The Unique Nature of Industrial Marketing

Industrial Marketing
• Also called: Business-to-Business (B2B) and Organizational Marketing. • Definition: the creation and management of mutually beneficial relationships between organizational suppliers and organizational customers. • Customer can be private firm, public agency, or nonprofit organization.
2

The Marketing Concept

• Creating value for customers with goods and services that address organizational needs and objectives.

3

Marketing Concept
• Three major components: – All company activities should begin with, and be based on, the recognition of a fundamental customer need. – A customer orientation should be integrated throughout the functional areas of the firm: production, engineering, finance, R&D. – Customer satisfaction is viewed as the means to long-term profitability goals.
4

B2B Defined • The management process responsible for the facilitation of exchange between producers of goods and services and their organisational customers. • B2B marketing and purchasing is a complex and risky business involving a number of different parties.

Flows within a B2B market

Differences between B2B and consumer marketing (1 of 3)

Differences between B2B and consumer marketing (2 of 3)

Differences between B2B and consumer marketing (3 of 3)

B2B customers • Commercial enterprises - profit making organisations that produce and/or resell goods and services for a profit. Can be subdivided into users, original equipment manufacturers (OEMs), resellers. • Government bodies. • Institutions - largely non-profit making organisations, e.g. universities, churches, etc.

Characteristics of B2B markets • Nature of demand - derived, joint, inelastic. • Structure of industrial and concentration. demand geographic

• Buying process complexity. • Buyer-seller relationships.

Strategic Focus Grid
High

Follower Customer Focus Isolate
Low Low

Interact

Shaper

Technology Focus

High
12

Market Orientation
• Acquire intelligence external environment. from the

• Disseminate that intelligence throughout the organization. • Respond to the take action.
(Kohli and Jaworski Marketing)

intelligence:
1990, Journal of

13

Marketing Mission Statement
• State in terms of meeting customer needs, not in terms of products or technologies. • Marketing HBR) Myopia (Levitt 1960

14

Marketing Activities
• Identify customer needs • Research customer behavior • Divide market into manageable segments • Develop new products/services • Establish/negotiate prices • Deliver, install, service products • Ensure adequate and timely supply of products at correct place • Allocate resources across product lines • Communicate with customers • Evaluate/control marketing programs
15

Marketing Mix
• Limited number of variables under Marketing’s control to create position that is attractive to the target market segment. • Four Ps
– Product – Price – Promotion – Place (Distribution)

16

External Environment
• Characterized by:
– Degree of Stability – Complexity – Diversity – Hostility

17

External Environment
• Six Environments
– Technological – Economic – Social/Cultural (Customer) – Political/Legal – Natural/Climatic – Competitive

18

So what’s different about B2B?
• • • • Marketing Concept Marketing Mix Market Segmentation Product Life Cycle

• All apply in both B2C and B2B.

19

So what’s different about B2B?
• The technical characteristics the product are important. of

• These products directly affect the operations and economic health of the customer. • The customer is an rather than an consumer, or family. organization individual

20

Five Major Differences Between B2B and B2C

• Products/Services being marketed • Nature of demand • How the customer buys • Communication process • Economic/Financial factors
21

Products/Services
• More complex • Functional vs. Symbolic Attributes • Large unit dollar value/Large quantities • Custom/Tailored • Various Stages from raw material to finished goods. • Foundation, Entering, Facilitating Goods

22

Raw Material Extraction Material Processing Manufacturing Parts/Subassembly Assembly Distribution Wholesale/Retail Trade Final Consumers Facilitators

Firms in Production Chain

23

Nature of Demand
• Derived – needed other goods and Precision steel various products to automobiles. to produce services. tubes for be used in

• Joint/Shared – pump set needs engine /motor

24

Influences on a B2B purchasing chain

Sourcing strategies - advantages and disadvantages (1 of 2)

Source: Adapted from Treleven (1987).

Sourcing strategies - advantages and disadvantages (2 of 2)

Source: Adapted from Hahn (1986) and Ramsey and Wilson (1990). Reprinted by permission of MCB University Press Ltd.

Models of organisational buying decision making

DEALERS / DISTRIBUTORS COMMERCIAL ENTERPRISE

OEMs; End user Public sector projects

GOVERNMENT BUSINESS BUYERS

INSTITUTIONAL

Public

private

COOPERATIVE SOCIETIES

Manufacturig units Non manufacturi ng units

What do they buy?
• Materials and parts – RM, Manufactured materials, components – gets into the product directly. • Capital goods: plant and building, infrastructural needs, machinery – needed to produce other products and services. • Supplies and services: consumables, delivery services, installation and commissioning, servicing and repairs,
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Decision problems in B2B purchasing decision making process (1 of 2)

Decision problems in B2B purchasing decision making process (2 of 2)

Roles in the buying process • • • • • • Purchasing suppliers. handle relationships with

Production/operations - meeting targets for the end product in both quantity and quality terms. Engineering - the specification and design. R&D. Finance managers. devolve budgets to appropriate

Marketing - outputs of the production process.

Unit production model of buyer-seller contact in B2B markets

Source: Adapted from Johanson (1982), copyright 1982 © John Wiley & Sons Limited. Reporoduced with permission.

Mass production model of buyer-seller contact in B2B markets

Source: Adapted from Johanson (1982), copyright 1982 © John Wiley & Sons Limited. Reproduced with permission.

