Industrial & B2B Marketing & Value Creation in a VUCA world

Monday 3rd April 2023

Dr. Clive Gallery

• What did we learn yesterday?

• Icebreaker: Carlsberg
• CCC & Find the company
• Mini Case-Studies: Vinamilk & Vinfast
• The Procurement Perspective: IBM, The Chemical
Industry, Tesla, Ikea, Ecovadis
• Case Studies: Airbus & Inditex (Zara)
• The True Cost of Fashion & Shein
• Shipping & Logistics
• How Amazon beats Supply Chain Disruption
• Industrial Suppliers to Vinfast
Carlsberg
The Importance of
Cash
Conversion
Cycles
CASH CONVERSION CYCLES are about improving cross functional processes that lead to 3 balance sheet
positions (2 in Current Assets and one in Current Liabilities):

CURRENT ASSETS

CURRENT LIABILITIES

1.Trade Receivables from

the sales processes and
3. Trade Creditors
(Payables) emanating
2. Inventories from MINUS from the purchasing
manufacturing / processes
purchasing related
processes (Supply Chain)

CCC FORMULA
(Trade Receivables / Sales) * 365 days + (Inventories/ Sales) * 365 days
MINUS
(Trade Payables / Sales)*365 days
Calculating the L’Oréal Annual CCC from 2020 to 2022

Where do I find these figures? 2022 2021 2020

Consolidated Income Statement or P&L Sales (Euros bn) 38,261 32,288 27,992
Consolidated Balance Sheet (Euros bn) Trade receivables 4,755 4,021 3,511
Consolidated Balance Sheet (Euros bn) Inventories 4,079 3,166 2,676
Consolidated Balance Sheet (Euros bn) Trade Payables 6,346 6,068 4,764
DAYS DAYS DAYS
Trade receivables / Sales * 365 days from the customer 45 45 46
Inventories / Sales * 365 days managing our stocks 11 10 10
Trade Payables / Sales * 365 days Paying our Suppliers 61 69 62
CASH CONVERSION CYCLE -5 -13 -7
Current assets: 01 year
Non- current assets: more than 1 year
Tính CCC:
Workshop: Find the Company? (20 minutes)
Profitability Profiles Find the Company?
28th March 2023

Market Cap (bn) 1005 9,1 2009 2500 146,25 214 410,22 189,87 86,34 10,75 596,64 18,58 113,02 6,92 198,48 219,64 18,28
Sales 514 10,3 198,7 394 31,6 38,26 79,2 12,4 17,74 54,67 81,46 8,2 26,58 1,92 23,18 222,7 4,6
Perception Coefficient 2,0 0,9 10,1 6,3 4,6 5,6 5,2 15,3 4,9 0,2 7,3 2,3 4,3 3,6 8,6 1,0 4,0
Operating Margin (%) 2,38 0,1 33,51 30,2 14,2 19,5 26,6 38,24 11,53 6,3 17% 3,8 10,51 7,78 32,29 2,6 (-22,52)
CCC (-37) (-30) (-7) (-73) (-4) (-49) 177 123 115 315 (-9) 58 21 31 3 1,4 58

Market Cap 534,11 4,6 26,15 224,94 46,27 27,13 107,67 382,24 124,89 266,04 101,54 56,48 187,17 NO 42,17 343,66 53,73
Sales 116 25,9 10,2 134,56 5,1 20,53 60,1 572,8 47,8 59,28 57,8 34,67 50,62 9,2 29,3 25,05 18,19
Perception Coefficient 4,60 0,18 2,56 1,67 9,07 1,32 1,79 0,67 2,61 4,49 1,76 1,63 3,70 1,44 13,72 2,95
Operating Margin 22,7 5,15 12,17 13,94 -1,5 -0,45 17 2,8 22 31 15,7 19,75 10,82 34,2 37,85 31,44 22,5
CCC (-22) 11 67 (-35) 3 (-43) (-24) 6 131 131 (-148) (-37) 101 (-8,59) 226 7

