0333_998510_10_cha08.

qxd 11-4-07 04:12 PM Page 167

8 ■ Selling in international markets

Case study AB chemicals

AB Chemicals (name disguised) supplies fine chemicals in pre-pack and semi-bulk quantities
for research and industry. As part of a larger group, AB Chemicals is well positioned to reap
substantial economies of size. It can develop stable, long-term strategies required for product
and market development and for broadening its product differentiation capabilities. This
gives AB a strong starting position for winning new customers and improving its service to
existing ones.
However, the market can be described as saturated and starting to decline. Many existing
customers are moving their chemical production facilities to Asia because of less strict
government regulations. Currently, 80 per cent of the market is in the hands of one monop-
oly player, 15 per cent is held by AB and the remainder divided over a number of smaller
players.
The market is mature and the products are commodities. Price and delivery are the two main
differentiators. There is very little opportunity to add value for the customer. Most users are
experts or researchers which offers limited opportunities for any add-on service support.
Because it is a commodity product, ease of purchase is probably the single-most important
purchasing criterion. This can be translated in the ease to find the right reference to order the
product and placing the actual order. In many cases, the customer requires several products
to conduct an experiment. These customers in pharmaceuticals, chemicals, healthcare and
education will then try to order all these products from the same supplier if possible.
AB has been able to win market share thus far based on lower prices than the main competitor,
a more user-friendly catalogue and 24-hour delivery. The field sales force visit the companies
and users who received their catalogue. Because the main competitor no longer had a field
sales force, this enabled AB to develop personal relationships between users and the
company. Apparently, other things being equal, people still prefer to buy product from other
people who they know personally.
Thus several channels to market were established – a field sales force; independent distribu-
tors for regions where no field sales force was available or where they were servicing a group
of customer which were not well represented by the sales force; a call centre; an eCommerce
web site. The channels were not chosen in terms of the costs involved to serve a customer but
so that the maximum number of new orders could be obtained.
However, after early success, growth in market share has started to level off in several
regions. This raises the following questions:
1 Is expecting further growth in those market realistically possible or have they achieved
their fair share of the market?
2 How can the company bring its costs of sales in line with current sales revenue and
growth?
3 If we reduce our sales force, how will our customers react?
As one manager explained it to us, we have to shift our sales approach from hard selling and
calling on as many customers as possible to a smart selling approach where new opportunities
will be looked for within specific accounts.
Called in as a consultant to AB, what solutions would you recommend and why?

167