Chapter01 110910013444 Phpapp01

Business Market Management
3rd edition
Chapter 1
Guiding Principles
Section I: Introduction and Overview

Copyright 2009 Pearson Education Publishing as Prentice Hall Business Market Management, 3rd edition Chapter 1-2
Chapter 1: Guiding Principles

Overview
I. Values as the Cornerstone of Business Market Management
II.
III. IV. V.
Managing Business Market Processes

Doing Business Across Borders Working Relationships and Business Networks Summary
Business Market Management, 3rd edition Chapter 1-3
Copyright 2009 Pearson Education Publishing as Prentice Hall
Business Market Processes

Managing Market Offerings Marketing Sensing New Offering Realization Business Channel Management Gaining New Business Understanding Value Sustaining Reseller Partnerships
Understanding Firms as Customers Crafting Market Strategy
Creating Value
Delivering Value
Guiding Principles Regard Value as the Cornerstone Focus on Business Market Processes Stress Doing Business Across Borders
Managing Customers
Accentuate Working Relationships & Business Networks

Basic Concepts
Business Market Management is the
process of understanding, creating, and delivering value.
Business Markets are firms, institutions,

or governments that acquire goods and services. Focuses on functionality or performance.
Guiding Principles of Business Market Management

Regard value as the cornerstone Focus on business market management processes Stress working across borders Accentuate working relationships and business networks
I. Value as the Cornerstone of Business Market Management
Business Market Management, 3rd edition
Chapter 1-7
What is Value in Business Markets?

1. Monetary 2. Economic, technical, service, and social net benefit 3. The exchange for price paid
Chapter 1-8
Fundamental Value Equation

(Value Price ) > (Valuea Pricea )
f f
Offeringsf
Copyright 2009 Pearson Education Publishing as Prentice Hall Business Market Management, 3rd edition
Offeringsa
Chapter 1-9
Value
Value can only be estimated. Value changes when:
Same functionality or performance provided while its cost changes to customer Functionality or performance changes while cost remains the same
Customer Incentive to Purchase is the difference between value and price.

Assessing Value
Supplier firms create and deliver value to targeted market segments and customer characteristics
Business market management strives to both

understand and capitalize on customer and market
segment variations
Chapter 1-11
Value Analysis
Conducted by a cross-functional team with the customer firm Team assesses market offerings attributes in term of:
Functionality or performance Total cost of specific performance or functionality Identification of lower-cost alternatives
II. Managing Business Market Processes
Chapter 1-13
Managing Business Market Processes

Business Process: a collection of activities that take one or more kinds of
input and creates an output that is of value

to the customer
Chapter 1-14
Processes Defined by Allaire

How the CEO runs the company Management How management interacts with employees Processes How decisions get made How communication takes place Focus is on reengineering efforts
Business Large, crosscutting collections of activities (product design, Processes order fulfillment, customer service)
Work Basic building blocks of business processes Processes How the work actually gets done
Chapter 1-15
Shareholder Value
Shareholder Value: when the economic returns generated from realizing its business strategy exceed the cost of capital employed Value Drivers:
Sales growth rates Operating profit margins Income tax rate Working capital investment Fixed capital investment Cost of capital Forecast period
Shareholder Value
Translating customer value into shareholder value critically depends on businesss ability to claim an equitable return on the value it delivers to customers.
Chapter 1-17
Core Business Processes

Product Understanding customer requirements and preferences Development Anticipating how they will change Management Constructing solutions that customers are willing to pay for (PDM) Supply Chain Management (SCM)
Incorporates acquisition of all physical and informational inputs Efficiently and effectively transforms processes into customer solutions
Addresses all aspects of
Customer Relationship Management (CRM)

Identifying customers Creating customer knowledge Building customer relationships Shaping customer perceptions about the organization and its products
Contributions to Marketing
Making core business processes more market-driven can result in:
Accelerated and enhanced cash flow
Reduced time to market

Earlier adoption from targeted customers
Chapter 1-19
Market-Driven Processes
Business Processes
PDM
Design a technically superior product
Market-Driven Business Processes

PDM
Create solution that enables customer to experience maximum value and benefit
SCM
Best inputs at cheapest price
SCM
Design, manage, and integrate firms supply chain with suppliers and customers
CRM
Customer relationship is a means to sell, deliver, and service a product
CRM
Customer relationship is an opportunity to learn about customers needs and wants and how best to create, satisfy, and sustain them
Chapter 1-20
Why Business Marketing Management?