Buying centres - comparison between consumer and B2B markets (1 of 2)

Buying centres - comparison between consumer and B2B markets (2 of 2)

I NDUSTRI BUYER BEHVI M ODEL AL OR

I NFO.SOURCE Sal per on es s Ex bii hi tons & t ade s r hows Tr ade j nal our s W OM DI RECT M AI L

Ac i tv
38

7 R’s of MARKETING MIX.
• • • • • RESEARCH – WHAT DO THEY WANT? RATE – SPEED – MIND TO MARKET CYCLE. RESOURCES – 4 Ms.- THROUGH THE SCM. RETAILING – SHELF SPACE VS MIND SPACE. RELIABILITY – SOLUTION – PERFORMANCE – SCM – AFTER SALES SERVICES • REWARD – LOYALTY ENHANCING – BRAND LOYALTY. • RELATIONSHIP- WITHIN SCM – CRM - MENTAL RECALL RATE.

39

How Customer Buys
• Group Process • Formal • Lengthy • Loyal • Decisions based on risk and opportunity
40

Communication
• Personal selling more important than mass paid advertising • Support sales with other promotional activities: advertising in trade journals, catalogs, trade shows, direct mail, WWW. • Message focused on technical, factual, and descriptive content. • Multiple audience members.
41

Economic/Financial Factors
• Competition oligopolistic • Power/Dependency relationships • Reciprocity: Doing business with companies that do business with them. • Economic variables: interest rates, inflation, business cycle
42

Marketing Environment Audit
• Macro environment • A. Demographic :What major demographic developments and trends pose opportunities or threats to this company? • What actions has the company taken in response to these developments and trends? • B. Economic What major developments in income, prices, savings, and credit will affect the company? What actions has the company been taking in response to these developments and trends? • C. Environmental: What is the outlook for the cost and availability of natural resources and energy needed by the company? • What concerns have been expressed about the company's role in pollution and conservation, And what steps has the company taken?

• D. Technological What major changes are occurring in product and process technology? What is the company's position in these technologies? What major generic substitutes might replace this product? • E. Political What changes in laws and regulations might affect marketing strategy and tactics? What is happening in the areas of pollution control, equal employment opportunity, product safety, advertising, price control, and so forth, that affects marketing strategy? • F. Cultural What is the public's attitude toward business and toward the company's products? What changes in customer lifestyles and values might affect the company?

44

• Task Environment • A. Markets What is happening to market size, growth, geographical distribution, and profits? What are the major market segments? • B. Customers What are the customers' needs and buying processes? How do customers and prospects rate the company and its competitors on reputation, product quality, service, sales force, and price? How do different customer segments make their buying decisions? • C. Competitors Who are the major competitors? What are their objectives, strategies, strengths, weaknesses, sizes, and market shares? What trends will affect future competition and substitutes for the company's products?

• D. Distribution and Dealers What are the main trade channels for bringing products to customers? What are the efficiency levels and growth potentials of the different trade channels? • E. Suppliers What is the outlook for the availability of key resources used in production? What trends are occurring among suppliers? • F. Facilitators and Marketing Firms What is the cost and availability outlook for transportation services, warehousing facilities, and financial resources? How effective are the company's advertising agencies and marketing research firms? • G. Publics Which publics represent particular opportunities or problems for the company? What steps has the • company taken to deal effectively with each public?
46

Marketing audit : Measurement of performance

• A. Business Mission • Is the business mission clearly stated in market-oriented terms? Is it feasible? • B. Marketing Objectives and Goals • Are the corporate and marketing objectives stated in the form of clear goals to guide marketing planning and performance measurement? • Are the marketing objectives appropriate, given the company's competitive position, resources, and opportunities?

• C. Strategy • Is management able to articulate a clear marketing strategy for achieving its marketing objectives? Is the strategy convincing? Is the strategy appropriate to the stage of the product life cycle, competitors' strategies, and the state of the economy? • Is the company using the best basis for market segmentation? Does it have sound criteria for rating the segments and choosing the best ones? Has it developed accurate profiles of each target segment? • Has the company developed a sound positioning and marketing mix for each target segment? Are marketing resources allocated optimally to the major elements of the marketing mix -- i.e., product quality, service, sales force, advertising, promotion, and distribution? • Are enough resources or too many resources budgeted to accomplish the marketing objectives?

• Marketing-Organization Audit • A. Formal Structure • Does the marketing officer have adequate authority over, and responsibility for, Structure company activities that affect the customer's satisfaction? • Are the marketing activities optimally structured along functional, product, end- user, and territorial lines? • B. Functional Efficiency • Are there good communication and working relations between marketing and Efficiency sales? • Is the product management system working effectively? Are product managers able to plan profits or only sales volume? • Are there any groups in marketing that need more training, motivation, supervision, or evaluation? • C. Interface Efficiency • Are there any problems between marketing and manufacturing, R&D, purchasing, Efficiency finance, accounting, and legal that need attention.

• • •

• • • • • • • • • • • • • •

Marketing-Systems Audit A. Marketing Information System Is the marketing intelligence system producing accurate, sufficient, and timely information about marketplace developments with respect to customers, prospects, distributors and dealers, competitors, suppliers, and various publics? Are company decision makers asking for enough marketing research, and are they using the results? Is the company employing the best methods for market and sales forecasting? B. Marketing Planning System Is the marketing planning system well conceived and effective? Is sales forecasting and market potential measurement soundly carried out? Are sales quotas set on a proper basis? C. Marketing Control System Are the control procedures adequate to ensure that the annual-plan objectives are being achieved? Does management periodically analyze the profitability of products, markets, territories, and channels of distribution? Are marketing costs periodically examined? D. New-Product Development System Is the company well organized to gather, generate, and screen newproduct ideas? Does the company do adequate concept research and business analysis before investing in new ideas? Does the company carry out adequate product and market testing before launching new products?