COMPANIES AB Inbev Luckin Hermès Macy's Nike Starbucks Lego Sea Ltd Ulta Tesla Costco Amazon Coupang LVMH Sanofi Snap Novo Nordisk
Renault Costco Walmart Netflix Microsoft Apple Heineken Zalando L'Oréal Unilever Shiseido RB Estée Lauder Alibaba Merck Meta AB Inbev
Profitability Profiles Find the Company?
28th March 2023

Amazon Zalando Microsoft Apple Netflix L'Oréal LVMH Hermès E Lauder Renault Tesla Shiseido Starbucks Luckin McDo CostCo Snap
Market Cap $ (bn) 1005 9,1 2009 2500 146,25 214 410,22 189,87 86,34 10,75 596,64 18,58 113,02 6,92 198,48 219,64 18,28
Sales $ (bn) 514 10,3 198,7 394 31,6 38,26 79,2 12,4 17,74 54,67 81,46 8,2 26,58 1,92 23,18 222,7 4,6
Perception Coefficient 2,0 0,9 10,1 6,3 4,6 5,6 5,2 15,3 4,9 0,2 7,3 2,3 4,3 3,6 8,6 1,0 4,0
Operating Margin (%) 2,38 0,1 33,51 30,2 14,2 19,5 26,6 38,24 11,53 6,3 17% 3,8 10,51 7,78 32,29 2,6 (-22,52)
CCC (days) (-37) (-30) (-7) (-73) (-4) (-49) 177 123 115 315 (-9) 58 21 31 3 1,4 58
Meta Macy's Ulta Alibaba Sea Ltd Coupang Unilever Walmart Sanofi Merck AB Inbev Heineken Nike Lego Maersk N Nordisk RB
Market Cap 534,11 4,6 26,15 224,94 46,27 27,13 107,67 382,24 124,89 266,04 101,54 56,48 187,17 NO 42,17 343,66 53,73
Sales 116 25,9 10,2 134,56 5,1 20,53 60,1 572,8 47,8 59,28 57,8 34,67 50,62 9,2 29,3 25,05 18,19
Perception Coefficient 4,60 0,18 2,56 1,67 9,07 1,32 1,79 0,67 2,61 4,49 1,76 1,63 3,70 NO 1,44 13,72 2,95
Operating Margin 22,7 5,15 12,17 13,94 -1,5 -0,45 17 2,8 22 31 15,7 19,75 10,82 34,2 37,85 31,44 22,5
CCC (-22) 11 67 (-35) 3 (-43) (-24) 6 131 131 (-148) (-37) 101 NO (-8,59) 226 7

Companies AB Inbev Luckin Hermès Macy's Nike Starbucks Lego Sea Ltd Ulta Tesla Costco Amazon Coupang LVMH Sanofi Snap Novo Nordisk
Renault Costco Walmart Netflix Microsoft Apple Heineken Zalando L'Oréal Unilever Shiseido RB Estée Lauder Alibaba Merck Meta AB Inbev
Definitions of Industrial Marketing or B2B Marketing:
• Trade in products & services between companies, especially those that are used in manufacturing: in some industrial
marketing situations, suppliers work with buying organizations to solve technical problems, knowing that to do so
places them in a strong negotiating position.

• Industrial Marketing is new, ground-breaking, fresh and risky. Many of the best ideas fulfill a need no one else
knows exists. And that’s the essence of marketing – to create something new and valuable.

✓ To achieve this industrial marketers work very differently to generalist marketers. They work hard to understand the
industrial they deal with, their customers, markets, products, and service offerings. They dig deep and ask many
questions.

✓ They use proven planning processes that will help industrials launch a new product, target new markets, acquire new
customers, retain existing customers, and more. I

• Industrial marketing creates content industrial buyers crave and need to make sophisticated purchasing decisions.
Industrial buyers are looking for the information and support that can solve their problems. And the quicker
industrials can connect what they offer back to their customers’ issues the more business they will win, not to
mention long-term loyalty. Example Macy’s v Ulta.
The 4 P’s

• Product
• Price
• Promotion
• Place
The 4 C’s
• Clients
• Costs
• Communications
• Convenience
1.SALES/ Revenue Also referred to as Revenue or Turnover

2. - Cost of Goods Sold (COGS)

