms: Catalog Electronic Websites, e-PROCUREMENT websites - Vertical

Markets (e-hubs) or functional , Pure-Play Auction Sites, Spot or exchange markets,

Private Exchanges, Set up direct extranet links to major suppliers, Barter Markets,

Buying Alliances, Set up their own company buying sites.


8






5.Bases for

Segmenting Business

and Government

Markets


4. Suppliers Filtering. Short List Selection

The Buyer center has to filter which suppliers are able to provide the right

product (in quality and quantity).

Suppliers that lack the required production capacity or suffer from a poor

reputation will be rejected.

Those that qualify may be visited by the buyer’s agents, who will examine the

suppliers’ manufacturing facilities and meet their staff.

After evaluating each company, the buyer will end up with a short list of

qualified suppliers.







5.Bases for

Segmenting Business

and Government

Markets


5. Proposal Solicitation

The buyer next invites qualified suppliers to submit proposals. If the item is

complex or expensive, the proposal will be written and detailed. After

evaluating the proposals, the buyer will invite a few suppliers to make formal

presentations.

The buyer expect excellent presenting proposals. Written proposals should be

marketing documents that describe value and benefits in customer terms. Oral

presentations must inspire confidence and position the company’s capabilities

and resources so they stand out from the competition. Proposals and selling

are often team efforts.







5.Bases for

Segmenting Business

and Government

Markets


6. Suppliers Selection.

Before selecting a supplier, the buying center will specify and rank desired

supplier attributes, often using a supplier-evaluation model such as the one

below.

The choice of attributes and their relative importance varies with the buying

situation.

Delivery reliability, price, and supplier reputation are important for routine-

order products. Each product has different attributes to evaluate. For

procedural-problem products, such as a copying machine, the three most

important attributes are technical service, supplier flexibility, and product

reliability. For political-problem products (such as the choice of a computer

system), the most important attributes are price, supplier reputation, product

reliability, service reliability, and supplier flexibility.







5.Bases for

Segmenting Business

and Government

Markets


Continue… 6. Supplier Selection

Before selecting a supplier, the buying center will specify and rank desired supplier a

supplier-evaluation model as the following:







5.Bases for

Segmenting Business

and Government

Markets


7. Order-Routine Specification

After selecting suppliers, the buyer negotiates the final order, listing the technical

specifications, the quantity needed, the expected time of delivery, return policies, warranties,

and so on.

In the case of maintenance, repair, and operating items, buyers are moving toward blanket

contracts rather than periodic purchase orders. A blanket contract establishes a long-term

relationship in which the supplier promises to resupply the buyer as needed, at agreed-upon

prices, over a specified period of time. This system locks suppliers in tighter with the buyer

and makes it difficult for out-suppliers to break in unless the buyer becomes dissatisfied

with prices, quality, or service.

Companies that fear a shortage of key materials are willing to buy and hold large

inventories. They will sign long-term contracts with suppliers to ensure a steady flow of

materials. Some companies go further and shift the ordering responsibility to their suppliers

in systems called vendor-managed inventory (VMI). These suppliers are privy to the

customer’s inventory levels and take responsibility for replenishing automatically through

continuous replenishment programs.







5.Bases for

Segmenting Business

and Government

Markets



8. Performance Review

The buyer periodically reviews the performance of the chosen supplier(s) using

one of three methods: The buyer may contact end users and ask for their

evaluations, rate the supplier on several criteria using a weighted-score

method, or aggregate the cost of poor performance to come up with adjusted

costs of purchase, including price. The performance review may lead the buyer

to continue, modify, or end a supplier relationship.

Many companies have set up incentive systems to reward purchasing

managers for good buying performance, in much the same way sales

personnel receive bonuses for good selling performance. These systems lead

purchasing managers to increase pressure on sellers for the best terms.






5.Bases for

Segmenting Business

and Government

Markets


Top firms are comfortable using technology to improve the way they do

business with their business to-business customers.

Companies are redesigning Web sites, improving search results,

leveraging e-mails, engaging in social media, and launching Webinars

and podcasts to improve their business performance. But that is just the

beginning.

Industrial Internet of Things IIoT is more than what we have done until

today: Be ready to innovate and re-create your company before deciding

to sail with IIoT.

Read this article from the World Economic Forum:

http://www3.weforum.org/docs/WEFUSA_IndustrialInternet_Report2015.pdf


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