External Relationships

Learning Outcome
After the lecture, you would appreciate the reason why it is important to have good external relationships

Stakeholder
Anyone who can affect, or be affected by the actions of the organization.

Eg.: Customers, shareholders, suppliers, employees, financial lenders and society in general.

Two categories of external stakeholders

1. Normative groups

2. Diffuse groups

Normative Groups
Provide authority for an organization to function can withhold resources and back actions Governments Regulatory bodies Trade associations Shareholders and financiers

Diffuse Groups
Take interest in the organization because theyre concerned about protecting the rights of themselves or others.

Environmentalists Public opinion leaders/respected voices in the society Campaigning journalists

Relationships with Governments

Although organizations have to contend with their own domestic governments, those selling into foreign countries often come up against levels of government intervention fat greater than they do have at home.

French minister urges steel-maker ArcelorMittal to leave country

http://www.guardian.co.uk/business/2012/nov/26/arcelormittal-france-steel-factory-closures

Nov. 26, 2012

France's industry minister has accused the world's largest steelmaker, ArcelorMittal, of "lying" and urged it to leave the country. In an extraordinary attack, Arnaud Montebourg also threatened the company with temporary nationalisation.
"We no longer want Mittal in France because they don't respect France," Montebourg said in an interview with the financial newspaper Les Echos.

In a broadside directed at Lakshmi, the Indian-born British billionaire who heads the company, he added: "Mittal's lies since 2006 are overwhelming he's never kept his word". The outburst came after ArcelorMittal announced it had postponed the relighting of a blast furnace at a plant in Dunkirk.

The French government has until Saturday, 1 December to find a buyer for the Florange furnaces and had contacted 117 steel-makers, of whom five had showed an interest. However, talks were said to have stalled because the furnaces and coke-plant Mittal has agreed to sell are not considered profitable enough without the rest of the Florange site, which supplies steel to the German car industry.

Montebourg told Les Echos: "The problem of the blast furnaces at Florange [is] not the blast furnaces in Florange, it's Mittal."

French minister threatens to expel Arcelor Mittal

http://www.bbc.co.uk/news/business-20496780 Nov. 26, 2012 Arcelor Mittal is no longer welcome in France, its minister for industrial recovery, has said, accusing the steelmaker of "lying" and "disrespecting" the country. "We no longer want Arcelor Mittal in France because they didn't respect France," Arnaud Montebourg told French business daily Les Echos.. The minister, who previously opposed the closure of a Peugeot factory, accused the company of "overwhelming lies" and said the Florange closure breaks a promise made by chief executive Lakshmi Mittal during Mittal Steel's 26.9bn-euro (21.8bn) takeover of Arcelor in 2006, which was strongly opposed by French ministers.

The problem "isn't the furnaces in Florange, it's Mittal", said Mr Montebourg.
As a result, Mr Montebourg has said he is exploring how to seize the entire Florange site should Mr Mittal refuse his demands.

"France's steel industry needs to live - there are 2,200 people on the site, 22,000 Arcelor Mittal employees in France and globally, there are 75,000 [employees involved in steel]," he told France Inter radio. "And the idea that the government, along with its sovereign wealth fund and partners like Eramet and Ascometal (mining and metallurgical groups), reflect upon a temporary state control... does not seem inappropriate. The Mittal family said they were "extremely shocked" by Mr Montebourg's attacks on the steelmaker. One person close to the group said: "These are pretty violent comments towards a group that employs 20,000 people in France."

Arcelor Mittal vows no more job cuts till June: EU

http://www.bangkokpost.com/news/world/336727/arcelormittal-vows-no-more-jobcuts-till-june-eu

Published: 20 Feb 2013 at 00.43

ArcelorMittal on Tuesday pledged to suspend closures and job cuts in Europe pending the launch of a pan-Europe plan in June to save the struggling steel industry, the European Commission said Tuesday. EU Industry Commissioner Antonio Tajani quoted a letter from the global steel giant as saying "there will be no more cuts" at its plants in Europe that employ 98,000 people until the launch of the plan.

Lobbying
Activities designed to influence governments or other authorities. A form of public relations Requires the right connections to people in high places Can involve forming partnerships with competitors or others in the same industry

Tyagis journey from consultant to lobbyist in dirty defence deals

http://www.hindustantimes.com/India-news/NewDelhi/Tyagi-s-journey-from-consultant-tolobbyist-in-dirty-defence-deals/Article1-1012393.aspx New Delhi, February 16, 2013

Almost six years before SP Tyagi came under scanner for links with alleged middlemen in the AgustaWestland VVIP helicopter deal, intelligence agencies had informed the UPA government that the former chief of air staff was lobbying on behalf of mega defence contractors.

