Documente Academic
Documente Profesional
Documente Cultură
1993, 9, 105-121
How to Create
Competitive Advantage in
Project Business
The Tnarketing of projects was studied separately from the seller's
and from the buyer's points of view. The txm research approaches
were then combined and e model for intemational project marketing was developed.
First it was demonstrated how the different stages in the buying
process are related to the seller's project marketing cycle. Then,
two separate empirical studies were conducted. In the first, three
key succes factors for project business were isolated. These factors
were then combined with six major action variables identified in
the other study. The resulting model shows how the marketing of
projects overlaps all corporate functions, and if is proposed that
this model can be used for creating competitive advantage in
project business.
Introduction
Background
Project marketing is quite a new subject which still lacks its own theorefical corpus
of original concepts validated by research. It has received little attenfion in marketing research, although projects have become increasingly important, particularly as
an intemafional business ojjerafion and as a strategic choice. Project business is
essentially different from tradifional trade with goods and services, and considering it as a strategic choice therefore requires organizafional readiness and a new
managenient approach.
The big advantage of project business is that the new demands in intemational
markets do not necessarily require the development of original new products. The
ability to combine and restructure existing or expandable product and service
potential can provide firms with new opportunifies and relafive sujjeriority in
project business not only in relafively new market areas such as the oil-exporfing
and developing countries, but in industrialized countries as well.
106
Theoretical Background
Project: Clarification of a Concept
There is no universally accepted definifion of a "project", and the situafion is
further complicated by the fact that different terms are used about this type of
business. However, there is a common feeling shared by some European researchers that it does need a specific markefing approach (Bansard et al. 1990),
beyond the limited approaches of compefifive bidding models (Boughton 1987;
Allen and Cova 1989),
Of several suggested tjrpologies for differenfiafing projects from other goods and
services, the transaction/producfion typology (Vasconcellos e Sa 1988), which is
described in a matrix (Figure 1), seems appropriate.
Unit
Maas
Production
Highly
complex
Industrial
goods
f Consumer N
y services J
Highly
simple
Marketing spreading
307
"Projects" occur at the most specific and most complex point, at the other
extreme from mass marketing approaches to consumer goods (Figure 1). They
feature high transacfion complexity (sf>ecific investments, the importance of the
purchase, perceived uncertainty) and are produced in units or specific batches.
This is the latest point reached in markefing theory, in the eighfies and early
ninefies (Heap and Campbell 1990; Rudelius et al. 1990), having evolved for industrial goods in the sixfies and for services in the sevenfies, A separate marketing
theory is needed for "projects" to avoid the erroneous direct application of industrial marketing concepts, just as a consumer goods marketing approach was
applied to industrial goods two decades ago.
From this typology arises the following proposal for a definifion of a project: "a
complex transacfion covering a discrete package of products, services and other
acfions designed specifically to create capital assets that produce benefits for the
buyer over an extended period of time". This definition encompasses the marketing of both extensive and parfial projects, such as some subcontractors' deliveries.
A suitable starfing point for constructing a model for project marketing is the sixstage project cycle used by developmentzd and financial insfitufions (Baum 1982):
(1)
(2)
(3)
(4)
(5)
(6)
idenfificafion;
preparafion;
appraisal;
negofiafion;
impiementafion and supervision;
evaluafion.
The development of this cycle to suit the marketers of projects will first be
presented as it emerged in earlier research (Holsfius 1987), Then the cycle will be
elaborated from the seller's as well as from the buyer's points of view in order to
create an interacfive project cycle.
108
B, Preparation
I
1
C, Bidding
D, Negotiation
E, Implementation
F, Transition
Figure 2.
lasdng one with many phases. Negotiation is a major component of these phases.
It occurs before the setting up of the bidder's list and requests for proposals.
109
Need awareness
i
i
i
1
i
i
i
i
i
i
i
I
i
i
<
New proposals
Possible loops
Negotiation
Final assessment
Final selection
Figure 3.
Contract
Source: COVA (1989)
Between suppliers and the buyer's network.
Tbe project buying cycle.
between invitafions to bid and bids, between first bids and new bids and before
final selections.
These negotiafions permit the buyer to adapt his demands according to the
informafion he may have collected from different bidders; in the same way, he may
express his requests more specifically to the bidders. Negotiation seems to be the
necessary medium for informafion in the buying of projects because of the direct
interacfion it involves.
A Request for Interfirm Linkages. Each of the three cases included requests for indus-
110
trial or financial interfirm linkages between the buyer (or an enfity of his network)
and the supplier. These ranked from the tradifional countertrade agreement to the
setting up of technology transfer agreements, licensing and joint ventures,
A Coming-into-play of Interpersonal Relations. Each of the three cases involved a high
level of interpersonal reiafions between buyer and bidders. These reiafions play an
informafive role as informafion is transferred from the buyer (or an enfity of his
network) to the bidder in order to help him better to meet the requests, or from the
bidder (or a member of his network) to the buyer in order to make him better aware
of the seller's capadfies.