3. GROSS MARGIN
4. - Operating Expenses (Marketing, R&D, Sales, Distribution, Admin,
Merger & General Expenses)
5. OPERATING PROFIT Profit after COGS and Operating Expenses

6. + Financial income - interest expenses & minority interest

7. Income before Tax

8. - Taxes
9. NET INCOME or Net Income (Earnings) after Tax. Used to calculate Earnings per
EARNINGS Share.
10. - Increase or decrease in Working Capital
11. - Capital Expenditure or Operating Expenditure
12. FCF* Free Cash Flow (used in Company Valuation)
Note: Extraordinary items are added to line 6
Characteristics of Industrial Marketing
• Today, marketing has become synonymous with a business plan because of its competitive strategy and financial success.
It uses techniques that work best for each business, its customers, and its leads to get people interested in products or
services.

• In its simplest format, industrial marketing is known as B2B (business-to-business marketing) and promotes goods and
services from one business to another. Today (and especially in a Covid environment), industrial marketing is generally done
with online tactics and involves many complex components.

• Data shows that industrial buyers are typically 70% of the way through their purchase decision process before reaching
out to a supplier. That's because today's B2B buyers are mostly millennials who are digital natives and do all their online
research anonymously online first.

• Industrial marketing begins with research into these target audiences and prospects to understand how to meet their
needs, what types of content, and where.

• Manufacturing customers want to see detailed product information, your company history, where you do business, and
reviews/testimonials that endorse your company. They expect the content they're researching to be available on-demand,
optimized for any device, interactive, and highly visual.

• Does your website provide everything a prospect is looking for? If you answered yes, that's great! You're ahead of the
game. But if you're not sure, that's okay — you can only go up from here. Businesses can no longer afford to ignore the
power of digital marketing and the opportunities it provides.
Content Marketing And Videos

• The purpose of a manufacturer's website is to engage industrial buyers by providing the content and functionality
buyers demand, resulting in quality, pre-qualified leads. Ideally, it should be working as a sales tool for you and
generating leads. You may already be including a lot of informative content on your website in the form of your
product information, specifications, certifications, applications, capabilities and equipment.

• You should also include your company history, reviews/testimonials to help prospects validate your company, as
well as detailed content that potentially gives buyers a positive perception of your company. Rather than just
create a standard About Us page with all this information in text, consider diversifying your content with videos.

• Instead of just writing paragraphs of content or posting pictures of your shop floor, videos can effectively promote
your brand too — marketing doesn't have to be all about writing. Different people consume content differently so
it makes sense that video content grows revenue 49% faster than those who don’t, but it's important to keep
your online content fresh.

• If you last updated your site a year ago, think about doing it again. The Google algorithm searches for many
factors, so an updated site but it is important if you want new buyers and customers to find you online. Keeping
your website design fresh and your content new will help boost your brand and visibility.
 1. DIGITAL ADVERTISING IS ON THE RISE
Strategic marketers are making these moves because:
• Live event budgets must be reallocated; manufacturing has seen its marketing and sales disrupted as much as any sector
with the cancellation of annual trade shows and disruptions in on-sight sales calls.
• Digital ads are an important touchpoint with buyers who are spending more time working on computers at home.
• Cancellations have opened up ad inventory and reduced prices.