AgustaWestland middleman was also involved in India's Mirage jet deal

http://ibnlive.in.com/news/tainted-chopper-deal-middleman-involved-in-indias-mirage-jets-deal-courtjudgement-reveals/373100-3.html

New Delhi: A new angle has now been uncovered in the AgustaWestland chopper deal. CNN-IBN has accessed French court documents which reveal that Christian Michel, the man accused of taking 60 per cent of kickbacks in the AgustaWestland 101 helicopter deal, was involved in earlier defence deals in India too. The court documents relate to a French court judgement delivered in 2002, where Michel himself admitted to being the middleman for Dassault, which makes military jets. Michel claimed he lobbied in India for Dassault for the Rs 2,500 crore Mirage fighter deal. The court judgement said that Michel was paid one lakh euros by Dassault for this deal.

Middlemen are banned in defence deals in India. Dassault's Rafale fighter was recently picked for the $10.4 billion Medium Multi-Role Combat Aircraft (MMRCA) deal under which India will buy 126 jets.

Hollande to lobby selling Rafale jets to India

http://www.presstv.ir/detail/2013/02/13/288850/hollande-to-lobby-selling-jetsto-india/
French President Francois Hollande has arrived in India where he will be lobbying hard for selling French fighter jets worth about 12 billion US dollars.

A high-level delegation of five ministers including Foreign Minister Laurent Fabius, Defense Minister Jean-Yves Le Drian and the chiefs of over 60 top French companies, is accompanying Hollande, who arrived in New Delhi on Thursday.

The two-day visit is aimed at boosting the "strategic Indo-French partnership launched 15 years ago," a French official said on Wednesday.
The Socialist president is expected to meet with Indian Premier Manmohan Singh and other ministers to discuss a $12-billion deal to deliver 126 Rafale warplanes to India.

New Delhi says the contract will not be signed during Hollande's visit as it is being fine-tuned by the Indian government. Last year, India chose Dassault Aviation's Rafale plane over the Typhoon fighter jet built by Eurofighter, which is a consortium of British group BAE Systems, Europe's EADS, and Italy's Finmeccanica. Rafale is a French twin-engine delta-wing fighter aircraft with semi-stealth capabilities.

Relationships with Lenders and Financial Bodies

Is it important from marketing perspective? Ability of these agents to affect what the organization does, what it sells, to whom it sells, for what price it sells etc. means that these relationships should be taken seriously.

Relationships with Pressure Groups and Publics

Consumer groups Environmentalists Human and animal rights activists Local communities Public opinion leaders

Corporate Social Responsibility

an organizations wider responsibilities to society in general Is this compatible with profitably satisfying consumers?

CSR: Wipro Care

Community relief

and rehabilitation in times of disasters

- Wipro Care adopted Pushpavanam village in tsunami ravaged belt of Tamil Nadu. - Worked during Orissa cyclone in 1999, Gujarat earthquake in 2001.
Education opportunities, health programs for the needy

CSR by Indian Oil Corp.

http://www.iocl.com/Aboutus/corporatesocialresponsibility.aspx

Companies Bill passed with mandate on CSR spending

http://www.financialexpress.com/news/companies-bill-passed-with-mandate-oncsr-spending/1047290 Responsibility on board members to make sure that the company spend 2% of 3 years average net profits on CSR. If not, give explanation. How will PnL get affected because of this? Double taxation on corporates? What is govt doing then? Whose money is it?

Finance Ministry to decide on tax benefits for CSR after Budget: Sachin Pilot http://economictimes.indiatimes.com/news/economy/policy/finance-ministry-todecide-on-tax-benefits-for-csr-after-budget-sachinpilot/articleshow/18449372.cms

Rahul Bajajs views

"The Companies Bill that has been passed by the Lok Sabha has many important features including those relating to independent directors, auditors. However, the most noteworthy and new feature of the Bill makes every corporate meeting certain criteria liable to spend 2 per cent of the average net profit of the last 3 years on CSR activities or explain why it has not been done so.

Such a provision probably does not exist in Companies Act of any major economy of the world. It appears that the standing committee and most Parliament members were very keen on the provision and hence the government succumbed to the pressure," Bajaj said. He said that most of corporates spend amount for CSR activities and "I can't agree that philanthropy, CSR activities and our generosity should be mandatory."

Venu Srinivasan, Chairman, TVS Motor

Venu Srinivasan, chairman of TVS Motor, also said making the CSR spend mandatory is akin to levying another tax. "The new Bill has tried to strike balance between the autonomy of the board. (On the CSR) If it is made mandatory, it becomes another tax in a sense. I am not comfortable with that position. But in a country like India, if companies don't undertake CSR activities, we will have serious issues in the long term. It is not a great deal of money (2 per cent of net profit) but on a principle basis I am not comfortable with it, even though I am not against CSR," he said.