• Marketing-Productivity Audit • A. Profitability Analysis • What is the profitability of the company's different products, markets, territories and channels of distribution? the company enter, expand, • Should contract, or withdraw from any business segments and what would be the short- and long-run profit consequences? • B. Cost Effectiveness Analysis • Do any marketing activities seem to have excessive costs? Can cost-reducing steps be taken?

• Marketing-Function Audits • A. Products • What are the product-line objectives? Are these objectives sound? Is the current product line meeting the objectives? • Should the product line be stretched or contracted upward, downward, or both ways? • Which products should be phased out? Which products should be added? • What is the buyers' knowledge and attitudes toward the company's and competitors' product quality, features, styling, brand names, etc.? What areas of product strategy need improvement?

• Price • What are the pricing objectives, policies, strategies, and procedures? To what extent are prices set on cost, demand, and competitive criteria? • Do the customers see the company's prices as being in line with the value of its offer? • What does management know about the price elasticity of demand experience curve effects, and competitors' prices and pricing policies? • To what extent are price policies compatible with the needs of distributors and dealers, suppliers, and government regulation?

• Distribution • What are the distribution objectives and strategies? there adequate market coverage and • Is service? • How effective are the following channel members distributors, dealers, manufacturers representatives, brokers, agents, etc.? • Should the company consider changing its distribution channels?

• Advertising, Sales Promotion, and Publicity are the organization's advertising • What objectives? Are they sound? • Is the right amount being spent on advertising? How is the budget determined? • Are the ad themes and copy effective? What do customers and the public think and Publicity about the advertising? • Are the advertising media well chosen? • Is the internal advertising staff adequate? • Is the sales-promotion budget adequate? Is there effective and sufficient use of salespromotion tools such as samples, coupons, displays, sales contests? • Is the publicity budget adequate? Is the public relations staff competent and creative?

• Sales-force • What are the organization's salesforce objectives? • Is the salesforce large enough to accomplish the company's objectives? • Is the salesforce organized along the proper principles of specialization (territory, market, product)? Are there enough (or too many) sales managers to guide the field sales representatives? • Does the sales-compensation level and structure provide adequate incentive and reward? • Does the salesforce show high morale, ability, and effort? • Are the procedures adequate for setting quotas and evaluating performances? • How does the company's salesforce compare to competitors salesforce?

• Different Problems: The “How” through Action Plans • Huge Problem: • Performance objectives aren’t broken down to the action plans required to execute. • What happens: We’re out of alignment. • We don’t have the available resources • We don’t have the funding • Timelines of different departments collide • Our stakeholders aren’t on board or coordinated

• The Biggest Obstacle: Alignment • What to Check out for Alignment • Do employees throughout the organization know the mission? • Are the processes clearly enough articulated? • Is everyone walking and talking in alignment? • Do we have clearly defined values and does everybody really demonstrate them? • What is the gap between what we (the Leadership Team) want and what we want them (the organization) to do? (World-class companies keep raising the bar and creating a gap.) • What are you doing now and what could you do if you got it right - if every individual were nailing it?

• More to check out for Alignment • Why can’t you execute? Because you’re not aligned. the strategy/business planning internally • Is credible? • Is it credible lower down to people charged with execution? are the dislocations? (People, timing, • What resources, technology, funding) • Is there is alignment in communication and in the messages going up and down? • Is there is execution alignment - a gap between what we’re trying to achieve ad what we’re actually achieving (both relative to plan and in terms of potential)?

• So what’s different in this Approach to Measuring • Clarity of Measures • Alignment – with the mission, the plan, the stakeholders, available resources • Drilling down from objectives to criteria and action plans – are the plans in alignment with the objectives, the resources, the time lines, customer and stakeholder needs

Continuous Learning
• Why is Continuous Learning Important? • Peter Senge’s definition “The Learning Organization” • Question for all of you: Do you have a learning organization? • Are you willing to invest in people? • Is it worth it? • If you don’t, how can you encourage your people to learn? • Concept of CANI : Continuous and Never-ending Improvement • Need to continually upgrade the quality of: • Our people • Systems • Processes • Procedures • Resources. • And if we don’t, somebody else will do it and take away our business.

People: Personal and Professional Development

Inputs, Outputs & Performance Management
Tasks

Inputs
Behaviors, Competencies, Technical Skills

Outputs
Deliverables, Performance Objectives

8

Strategic Planning Model

What is Strategic Planning?
• Process to establish priorities on what you will
accomplish in the future • Forces you to make choices on what you will do and what you will not do • Pulls the entire organization together around a single game plan for execution • Broad outline on where resources will get allocated

Why do Strategic Planning?
• If you fail to plan, then you plan to fail – be
proactive about the future • Strategic planning improves performance • Counter excessive inward and short-term thinking • Solve major issues at a macro level • Communicate to everyone what is most important

Fundamental Questions to Ask
• Where are we now? (Assessment) • Where do we need to be? (Gap / Future End State) • How will we close the gap (Strategic Plan) • How will we monitor our progress

A Good Strategic Plan should . . .
• Address critical performance issues
• Create the right balance between what the organization is capable of doing vs. what the organization would like to do • Cover a sufficient time period to close the performance gap • Visionary – convey a desired future end state • Flexible – allow and accommodate change • Guide decision making at lower levels – operational, tactical, individual

Strategic Planning Model A B C D E
Where we are Where we want to be How we will do it How are we doing

Assessmen
t

Baseline

Component
s

Down to
Specifics

Evaluate

• Environmental Scan • Background Information • Situational Analysis • SWOT – Strength’s, Weaknesses, Opportunities, Threats

• Situation – Past, Present and Future • Significant Issues • Align / Fit with Capabilities • Gaps

• Mission & Vision • Values / Guiding Principles • Major Goals • Specific Objectives

• Performance Measurement • Targets / Standards of Performance • Initiatives and Projects • Action Plans

• Performance Management • Review Progress – Balanced Scorecard • Take Corrective Actions • Feedback upstream – revise plans

Pre-Requisites to Planning
• Senior leadership commitment • Who will do what? • What will each group do? • How will we do it? • When is the best time?