Marketing work processes should take place within business market processes Business market processes cut across functional areas Depends upon seamless cross-functional cooperation
Business Market Processes Understanding Value

Marketing Sensing: process of generating knowledge about the marketplace that individuals in the firm use to inform and guide their decision making
Chapter 1-22

Understanding Value
Marketing individuals in the firm use to inform and guide their Sensing
Generating knowledge about the marketplace that decision making
Learning how companies rely on a network of suppliers Understanding to add value to their offering, integrate purchasing Firms as Customers activities with those of other functional areas and outside firms, and make purchase decisions Studying how to exploit a firms resources to achieve
Crafting short-term and long-term marketplace success, deciding Market Strategy upon a course of action, and flexibly updating it as
learning occurs during implementation

Chapter 1-23

Creating Value
Managing Putting products services, programs, and systems Market together in ways that create great value for targeted Offerings market segments and customer firms
New them to construct market offerings, and bringing them to Offering Realization market. Realization is all the activities used to transform
Developing new core products or services, augmenting
ideas into a market offering that it commercializes
Designing a set of marketing and distribution arrangements that create superior customer value for Business targeted market segments and customers, and executing Channel Management those arrangements either directly through supplier firm sales forces and logistics system or indirectly through resellers and third-party service providers

Delivering Value
Differentiating business opportunities, prospecting for new Gaining New business, assessing the fit with supplier offerings and Business priorities, gaining the initial order, and fulfilling it to the customers complete satisfaction
Sustaining made to deliver value to customer firms, strengthening this Reseller Partnerships delivered value, and working progressively together to
A supplier and its reseller fulfilling commitments they have
continue to fulfill changing marketplace
Differentiating transactional and collaborative customers, Managing delivering offerings that fulfill the respective requirements, Customers and preferences of a portfolio of customers in a superior way, and getting a fair return in exchange
Marketing
Business Marketing
The true meaning of Marketing [is] knowing what is value for the customer. --Peter Drucker
(1980)
Understanding that advances in marketing work processes & marketing relationships are needed to realize & profit from understanding of value.
Chapter 1-26
Updated: the four Ps

Product
Flexible market offerings that consist of naked solutions Offerings are responsive to customer requirements and preferences
Pricing
What a market offering is worth to the customer
Promotion
Marketing communications are focused Tailored to varying requirements for gaining and sustaining customers & resellers Shape and reinforce suppliers value
Place
Design customer-driven distribution channels Channel offerings build marketplace equity Implement cooperative channels arrangements that are adaptive
Chapter 1-27
III. Doing Business Across Borders
Chapter 1-28
Doing Business Across Borders

Language and Culture Cross-Border Negotiation
Dispute Resolution
Currency Exchange and Payment Risk
Language and Culture

Doing business across borders does not always mean that the language and culture of managers will be different, just as doing business within the same country does not always mean that the language and the culture will be the same.

Determine what language to use
English regarded as the language of international business

Alternatives to English:
Use the language of one party Use another language both parties are willing to use Or, rely on interpreters
Indian Automotive Component Manufacturers

Indias over 10,000 small and 500 midsize automotive component companies
Critical success factors:
1. Large and growing Indian middle class
2. High demand, local raw materials, low labour costs, high productivity and intense competition 3. Government focus and consequent support Copyright 2009 Pearson Education Business Market Management, 3 edition
rd
Publishing as Prentice Hall
Chapter 1-32

Culture is an abstract and imprecise concept
Bundled characteristics that uniquely define members of a particular group
Culture comprises a:
Set of assumptions
Values Beliefs
Socially instilled norms
Chapter 1-33

Culture is so imprecise and changeable a phenomenon that it explains less than most people realizeAnd within the overall mix of what influences people, behavior, cultures role may be declining, rather than rising, squeezed between the greedy expansion of the government on one side, and globalization on the other.
--The Economist, Cultural Explanations
Chapter 1-34
Cross-Border Negotiation
Considerations
Profitability of the business to be gained Perceived benefits of the relationship Anticipated consequences of the negotiated deal on suppliers business in other
country markets
Cross-Border Negotiation
Differences from domestic negotiation
1.
2. 3.
Culture
Unfamiliar and uncomfortable settings Influence of ideology
4.
5. 6.
Greater involvement of government in business

Defining which countrys laws govern the business transaction Instability and sudden change in foreign market
7.
8.
Dispute resolution
Foreign currencies
Cross-Border Dispute Resolution

Negotiate first how to resolve disputes
International commercial arbitration

Arbitration usually occurs in a third country
Specify arbitration institution when possible
Chapter 1-37
Currency Exchange and Risk

Currency for transactions
Suppliers country currency
Customers country currency Third party currency
Payment
Letter of credit (LC) Confirm letter of credit
Chapter 1-38
IV. Working Relationships and Business Networks
Chapter 1-39
Work Teams
Work Teams: a small number of people with complementary skills who are committed to:
a common purpose set of performance goals an approach which they hold themselves mutually accountable
Work Teams
Teams create value in their collective work-product that could not be produced outside the team setting
Chapter 1-41
Working Relationships
Transactional of basic products for highly competitive prices, and/or Relationships
Customer and supplier focus upon the timely exchange one end
Achieved through partnering. Customer firm and Collaborative supplier firm form strong and extensive social, Relationships economic, service, and technical ties. Mutual goals: lowering total costs and/or increasing value.
Chapter 1-42
Collaborative Relationship Agreements