Managing Media Relationships

Get to know the reporters on your local paper, the editor at the local TV news desk and the DJs at your local radio station.
The best way to make your PR effective is to find out what journalists want and to provide it. What makes a good news story depends very much on the publication. In the trade press, a sales story, a product launch or a new appointment will often get coverage.

Examples of Charismatic Business Leaders

Warren Buffett Berkshire Hathway Richard Branson Virgin Group

Supplier Relations

From Distribution Channel to Supply Chain

Distribution Channel

Organization

Distributor

Customer

Supply Channel

Supplier Supplier

Organization

Distributor

Customer

Upstream

Downstream

Supply Chains and Distribution Channels

Distribution channels tend to focus on the movement of the finished product only whereas supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer.. Key difference between supply chains and distribution channels is the way in which the value is created. In supply chain, the value is created primarily through the transformation of the physical product i.e. raw materials are refined; they are fabricated into the components; they are made into semi-finished products; they are assembled into finished products. In distribution channel, the only transformation of the product is in terms of its location and pack size.

External Supply Chain

Raw Materials

Components

Distributors

Fabricators

Assemblers

Internal Supply Chain

Functional silos become a lateral value chain

Receiving

Quality

Production

Despatch

Production planning and materials control

Integration

Example of Vertical Integration:

An automobile company may own a tire company, a glass company, and a metal company. Control of these three subsidiaries is intended to create a stable supply of inputs and ensure a consistent quality in their final product. It was the main business approach of Ford and other car companies in the 1920s, who sought to minimize costs by integrating the production of cars and car parts.

Maruti Suzuki vendors face heat; auto parts supplies stopped

http://articles.economictimes.indiatimes.com/2012-07-20/news/32764497_1_marutisuzuki-s-manesar-manesar-plant-dzire "Our supplies to Maruti Suzuki's Manesar plant have been stopped completely after the violence incident hit the plant," Punjab-based GNA Group Director Ranbir Singh told today. The company supplies propelling shaft assemblies and intermediate shaft assemblies for Maruti's 'Swfit' and 'Dzire' models.

The company monthly supplies auto components worth of Rs 4 crore to Maruti Suzuki. "Almost 70 per cent of our supplies to Maruti Suzuki have been affected," he said.
Asked whether the company received any indication from Maruti about when to supply fresh orders, he replied in negative. Echoing similar sentiments, another auto component maker Moonlight said its order book has also been impacted because of closure of Maruti's plant. "We supply sheet components among other auto parts to Maruti Suzuki worth Rs 30 lakh a month," said company's Director Prithivi Raj.

A Systems Integration View

Distribution channel

CAR MAKER

A. System integrator

B. System integrator

C. System integrator

D. System integrator

E. System integrator

Three Types of Trust

Type of trust Buyer perspective Supplier perspective

1. Contractual trust

Not trusted to perform the task effectively, so muct use safeguard of a contract to ensure remedies, should there be failure.
This may be based on perception of supplier-firm or experience, or experience of poor past performance or behavior of the supplier.

This might just be a oneoff order so want to keep investment (financial or otherwise), and costs to minimum.
Aim to satisfy customers most basic requirements. No point trying to delight the customer as there is no guarantee of future business.

Type of trust 2. Competence trust

Buyer perspective Trust that the supplier does have the necessary skills and expertise to perform the task Perhaps based on prior experience or interactions indicating the suppliers intent, attitude, culture, professionalism, etc.

Supplier perspective Confidence that payment terms will be adhered to Indication of potential future business opportunities.

As such can perhaps invest more in supply situation s possibly future payback.

May be based on reputation Customer behaving in or knowledge of other professional manner. (clear customers served. communication, realistic demands) May be bsed on external accreditation (eg: quality marks)

Type of trust 3. Goodwill trust

Buyer perspective Complete confidence that the supplier will meet all their requirements. These requirements may be explicit and implicit. Confidence that the supplier will do all it can to satisfy the customer in terms of both quality of product and the service. Good source of technical knowledge and innovation. Could exploit this in other areas.

Supplier perspective Knows that it is the preferred supplier a first port of call. Knows future order requirements and changes well in advance so can plan well ahead. This is good for general business and not just the relationship with that particular customer. May get valuable market or technological insights. Eg: trends and shifts in customer markets.

Networks

Knowledge
Codified Knowledge can be easily packaged and traded as a commodity thus generally available to all

Tacit Knowledge embedded within a specific individual or organization and transferable only in close, long-term collaborations

Collection of assignments

Case Supplier Relations at Dell

Thank You