Assessment

Assessment Model: S W O T
Internal Assessment: Internal Assessment: Organizational assets, Organizational assets, resources, people, culture, resources, people, culture, systems, partnerships, systems, partnerships, suppliers, ...... suppliers,

Assessme
nt

External Assessment: External Assessment: Marketplace, competitor’s, Marketplace, competitor’s, social trends, technology, social trends, technology, regulatory environment, regulatory environment, economic cycles .. economic cycles SWOT SWOT

Good Points
• • Easy to Understand Apply at any organizational level

Possible Pitfalls
• • Needs to be Analytical and Specific Be honest about your weaknesses

Strength’s
• Strength’s – Those things that you do well, the
high value or performance points • Strengths can be tangible: Loyal customers, efficient distribution channels, very high quality products, excellent financial condition • Strengths can be intangible: Good leadership, strategic insights, customer intelligence, solid reputation, high skilled workforce • Often considered “Core Competencies” – Best leverage points for growth without draining your resources

Assessme
nt

Weaknesses
• Weaknesses – Those things that prevent you from
doing what you really need to do • Since weaknesses are internal, they are within your control • Weaknesses include: Bad leadership, unskilled workforce, insufficient resources, poor product quality, slow distribution and delivery channels, outdated technologies, lack of planning, . . .

Assessme
nt

Opportunities
• Opportunities – Potential areas for growth and
higher performance • External in nature – marketplace, unhappy customers with competitor’s, better economic conditions, more open trading policies, . . • Internal opportunities should be classified as Strength’s • Timing may be important for capitalizing on opportunities

Assessme
nt

Threats
• Threats – Challenges confronting the organization,
external in nature • Threats can take a wide range – bad press coverage, shifts in consumer behavior, substitute products, new regulations, . . . • May be useful to classify or assign probabilities to threats • The more accurate you are in identifying threats, the better position you are for dealing with the “sudden ripples” of change

Assessme
nt

Baseline

Why create a baseline?
• Puts everything about the organization into a
single context for comparability and planning • Descriptive about the company as well as the overall environment • Include information about relationships – customers, suppliers, partners, . . . • Preferred format is the Organizational Profile

Baseline

B Organizational Profile 1. Operating Environment

aseline

• Products and Services – Suppliers, Delivery
Channels, Contracts, Arrangements, . . . • Organizational Culture – Barriers, Leadership, Communication, Cohesiveness . . . . • Workforce Productivity – Skill levels, diversity, contractor’s, aging workforce, . . . • Infrastructure – Systems, technology, facilities, . . • Regulatory – Product / Service Regulation, ISO Quality Standards, Safety, Environmental, . . .

B Organizational Profile 2. Business Relationships

aseline

• Organizational Structure – Business Units,
Functions, Board, Management Layers, . . . • Customer Relationships – Requirements, Satisfaction, Loyalty, Expectations, . . . • Value Chain – Relationship between everyone in the value chain . . . . • Partner Relationships – Alliances, long-term suppliers, customer partnerships, . . .

Organizational Profile B 3. Key Performance Categories
• Customer • Products and Services • Financial • Human Capital • Operational • External (Regulatory Compliance, Social Responsibility, . . . )

aseline

Gap Analysis
Baseline / Org Profile

Baseline

Challenges / SWOT

Gap = Basis for Gap = Basis for Long-Term Long-Term Strategic Plan Strategic Plan

Compone nts

Major Components of the C Strategic Plan / Down to Action
Mission Vision Goals Objectives Initiatives Measures Targets AI1 M1 M2 T1 T1 O1 AI2 M3 T1 AI3 O2 Why we exist What we want to be

ompone nts

Strategic Plan Action Plans Evaluate Progress

What we must achieve to be successful
Specific outcomes expressed in measurable terms (NOT activities) Planned Actions to Achieve Objectives Indicators and Monitors of success Desired level of performance and timelines

Mission Statement
• Captures the essence of why the organization
exists – Who we are, what we do • Explains the basic needs that you fulfill • Expresses the core values of the organization • Should be brief and to the point • Easy to understand • If possible, try to convey the unique nature of your organization and the role it plays that differentiates it from others

Compone
nts

C Examples – Good and Bad Mission Statements
NASA To Explore the Universe and Search for Life and to Inspire the Next Generation of Explorers

ompone nts

Does a good job of expressing the core values of the organization. Also conveys unique qualities about the organization.
Walt Disney

To Make People Happy

Too vague and and unclear. Need more descriptive information about what makes the organization special.