Great Importance Given to Relational Criteria. At each phase of the process, relational
criteria seemed to play an important role. Being a current or a back-up supplier, or
having local fadlifies, seemed to be as important as sound references, a good
reputafion and technical capacity at the pre-selecfion stage. For final selection, the
quality of countertrade agreements and other interfirm linkages seemed to be as
important as price or technical quality; this was obvious in one case in which the
successful bidder's price was 10% above the lowest price for the same technical
quality,
A Large Set of Choice Criteria in the Various Phases. Price is no longer the sole
criterion. Other criteria are used in the selecdon process, such as the relafional ones
mentioned above, plus warranty, reputafion, norms and standards and, of course,
quality and delivery fime. These criteria are of two types:
those used to establish the bidders' list;
those used to evaluate the proposals.
The Management of the Buying Centre Through the Combination "Buying + Engineer-
Each phase involves numerous exchanges between the buyer and the bidders in
order to match demands and offers.
In fact, the best approach is to focus on the buyer-seller transaction and on the
transaction cycle, rather than to tackle the problem from the buyer's or the seller's
Buyer's side
A - Search
Need awareness
111
C - Bidding
D-Neg otiation
i
1
Bidder's list
i
Request for proposals
i
Exchange of information
Analysis ofi proposals
i
Short-list
i
Negotiation
Specifications
New proposals
1
i
Negotiation
i
Final assessment
i
Final selection
I
Contract
E Implementation
F - Transition
112
bidding (C) and negotiafion (D), and that is the way standard products are marketed. As is known from previous research (HSkansson 1982, 1987), most industrial goods and services need an interacfive approach between buyer and seller and
therefore some of the aspects of preparafion (B), implementation (E) and transifion
(F) may also be relevant when the firm provides goods and services. Projects,
however, always have to go through the complete range of the cycle, from A to F,
The widening of the marketing scope when a firm proceeds from goods to
projects is illustrated in Figure 5, This interpretation is supported by an analysis of
A
A, Search
B, Preparation
C, Bidding
D, Negotiation
E, Implementation
rB
-E
-F
F, Transition
Goods
* Projects
Empirical Findings
The research method used throughout this study approaches the concept of project
business in two different ways and in two different geographical areas, Northem
Europe and Southem Europe, In the first empirical study, some factors are identified which further the seller's success in project business. In the second, major
acfion variables are identified when the seller's bidding behaviour is related to
phases in the project cycle.
Previous research results suggest that factors that might infiuence the internafiortalizafion process of the product range towards projects are: an adequate
113
114
Nenssary
di
EntrepreiKurial
qualities
Organization
Marketing
perwmnel
Productioii
capacity
Experience
in exports
Technology
_L
Financial
background
Intrapre neuring
Scope of
marketing
115
Factor 2
Financial arrangements
Organization
Entrepreneurial qualibes
Risk management
Intrapreneuring
Marketing personnel
Countertrade
0-853
0-000
0-742
0-000
0-000
0-777
0-000
0-633
0369
0-615
0-000
0-000
0-000
0-000
Loadings of less than -2500 were replaced by zero,
factor 3
0-000
0-000
0-000
0-000
0-000
0-788
0-766
ness. The organizafion should also have its own high-class financial expert familiar
with project financing at an intemafional level. In view of the adniinistradve
aspects of this dimension,/acfw I was called administrative effectiveness.
The variables "entrepreneurial qualifies of those who run the business" and "a
company culture that favours intrapreneuring" were factored together. The third
variable included in factor 2 was "risk management". In the vahdadon of the model
it was also pointed out by interviewees that the risk concept is closely interrelated
with entrepreneurship, Pactor 2 can be called entrepreneurial culture.
The third dimension comprises the variables "marketing personnel" and "readiness to respond to countertrade demands", Markefing personnel included all those
who parficipate in the various stages of project marketing. This concept comprised
these people's knowledge of languages and target country cultures, their internafional orientadon and intemafional contacts. As marketing personnel should
also be knowledgeable and fiexible enough to engage in negofiadon with customers about countertrade possibUifies, factor 3 was called personnel readiness.
The role of the variable "scope of markefing A-F" was also explored by calculating correlafions between the independent summary variable "orgardzadonal readiness" and project volume while keeping the variable A-F constant. The correlafion
was negadve when A-F was not developed, and highly posifive where 1 or 2
phases were added to the scope of marketing. These results confirm that project
markefing is basically different from the tradifional marketing of industrial goods
and services.
In project business, it is neither feasible nor interesfing to make clear disfincfions
between the funcfions of the firm. Indeed, funcdons overlap and success in project
business is much more linked with the totality of the firm's qualities (cf, the factors
identified) than with the performance of a specific funcfion.
116
French public sector firm SNECMA), provided the opportunity for an in-depth
analysis of three typical cases of intemafional compeddve bidding for projects.