2. B2B DIGITAL SALES, E-COMMERCE ARE HERE TO STAY

Two-thirds of B2B decision-makers believe self-service options for customers — such as e-commerce sites — are more
important at this stage than traditional sales interactions, according to a recent survey by McKinsey & Company. As a
result, only 21% now depend on in-person selling, preferring digital modes of customer engagement.
3. CERTAIN MANUFACTURING SECTORS ARE BOOMING
Certain manufacturing sectors in our reconfigured economy already are booming as businesses pivot to respond to shifting
demand:
•Food, beverage, and tobacco companies lead the pack.
•Fabricated metal product and chemical companies are “growing strongly” according to ISM president Timothy Fiore.
•Transportation is booming as supply chains scramble to adjust and demand grows for light and heavy vehicle production
and civilian aircraft, such as regional jets.
Perhaps the most sustainable robust growth is in medical disposables (a medical device or equipment for one-time or
temporary use). The global medical disposables market is expected to grow at a compound annual growth rate (CAGR) of
16.7% from 2020 to 2027. Other growth sectors in manufacturing include packaging (think of all those cardboard boxes
and containers used in shipping and deliveries & ecommerce) and mining production.
4. MANUFACTURING CONTENT MARKETING IS MATURING
Industrial content marketing was a growth area prior to the pandemic as younger engineers and purchasing
managers were doing much of their pre-purchase research online. Nearly three-quarters of respondents in a survey
this past summer say they are conducting more than half of the buying process online before choosing to speak with
someone at a company. Prospective customers are researching and evaluating manufacturers before they ever
contact them.
There is opportunity for companies that take content marketing seriously to pull ahead, particularly in underutilized
areas that extend beyond bread-and-butter content channels such as websites/blogs, email, and social media:
•Speaking opportunities (primarily virtual at this stage).
•Media/influencer relations.
•Articles in third-party publications.

5. NEW CUSTOMERS THROUGH DIGITAL MARKETING

It found that due to the in-person limitations of COVID-19, manufacturers adjusted their approach to generating new
customers by increasing their use of:
•Webinars and virtual events 20%
•Search and social media 14%
•Website 12%
Why you still need to
“market” your
Marketing in Industrial
companies
B2B Marketing in Vietnam
Vinamilk & Vinfast
Vinfast: The next Tesla?
Negotiation for
Industrial
Marketing
Negotiation
examples…
Overview B2B Marketing, Innovation & Value Creation
B2B Marketing
• Innovation: Client and customer
technical expertise
• LT Partnerships
• Drive Top-line Growth (Offline and
Online)
• Value Proposition
• Unique Selling Proposition
• Customer Journey
• User Experience
• Inbound (Customer Search) &
Outbound Marketing (E-mail
campaigns)
• Business Category Analysis and
Market expertise / intelligence
• Planning Expertise to launch new
products, conquer new markets,
acquire new customers & retain
existing customers
• Website & SEO Optimization
• Brand expertise
• Social Media Expertise
• Business Growth levers
• Data Analysis Experts
• Positive ROI on Investments
Strategic Procurement Value Creation levers
• Innovation = Sustainable Cost-Out & Sustainable Value- • Market Cap, Operating Profit and CCC
In • Removing Unnecessary Costs
• Needs to deliver Exciting Innovation for the • Improving Cash Flows (Digitalization CCC)
client/customer…should come from Marketing • Reducing Risk (Risk Mapping)
• Functional Specification, rather than technical • Improving Visibility
specification which leads to Over-Specification • Communication to all Stakeholders
• Design to Cost • CSR, Sustainability & Reputation
• Still many Silos (Procurement has a front-row seat)
• New KPI’s, eg. Sustainability • Improving SEO
• Covid is leading to more VERTICAL Integration • Social Media Exposure
• Risk Management (main KPI) & Risk Sharing • Marketing data Analytics
• Business Category Expertise • ESG Fund Investment Strategies
• CSR & Sustainability
• Strategic Supplier Selection & Evaluation
• Global Sourcing & Negotiation
• Upstream involvement with Marketing and also R&D
• Partnership, Collaboration & Relationship building
• High-level people speaking different languages
(Marketing, Finance and R&D)
• Digitalization of processes (e-auctions, e-billing, e-
contracts, e-tenders
• CRM & Data Analytics (great Supplier Databases) but
little customer knowledge.
Main features of the B2B selling process are:
• Marketing is one-to-one in nature. It is relatively
easy for the seller to identify a prospective
customer and build a face-to-face relationship.
• Highly professional and trained people in buying
processes are involved. In many cases, two or
three decision makers must approve a purchase
plan.
• Often the buying or selling process is complex, and
includes many stages (for example, 1. request for
proposal, 2. request for tender, 3. selection
process, 4. awarding of tender, 5. contract
negotiations, and 6.signing of final contract, 7.
supplier evaluation 8. Decision to keep or not?).
• Selling activities involve long processes of
prospecting, qualifying, wooing, making
representations, preparing tenders, developing
strategies, and contract negotiations.
Competitive tendering or Call for bid
B2B marketing often involves competitive
tendering This is a process where a
purchasing organization undertakes to
procure goods and services from suitable
suppliers.
Due to the high value of some purchases (for
example buying a new computer system,
manufacturing machinery, or outsourcing a
maintenance contract) and the complexity of
such purchases, the purchasing organization
will seek to obtain a number of bids from
competing suppliers and choose the best
offering.
An entire profession (strategic procurement)
that includes tertiary training and
qualifications has been built around the
process of making important purchases.
The key requirement in any competitive tender is to ensure that:
Imagine: VINFAST in 2014: Objective: Build a world-class ELECTRIC motorbike for Vietnam and then sell to the world.
Estimated price 25 million VD.
• The business case for the purchase has been completed and approved.
• The purchasing organization's objectives for the purchase are clearly defined.
• The procurement process is agreed upon and it conforms with fiscal guidelines and organizational policies.
• The selection criteria have been established.
• A budget has been estimated and the financial resources are available.
• A buying team (or committee) has been assembled.
• A specification has been written.
• A preliminary scan of the market place has determined that enough potential suppliers are available to make the process
viable
• It has been clearly established that a competitive tendering process is the best method for meeting the objectives of
this purchasing project. If (for example) it was known that there was only one organisation capable of supplying; best to
get on with talking to them and negotiating a contract.