Vision

Compone
nts

• How the organization wants to be perceived in the future – what success looks like • An expression of the desired end state • Challenges everyone to reach for something significant – inspires a compelling future • Provides a long-term focus for the entire organization

Examples of Vision Descriptors nts
• • • • • • • • • • • • • • • • Adept Aggressive Agile Aligned Assertive Available Best-inclass Challenging Clear Competent Complex Compliant Conservative Coordinated Critical Direct

Compone

• • • • • • • • • • • • • • •

Equal Disciplined Effective Efficient Enduring Expanding Expert Fast Fast-paced Financially-sound Focused Growth Healthy Improving Incentivized

• • • • • • • • • • • • • • •

Informative Innovative Leading Logical Major Nimble Pioneering Protected Organized Over-Arching Quick Ready Responsive Savvy Simple

• • • • • • • • • • • • • •

Solid Solvent Stable State of the Art Strong Streamlined Sufficient Strategic Sustainable Timely Value-added Vigilant Visionary World-class

• Every organization should be guided by a set of

C Guiding Principles and Values

ompone nts

values and beliefs • Provides an underlying framework for making decisions – part of the organization’s culture • Values are often rooted in ethical themes, such as honesty, trust, integrity, respect, fairness, . . . . • Values should be applicable across the entire organization • Values may be appropriate for certain best management practices – best in terms of quality, exceptional customer service, etc.

We obey the law and do not compromise moral or ethical principles ––ever! We obey the law and do not compromise moral or ethical principles ever! We expect to be measured by what we do, as well as what we say. We expect to be measured by what we do, as well as what we say.

Examples of C Guiding Principles and Values

ompone nts

We treat everyone with respect and appreciate individual differences. We treat everyone with respect and appreciate individual differences. We carefully consider the impact of business decisions on our people and we We carefully consider the impact of business decisions on our people and we recognize exceptional contributions. recognize exceptional contributions.

We are strategically entrepreneurial in the pursuit of excellence, encouraging original thought We are strategically entrepreneurial in the pursuit of excellence, encouraging original thought and its application, and willing to take risks based on sound business judgment. and its application, and willing to take risks based on sound business judgment.

We are committed to forging public and private partnerships that combine diverse strengths, We are committed to forging public and private partnerships that combine diverse strengths, skills and resources. skills and resources.

Goals
• Describes a future end-state – desired outcome
that is supportive of the mission and vision. • Shapes the way ahead in actionable terms. • Best applied where there are clear choices about the future. • Puts strategic focus into the organization – specific ownership of the goal should be assigned to someone within the organization. • May not work well where things are changing fast – goals tend to be long-term for environments that have limited choices about the future.

Compone
nts

Developing Goals
• Cascade from the top of the Strategic Plan –
Mission, Vision, Guiding Principles. • Look at your strategic analysis – SWOT, Environmental Scan, Past Performance, Gaps . . • Limit to a critical few – such as five to eight goals. • Broad participation in the development of goals: Consensus from above – buy-in at the execution level. • Should drive higher levels of performance and close a critical performance gap.

Compone
nts

Examples of Goals
Reorganize the entire organization for better responsiveness to customers Reorganize the entire organization for better responsiveness to customers

Compone
nts

We will partner with other businesses, industry leaders, and government agencies in order to We will partner with other businesses, industry leaders, and government agencies in order to better meet the needs of stakeholders across the entire value stream. better meet the needs of stakeholders across the entire value stream. Manage our resources with fiscal responsibility and efficiency through aasingle comprehensive Manage our resources with fiscal responsibility and efficiency through single comprehensive process that is aligned to our strategic plan. process that is aligned to our strategic plan. Improve the quality and accuracy of service support information provided to our internal Improve the quality and accuracy of service support information provided to our internal customers. customers. Establish aameans by which our decision making process is market and customer focus. Establish means by which our decision making process is market and customer focus.

Maintain and enhance the physical conditions of our public facilities. Maintain and enhance the physical conditions of our public facilities.

Objectives
• • • • • • • •

Compone
nts

Relevant - directly supports the goal Compels the organization into action Specific enough so we can quantify and measure the results Simple and easy to understand Realistic and attainable Conveys responsibility and ownership Acceptable to those who must execute May need several objectives to meet a goal

Goals vs. Objectives
GOALS Very short statement, few words Broad in scope Directly relates to the Mission Statement Covers long time period (such as 10 years) OBJECTIVES Longer statement, more descriptive Narrow in scope

Compone
nts

Indirectly relates to the Mission Statement Covers short time period (such 1 year budget cycle)

Examples of Objectives
Launch at least three value stream pilot projects to kick-off our transformation to aaleaner Launch at least three value stream pilot projects to kick-off our transformation to leaner organization. organization.

Compone
nts

Develop aacustomer intelligence database system to capture and analyze patterns in purchasing Develop customer intelligence database system to capture and analyze patterns in purchasing behavior across our product line. behavior across our product line.

Centralize the procurement process for improvements in enterprise-wide purchasing power. Centralize the procurement process for improvements in enterprise-wide purchasing power.

Consolidate payable processing through aaP-Card System over the next two years. Consolidate payable processing through P-Card System over the next two years.

Monitor and address employee morale issues through an annual employee satisfaction survey Monitor and address employee morale issues through an annual employee satisfaction survey across all business functions. across all business functions.

Down to Specifics

What are Action Plans?
• • • • • The Action Plan identifies the specific steps that will be taken to achieve the initiatives and strategic objectives – where the rubber meets the road Each Initiative has a supporting Action Plan(s) attached to it Action Plans are geared toward operations, procedures, and processes They describe who does what, when it will be completed, and how the organization knows when steps are completed Like Initiatives, Action Plans require the monitoring of progress on Objectives, for which measures are needed

Down to
Specifics

Objectives Initiatives Action Plans

• Assign responsibility for the successful completion of the Action Plan. Who is responsible? What are the roles and responsibilities? • Detail all required steps to achieve the Initiative that the Action Plan is supporting. Where will the actions be taken? • Establish a time frame for the completion each steps. When will we need to take these actions? • Establish the resources required to complete the steps. How much will it take to execute these actions? • Define the specific actions (steps) that must be taken to implement the initiative. Determine the deliverables (in measurable terms) that should result from completion of individual steps. Identify in-process measures to ensure the processes used to carry out the action are working as intended. Define the expected results and milestones of the action plan. step • Provide a brief status report on each step, whether completed or not. What communication process will we follow? How well are we doing in executing our action plan? • Based on the above criteria, you should be able to clearly define your action plan. If you have several action plans, you may have to prioritize.