Strategic Alliance: commercial agreement between 2 or more parties to work together in some mutual defined ways
Gives & Gets Time Horizons
Pre-agreed disputeresolution mechanism

Collaborative Relationship Development

Exchange Episodes:
critical incidents when parties engage in actions related to the development of a relationship
1. Defining purpose
2. Setting boundaries
3. Creating and claiming value

4. Evaluating exchange outcomes
Business Networks
Business Network:
a set of two or more connected business relationships
Alliance Network:
a clique
of interrelated and coordinated
business relationships
Chapter 1-45
Connected Relations for Firms in a Dyadic Relationship

Other Supplier Units Other Ancillary Firms Third Parties in Common Other Ancillary Firms Supplementary Supplier
Suppliers Supplier
Supplier Business Unit
Focal Relationship
Customer Business Unit
Customers Customer
Other Units in Focal Customer Firm
Other Customers
Competing Supplier
Other Units in Focal Supplier Firm
Other Units in Focal Supplier Firm
Chapter 1-46
Business Network Characteristics

1. Organized around developing and realizing an envisioned market opportunity 2. Multiplex relations where firms are:
suppliers,
customers, and competitors to one another
3. Increasingly international in composition

Analyzing Business Networks

Actors Network Horizon
Actors: firms, customers, suppliers, How extended actors view of the network is regulatory agencies Depends on the actors experience and the Perform the activities and control resources structural network features
Activities
Transaction, order management cycle Create value through transforming resources
Network Context
Structured in terms of the actors, activities, and resources
Resources
Anything that actors explicitly value Technical know-how, equipment, personnel, capital
Network Identities
How firms see themselves in the network How they are seen by other network actors Captures the uniqueness of each firm in its set of relationships
Chapter 1-48
V. Summary
Chapter 1-49
Summary
Overview of business market management Four guiding principles of BMM:
1. 2. 3. 4. Value Business market processes Business across borders Working relationships and business networks
Chapter 1-50
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
Chapter 1-51

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Business Market Management

Section I: Introduction and Overview

Chapter 1: Guiding Principles

Managing Business Market Processes

Copyright 2009 Pearson Education Publishing as Prentice Hall

Business Market Processes

Understanding Firms as Customers Crafting Market Strategy

Accentuate Working Relationships & Business Networks

Business Markets are firms, institutions,

Guiding Principles of Business Market Management

I. Value as the Cornerstone of Business Market Management

Copyright 2009 Pearson Education Publishing as Prentice Hall

Business Market Management, 3rd edition

What is Value in Business Markets?

Copyright 2009 Pearson Education Publishing as Prentice Hall

Business Market Management, 3rd edition

Fundamental Value Equation

Customer Incentive to Purchase is the difference between value and price.

Business market management strives to both

Copyright 2009 Pearson Education Publishing as Prentice Hall

Business Market Management, 3rd edition

II. Managing Business Market Processes

Copyright 2009 Pearson Education Publishing as Prentice Hall

Business Market Management, 3rd edition

Managing Business Market Processes

input and creates an output that is of value

Copyright 2009 Pearson Education Publishing as Prentice Hall

Business Market Management, 3rd edition

Processes Defined by Allaire

Copyright 2009 Pearson Education Publishing as Prentice Hall

Business Market Management, 3rd edition

Copyright 2009 Pearson Education Publishing as Prentice Hall

Business Market Management, 3rd edition

Core Business Processes

Customer Relationship Management (CRM)

Reduced time to market

Copyright 2009 Pearson Education Publishing as Prentice Hall

Business Market Management, 3rd edition

Market-Driven Business Processes

Copyright 2009 Pearson Education Publishing as Prentice Hall

Business Market Management, 3rd edition

Why Business Marketing Management?

Business Market Processes Understanding Value

Copyright 2009 Pearson Education Publishing as Prentice Hall

Business Market Management, 3rd edition

Business Market Processes

Generating knowledge about the marketplace that decision making

learning occurs during implementation

Copyright 2009 Pearson Education Publishing as Prentice Hall

Business Market Processes

Developing new core products or services, augmenting

ideas into a market offering that it commercializes

Business Market Processes

A supplier and its reseller fulfilling commitments they have

continue to fulfill changing marketplace

Business Market Management, 3rd edition

Updated: the four Ps

Copyright 2009 Pearson Education Publishing as Prentice Hall

Business Market Management, 3rd edition

III. Doing Business Across Borders

Copyright 2009 Pearson Education Publishing as Prentice Hall

Business Market Management, 3rd edition

Doing Business Across Borders