The first case concerned the supply of landing gear for the CN 235, a commuter
aircraft developed by Casa in Spain and Nurtanio in Indonesia, The second case
was for the supply of landing gear for the ATR 42, a commuter aircraft developed
by Aeritalia in Italy and Aerospadale in France, The third case was more complex in
nature. It dealt with the supply of main landing gear for the AMX, a fighter aircraft
developed by Aeritalia and Aermecchi in Italy in assodafion with Embraer in
Brazil,
On the basis of these three case studies, six major variables and their subvariables (underlined) were identified:
"Promodon" of the firm, its technologies, its experiences with other projects;
"Reladons" with the buyer, or a member of its network, at an interorganizational level and at an interpersonal level;
"Sales force", with the intemational salesmen and the local agents;
"Corporate linkages", with the setting up of industrial and financial interfirm
agreements;
"Price" with the escalation formula and the terms of payment;
"Offer", with its tradidonal consfituents Technology/DesignlDelivery time but
also Norms/Warranties/Logistics.
These variables and sub-variables are combined with the three phases following
the emergence of a project (A): the preparafion phase B, the bidtUng phase C and
the negodadon phase D,
Table 2. A Matrix for tbe Intemational
Marketing of Projects
Phases
Variables
Preparation
Bidding
Negotiation
Pramotion
Relations
Sales force
iCL
Price
Offer
X
X
X
X
X
X
X
X
X
X
1 ]7
Conceptual Synthesis
Towards a Winning Marketing/Management Model
Combining the two studies is not an easy task, and the emerging sjnithesis should
rather be regarded as a hypothesis to be validated by further research than a
normadve model for project business success.
The focus is now on the combinadon of the three key success factors of the factor
analysis and its original seven sub-factors with the six major action variables and
their fourteen sub-variables. These are synthesized into a model for the successful
markedng and management of projects. This synthesis can be achieved through
the division of the factors and variables into sub-factors and sub-variables in order
to facilitate the discovery of probable linkages (Figure 7),
Certain linkages are evident, such as the combining of "financial corporate linkages" and "capability of exploiting special financial arrangements". Others might
appear somewhat forced, such as combining "offer" and "entrepreneurial qualides
of those who run the business", and should be further verified. However, as the
concepts entrepreneurial qualides and intrapreneuring stand for perception and
the acceptance of new ideas, there is an obvious link between the idea of entering
project business and the promotion and offering of projects,
A company is able to exploit special financial arrangements if it has a high-class
in-house expert, or group of experts, who are familiar with internadonal project
financing, and consequently can create and profjose original forms ot financial
linkages,
A prerequisite for orgardzadonal readiness for project business is co-operation
between the product-line organizadon and the project organization. The importance top management attaches to the project organizadon and the collaboration
between profit centres is also a measure of organizadonal readiness. Finally, in
order to cope with local requirements, beyond its boundaries, an organizadon
must indude agents and logistics systems in the targeted countries, and must be
ready to cope with internadonal technical norms.
Risk management can be operationalized as the number of different kinds of
project risks that are analysed, and the readiness to evcJuate risk probability and to
choose the appropriate strategies. This applies especially to the financial risks
linked with price, escalation formula, terms of payment and warrandes.
Whereas the measurement of entrepreneurial qualides concerns versatility.
118
Capability ore]q>loiting ,
special flctancial
arrangementB
Organizational
readiness for
project busineBs
Action variables
(and Bub-variablee)
Financial linkages
Risk management
Entrepreneurial
qualities
' Intrapreneuring
Price
> Escalation formula
* Terms of payment
> Warranties
Promotion
Design
Technology
L Delivery time
Readiness to respond
to counter trade
demands
Industrial linkages
Marketing
personnel
International sal^-force
Interorganizational and
interpersonal relationships
119
Personnel readincBS
Delivery time
Warranties
Technology
Design
Escalation formula
Terms of payment
Administrative
effectiveness
Figure 8. Tbe project winning triad: key success factors and marketing variables atid
sub-variables.
pates in the "project scanning system" (for the concept "Project scanning system",
see Boughton 1987, and Seiirat/Rougeaux 19W), The same is true for the implementadon of the "Reladons" variable, which affects all departments and goes
beyond the traditional boundaries of the firm.
Conclusion
Two different research approaches to defining key success elements for project
business were developed on the basis of a central concept in the marketing of
projects. This concept is the project markedng cycle with its six phases: search/
preparadon/bidding/negotiadon/implementadon/transidon. The first empirical
study made it possible to isolate three key success factors for a firm engaging in
project business: personnel readiness, administrative effectiveness and entrepreneurial culture. The second study resulted in the idendfication of six major acdon
variables for the marketing of projects: promodon, reladons, sales force, corporate
linkages, price and offer,
A conceptual combinadon of these two sets of factors resulted in a hypothetical
project-winning model. This model, like other proposidons, now needs to be
validated.
The results presented in this study highlight two major characterisdcs of project
markedng:
the buyer/seller interacdon at each of the six phases of the process;
the overlapping of all corporate funcdons in the marketing process.
120
These two characteristic features, together with the details of the phases in the
project marketing cycle, support the idea of specificity in project markedng compared vnth the tradidonal marketing of industrial goods and legidmate the creation
of the "European network on project markedng and systems selling" that groups
the researchers implicated in this field.
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