Characteristics of D Action Plans

own to Specifics

Action Plan Execution

Down to
Specifics

• Requires that you have answered the Who, What, How, Where, and When questions related to the project or initiative that drives strategic execution • Coordinate with lower level sections, administrative and operating personnel since they will execute the Action Plan in the form of specific work plans • Assign action responsibility and set timelines – Develop working plans and schedules that have specific action steps • Resource the project or initiative and document in the form of detail budgets (may require reallocation prior to execution) • Monitor progress against milestones and measurements • Correct and revise action plans per comparison of actual results against original action plan

Quantify from Action Level D Up in terms of Measurements
• Measure your milestones – short-term outcomes at
the Action Item level. • Measure the outcomes of your objectives. • Try to keep your measures one per objective. • May want to include lead and lag measures to depict cause-effect relationships if you are uncertain about driving (leading) the desired outcome. • Establish measures using a template to capture critical data elements

own to Specifics

Measurement Template
(Insert organization name) (Insert division name) (Insert department name) Objective Description – description of objective purpose, in sufficient detail for personnel not familiar with the objective to understand its intent. Objective descriptions are typically two or three paragraphs long. This will appear in the pop-up window when you mouse over the objective in the Balanced Scorecard System.

Down to
Specifics

Risk Frame area (Insert objective (Insert (Insert reporting objective supports owner) measurement contact info) owner) References – source documentation for objective and objective description

Comments – additional information about the objective not covered in above blocks, such as recommendations for further revision, additional organizations objective impacts, recommendations for coordination / alignment with other objectives, etc. Measure Name - The name exactly as you want it to appear in the Balanced Scorecard, including the measure number (i.e. Percent Employees Satisfied, etc.) Measure Description – description of the measure, include its intent, data source, and organization responsible for providing measure data. This will appear in the pop-up window when you mouse over the measure in the Balanced Scorecard. Measure Formula – Data Source - The formula used to source of the data – calculate measure manual, data value (if any) spreadsheet, or database name and contact familiar with the data

Measure Weight - the relative weight of the measure based on the impact it has on Measure Reporter – Person responsible the overall objective. The total weights for all measures for an objective must add to for providing measure data. Include the 100 name, organization and email. Target Maximum – Maximum expected value for the measure. Effective Date – Frequency – How often Units – Units Date the target first target data will be reported of measure becomes effective

Target – Point where the measure goes from green to amber

Integrity – Complete; useful; inclusive of several types of measure; designed to measure the most important activities of the organization Reliable: Consistent Accurate - Correct Timely – Available when needed: designed to use and report data in a usable timeframe Confidential and Secure: Free from inappropriate release or attack

Criteria for Good Measures

Down to
Specifics

Examples of Measurements Lead Indicators

Down to
Specifics

• Average time to initiate customer contact => shorter time should lead to better customer service • Average response time to incident => below average response times should lead to increased effectiveness in dealing with incident • Facilities that meet facility quality A1 rating => should lead to improved operational readiness for meeting customer needs

D Examples of Measurements Lag Indicators

own to Specifics

• Overall customer satisfaction rating => how well you are doing looking back • Business Units met budgeted service hour targets => after the fact reporting of service delivery volume • Number of category C safety accidents at construction sites => historical report of what has already taken place

Targets

Down to
Specifics

• For each measurement, you should have at least one target • Targets should stretch the organization to higher levels of performance • Incremental improvements over current performance can be used to establish your targets • Targets put focus on your strategy • When you reach your targets, you have successfully executed your strategy

Examples of Targets
Average Time to Process New Employee Setups in DB Utilization Rate for Rental Housing Units Toxic Sites meeting in-service compliance Personnel Fully Trained in Safety and Emergency Open Positions Filled after 30 day promotion period % Reduction in Orders Filled Short in 1st Cycle

Down to
Specifics

65 days Year 60 days Year 55 days Year 2007 2008 2009 90% for Year 2007 92% for Year 95% for Year 2008 2009

55% for Year 70% for Year 95% for Year 2007 2008 2009 65% by 2rd Quarter 75 positions Sept 2007 50% by Year 2008 75% by 3th Quarter 90% by 4th Quarter

100 positions 135 positions Jan 2008 July 2008 65% by Year 2009 85% by Year 2010

Sanity Check . . .

Down to
Specifics

Make sure everything is linked and connected for a tight end-to-end model for driving strategic execution.

OBJECTIVE
Improve Employee Satisfaction

MEASURE / TARGET
Measure
Percent Satisfaction

90% Employee Satisfaction Survey Rating
gap

INITIATIVE
Employee Productivity Improvement Program

45%

ACTION PLAN
Identify issues per a company wide survey

Target 90% favorable overall

Target

Actual

International Marketing
• Trade policy • Culture • Consumer buying power • Product strategies

Obstacles to Trade: Protectionism
• Differing interests of consumers and manufacturers • Benefits of trade tend to be more diffused than benefits to specific groups of protectionism

Approaches to Protectionism
• Tariffs • Quotas • “Voluntary” export restrictions • Subsidies to domestic producers/exporters • Non-tariff barriers
– legal obstacles – differential treatment

Cultural Lessons
• Diet Coke is named Light Coke in Japan--dieting was not well regarded • Red circle trademark was unpopular in Asia due to its resemblance of Japanese flag • Packaging of products is more important in some countries than in U.S. • Advertisement featuring man and dog failed in Africa--dogs were not seem as man’s best friend

More Cultural Lessons...
• Cologne ad featuring a man “attacked” by women failed in Africa • Food demonstration did well in Chinese stores but not in Korean ones--older women were insulted by being “taught” by younger representatives • Pauses in negotiations • Level of formality

Definitions
• Culture:
“That complex whole which includes knowledge, belief, art, morals, custom, and any other capabilities and habits acquired by man as a member of society.”