Because of the significant value of many purchases, issues of probity arise. Organisations seek to ensure that awarding a
contract is based on "best fit" to the agreed criteria, and not bribery, corruption, or incompetence.
The
Procurement
Perspective
What is the
difference between
Purchasing &
Procurement?
The Importance
of Data
The Chemical
Industry
COST-OUT … The 4 LEVERS

1. Multi-site Coordination

2. Reducing Over-Specification

3. Functional Spec vs. Technical Spec

4. Supplier Cost Breakdown

What is a Value A Relationship which will enable us to get:
Relationship? Sustainable Cost-Out & Sustainable Value-In
Cost-Out

Reducing and where

possible eliminating
all unnecessary
costs from the
system
Value-In

Creating, developing
and implementing the
actions which will
enable us to offer
added value to our
customers
Suppliers are a Force of Proposition
 Industrial Supplier Feedback

• We like working with XXXXX…they are fast moving and more than that, they are successful…but they could be so
much more successful if they were to work more closely and understand their suppliers
• They do not seem to be interested in trying to understand how we could optimise our production.
• XXXXX believe they are good in ‘speed to market’…we don’t think so….they have good ideas but they are weak in
the ‘execution’ of actions that follow;
• They do not have a clear process for the development of new products;
Industrial Supplier Feedback

• XXXXX have 3 priorities…price, price and price…

• XXXXX do not seem to be particularly interested in our technological improvements
• We don’t know which door to knock on if we have an idea;
• We are only being used to ‘solve problems’ not to ‘provide solutions’
• They do not seem to understand that packaging is a ‘high-tech’ business and that certain suppliers are at the leading
edge of that technology…in many cases they tell us and not ask us
Industrial Supplier Feedback

• Relationships with key suppliers are based on ‘trust and understanding’

• They do not understand our costing…they seem to think that everything is linked to cycle time…without taking into
consideration the complexity of the product…
• We could eliminate loads of excess cost…if there was a better understanding of where our costs come from…why
there is waste and obsolescence…how much a colour change costs…
• They ask us to help develop the project from drawing through to sample…then they take it elsewhere for quotes
Industrial Supplier Feedback

• How do they expect us to invest £5m on machines without commitment to volume

• There is clearly a problem of attitude…some of XXXXX’s competitors respect our technology and our constant
strive to improve…
• It is often difficult to know who’s in charge…their organisation isn’t clear…
• They are ‘unwilling’ to commit to business seems deep-routed
TESLA
IKEA: How we
work
Ecovadis &
Sustainable
Procurement
Practices
AIRBUS (EADS)
Historical development of
Procurement
INDITEX / ZARA
The True Cost of Fast
Fashion
SHEIN