Alternative definition:
shared by most people in a group” [at least to some extent].

“Meanings that are

(Adapted from Peter and

Olson, 1994)

Hofstede’s Cultural Dimensions
• Individualism (vs. collectivism) • Power distance • Masculine vs. feminine • Strong vs. weak uncertainty avoidance • Short vs. long term orientation (Confucianist dynamics)
– “The Foolish Old Man Who Moved the Mountain”

Based on interviews with IBM executives throughout the World--1980s

Negotiation Content
• Non-task sounding • Task-related exchange of information • Persuasion • Concessions and agreements

Geography--Surprisingly Impactful
• U.S. and most Western European areas are highly generally accessible • Compare to areas in the developing World:
– – –

China Russia Latin America (even Mexico), Africa

• Communication vs. shipping

Climate and Topography: The Case of Latin America
• 4,500 by 3,000 miles (at widest) • 48% forests • West coast dominated by mountain ranges • 5% of land arable • Natural barriers inhibiting growth • Large proportion of residents in cities; people in rural areas often do not associate themselves with countries

Climate and Topography: The Case of Latin America
• 4,500 by 3,000 miles (at widest) • 48% forests • West coast dominated by mountain ranges • 5% of land arable • Natural barriers inhibiting growth • Large proportion of residents in cities; people in rural areas often do not associate themselves with countries

China:
• Very rapid progress on Shanghai infrastructure • Rural villages are difficult to access • Strong regional differences even within the country

Geography

Some Issues in Culture
• Time
– monochronic vs. polychronic – meanings

• Symbols
– colors – historical associations

• Personal space
– preferred distance – territoriality – interaction with/ignoring people in close proximity

• Friendship and acquaintance • Agreements • Etiquette

Eastern vs. Western Culture
• Differences in
– Values – Perceptions of
• Objects • Reality
– Stability vs. change – Control
pain mana

– Perceived roles

Perceived Control Over Reality
• World is not generally seen as predictable
– Trends are not expected to continue

• Individual has little control over the world • BUT
– Outcome is believed to be tied to effort, not individual skill

More Tendencies
• Westeners tend to rate themselves
– More unique than average and what they are – “Above average” in ability

• Easteners tend to rate themselves
– Less unique than they really are – “Below average”

Proverbs
• Western: “The early bird gets the worm” • Eastern:
– “The first bird in the flock gets shot” – “A nail that stands out will be hammered down.”

Source: Richard E. Nisbett, The Geography of Thought: How Asians and Westeners Think Differently … and Why, New York, 2003, The Free Press

Values
Issue
Distinctiveness of people Perceived control Emphasis

Western Value
Want to be distinctive Significant; values determine choices

Eastern Value
Not valued; emphasis on tie to group Modest—societal values are already established

Success and achievement; Best outcome for relevant relationships may get in the way group (e.g., family, work group) Strive to feel good; assurances wanted Equality or superior position Same rules apply to all Tied to belonging with group Clearly defined; hierarchical Depend on context and relationship

Self-esteem Relationships Rules

Some implications
• Thanking people—for things they are clearly supposed to do? • Why the need for a choice between 40 different brands of cereal?

Socialization
• Western textbook: “See Dick run. See Dick play. See Dick run and play.” • Chinese: “Big brother takes care of little brother. Big brother loves little brother. Little brother loves big brother.”

Perception of People
• Western: People have characteristics independent of the situation
– Fundamental attribution error: People attribute their own behavior to the circumstances but that of others to innate characteristics.

• Eastern: Person is connected; behavior is the result of specific roles played at the time

INTERNATIONAL BUSINESS – WHY ?

•Highly competitive business environment – competition from multi-nationals. •Business firms should increase their top lines and reduce costs to retain their bottom lines. •One of the options, which some feel is a must, is to internationalize the business operations. •Business firms should therefore develop proper strategies to globalize operations.

INTERNATIONAL MARKETING – WHY?
• INTERNATIONAL MARKETING – WHY? • Completion from MNCs in Domestic Market. • To increase Top line in order to keep steady bottom line with rising costs. • Maximize profits. • Global sourcing by multinationals has made export of components and products more lucrative. • Reduction of duty and barriers by members of the WTO has made has made global markets more attractive. • Convergence of tastes of customers globally has resulted in development of global products/services. • The growth of buying power worldwide, including developing countries. • “International Marketing: Marketing products/services across national borders by a national or multinational company”.

3 Stages of International Marketing:

• Depends on involvement of the firm • Export Marketing
– marketing across political boundaries

• Multinational Marketing
– marketing activities include other operations in more than one country.

• International Business
– where organizations focus on global competitive advantage and spread their value creation activities globally.

International Trade Environment
By many countries earlier to protect • Trade Barrier domestic Industry. Barriers by imposition of • Tariff Barriers Duties (import duty) and taxes. • India once has duty of 300% on some imported items but today reduced to 30 - 20%. • Non-Tariff Barriers Other than tariff such as: Licensing • Import Quota • Voluntary Export Restraints • Administrating protections. •

• Some of the Administrative Barriers – • Safeguards against import surges threatening domestic industry. • Health Standards as NTB. • Foreign Exchange Regulations not releasing FE for import. • Trading Blocks Line – • A S E A N • European Union, etc. • S A A R C

Market Selection:
Decide Marketing Objective Define Parameters of Market Selection Preliminary Screening

Evaluation by Metrix & Selection

Detailed study and short listing

Normal Marketing Objectives:
• Profit More profitable in International Market. • Sales Volume To increase sales volume and grow. • Competition To beat domestic competition, compete globally – even counter competition. • Government Policy Incentives for export or government policy not to allow volume exclusion of some industries.

Evaluation Attributes:
Political Economy • General: Currency • Infrastructure • Government Regulations/Bureaucracy • Tax • Can it be a market hub? • • Specific: Demand Competition/Price Sensivity • Manufacturing cost • • Government Policy/Incentives for business Cultural influence on Marketing Mix. •

Strategic International Market Entry Choices
Leveraging Internal Competency - Asset Specificity - Strategic Resource - Context Specificity Managing Uncertainty - Environmental - Behavioral

Choice of International Mode of Entry

Internalization

Collaboration

Direct Exports

Indirect Exports Contractual Agreements -Licensing - Franchising - Syndication - Turnkey Projects Equity Joint Ventures - Minority - Equal - Majority

Greenfield Investments

Acquisitions

Entry Mode Selection Tradeoffs • Risk
• Return • Control • Investment

Market Entry Strategies

Indirect Exporting
• Exporting via intermediaries in domestic market
– Via domestic clients – Export houses/ trading companies – Piggybacking – Co-operative export venture – Clients buying offices in home market

Direct Exporting
1. Exporting via intermediaries in foreign market 2. Direct selling to firms within the foreign market (e.g. large companiesindustrial goods) 3. Mail order 4. Via local sales office 5. Direct to government body

Contrasting Advertising Perspectives (Aithison 2002)
• Western
– “Atomistic”—broken down to smallest component parts – “Unique selling propositions” – “How to” – Positioning – May be “dull and boring” – “Copy focused”

• Asian
– Holistic – “Everything relates to everything else” – How things “fit together” and “relate” – Visual and oral
Jim Aitchison, How Asia Advertises, New York: Wiley, 2002.

Advertising Content Comparisons
• American:
– Individual benefit and pleasure (e.g., “Make your way through the crowd)

• Korean
– Collective values (e.g., “We have a way of bringing people together)

Debate and Conflict
• “The first person to raise his voice has lost the argument.” (Chinese proverb) • Use of indirection and projection • Face-to-face vs. anonymous comments • Western adversarial “rule of law” based on consistent universal ideals vs. solution for the case at hand in context

Relationships, Education, and Work
• Western
– – – – Standing out; being “better” Self perceived favorably Self-esteem building Work longer on successful job

• Eastern
– Harmony – Must “weed out” personal characteristics that might annoy others – Taught self-criticism – Not recognized in profession until after many years of practice – Work longer on unsuccessful job

Physical Product vs. Communication Adaptations
Communication adaptations not needed (extension) Product Some industrial adaptations not equipment; some needed electrical (extension) equipment Product Gasoline; laundry adaptations detergent needed Communication adaptations needed Bicycle; fast food; chewing gum

Greeting cards

Domestic Compass-equipped prayer rug; hand equivalent does powered washing machine not exist (product invention)

CONSUMER INCOMES AND BUYING POWER
• Measuring country wealth
– gross domestic product – “purchase parity” vs. nominal

• Government role in the economy
– Tax burden – Services provided by the Government— e.g., health care, education

Country of Origin Effects
• Perception of product
– quality (e.g., Japan, Germany) – elegance and style (e.g., France, Italy)

• Historical associations • Positioning strategies
– Emphasis on origin (e.g., French wine) – De-emphasis/obfuscation of of country of origin (e.g., French beer, American products with French language labels)

Nominal vs. Purchase Parity Adjusted GNPs—Examples (2003)

Country
Source: World Bank (http://www.worldbank.org/data/databytopic/GNIPC.pdf)

United State

The Hamburger Standard (from the Economist)
Country Local Price in US$ Buying power relative to U.S. $2.71 3.14 1.35 2.18 1.20 4.59 1.00 .75 2.00 1.24 2.26 0.59

U.S. Britain Egypt Mexico China Switzerland

Market Entry Strategies
• Exporting
– Low investment – Low control of promotion

• Joint venture
– Considerable investment – More control – Able to benefit from partner’s experience – Must work with partner

• Licensing
– Low investment – Low control of promotion, positioning, and quality – Able to benefit from existing distribution and market knowledge

• Direct investment
– – – – Large investment Risky Greater control May lack knowledge of market

Market Positioning Strategies Across Countries
• • • • Häagen-Dazs—U.S. vs. Japan Corona Beer—Mexico vs. U.S. Mercedes-Benz—Europe vs. U.S. McDonald’s
– U.S. – Europe – Developing countries—e.g., China

• Anti-trust • Foreign Corrupt Influences • Anti-boycott laws • Trading With the Enemy

U.S. Laws of Interest to firms with U.S. Involvement

The International Life Cycle“Leap frogging” •
• Market for older technology tends to exist in less developed countries
– Manufacturing of older generation technology--e.g., Pentium I computers – Resale of capital equipment— e.g., DC 8 aircraft, old three part canning machines

– Going directly from old technology to the very newest, skipping intermediate step (e.g., wireless rather than wired technology)

• Some countries tend to be more receptive to innovation than others

• Shortening of product life cycles

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