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Business Market Management3rd 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 Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management, 3rd edition Chapter 1-4 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. Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management, 3rd edition Chapter 1-5 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 Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-6 . I. 3rd edition Chapter 1-7 . Value as the Cornerstone of Business Market Management Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. What is Value in Business Markets? 1. Monetary 2. technical. service. Economic. The exchange for price paid Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. and social net benefit 3. 3rd edition Chapter 1-8 . 3rd edition Offeringsa Chapter 1-9 .Fundamental Value Equation (Value – Price ) > (Valuea – Pricea ) f f Offeringsf Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. Value  Value can only be estimated. Copyright © 2009 Pearson Education Publishing as Prentice Hall .  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. 3rd edition Chapter 1-11 .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 Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. Value Analysis  Conducted by a cross-functional team with the customer firm  Team assesses market offering’s attributes in term of: Functionality or performance Total cost of specific performance or functionality Identification of lower-cost alternatives Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-12 . 3rd edition Chapter 1-13 . Managing Business Market Processes Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management.II. 3rd edition Chapter 1-14 .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 Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. Processes order fulfillment.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. customer service) Work Basic building blocks of business processes Processes How the work actually gets done Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition 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 Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-16 . 3rd edition Chapter 1-17 . Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management.Shareholder Value Translating customer value into shareholder value critically depends on business’s ability to claim an equitable return on the value it delivers to customers. 3rd edition Chapter 1-18 .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) Copyright © 2009 Pearson Education Publishing as Prentice Hall • • • • Identifying customers Creating customer knowledge Building customer relationships Shaping customer perceptions about the organization and its products Business Market Management. 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 Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-19 . and sustain them Chapter 1-20 Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. manage. deliver.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. satisfy. and integrate firm’s supply chain with suppliers and customers CRM Customer relationship is a means to sell. and service a product CRM Customer relationship is an opportunity to learn about customers’ needs and wants and how best to create. 3rd edition . 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 Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-21 . 3rd edition Chapter 1-22 .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 Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. deciding Market Strategy upon a course of action. and flexibly updating it as learning occurs during implementation Business Market Management. and make purchase decisions Studying how to exploit a firm’s resources to achieve Crafting short-term and long-term marketplace success. integrate purchasing Firms as Customers activities with those of other functional areas and outside firms. 3rd edition Copyright © 2009 Pearson Education Publishing as Prentice Hall Chapter 1-23 .Business Market Processes 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. Realization is all the activities used to transform Developing new core products or services.Business Market Processes Creating Value Managing Putting products services. and bringing them to Offering Realization market. and systems Market together in ways that create great value for targeted Offerings market segments and customer firms New them to construct market offerings. programs. 3rd edition Chapter 1-24 . 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 Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 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. Business Market Processes Delivering Value Differentiating business opportunities. Managing delivering offerings that fulfill the respective requirements. gaining the initial order. 3rd edition Chapter 1-25 . prospecting for new Gaining New business. assessing the fit with supplier offerings and Business priorities. and getting a fair return in exchange Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. and working progressively together to A supplier and its reseller fulfilling commitments they have continue to fulfill changing marketplace Differentiating transactional and collaborative customers. strengthening this Reseller Partnerships delivered value. and fulfilling it to the customer’s complete satisfaction Sustaining made to deliver value to customer firms. Customers and preferences of a portfolio of customers in a superior way. Marketing Business Marketing “The true meaning of Marketing [is] knowing what is value for the customer. Chapter 1-26 Business Market Management.” --Peter Drucker (1980) Copyright © 2009 Pearson Education Publishing as Prentice Hall Understanding that advances in marketing work processes & marketing relationships are needed to realize & profit from understanding of value. 3rd edition . 3rd edition Chapter 1-27 .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 supplier’s value Place Design customer-driven distribution channels Channel offerings build marketplace equity Implement cooperative channels arrangements that are adaptive Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. III. Doing Business Across Borders Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-28 . 3rd edition Chapter 1-29 .Doing Business Across Borders  Language and Culture  Cross-Border Negotiation  Dispute Resolution  Currency Exchange and Payment Risk Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-30 . just as doing business within the same country does not always mean that the language and the culture will be the same. Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management.Language and Culture Doing business across borders does not always mean that the language and culture of managers will be different. 3rd edition Chapter 1-31 .Language and Culture  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 Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. Government focus and consequent support Copyright © 2009 Pearson Education Business Market Management.000 small and 500 midsize automotive component companies  Critical success factors: 1. low labour costs. high productivity and intense competition 3. local raw materials. Large and growing Indian middle class 2. 3 edition rd Publishing as Prentice Hall Chapter 1-32 . High demand.Indian Automotive Component Manufacturers India’s over 10. Language and Culture  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 Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-33 . rather than rising.Language and Culture “Culture is so imprecise and changeable a phenomenon that it explains less than most people realize…And within the overall mix of what influences people. behavior. culture’s role may be declining. squeezed between the greedy expansion of the government on one side. “Cultural Explanations” Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-34 . and globalization on the other.” --The Economist. Cross-Border Negotiation  Considerations Profitability of the business to be gained Perceived benefits of the relationship Anticipated consequences of the negotiated deal on supplier’s business in other country markets Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-35 . 2. Culture Unfamiliar and uncomfortable settings Influence of ideology 4. Greater involvement of government in business Defining which country’s laws govern the business transaction Instability and sudden change in foreign market 7.Cross-Border Negotiation Differences from domestic negotiation 1. 3. 8. Dispute resolution Foreign currencies Business Market Management. 3rd edition Chapter 1-36 Copyright © 2009 Pearson Education Publishing as Prentice Hall . 5. 6. 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 Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-37 . Currency Exchange and Risk  Currency for transactions  Supplier’s country currency  Customer’s country currency  Third party currency Payment  Letter of credit (LC)  Confirm letter of credit Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-38 . IV. 3rd edition Chapter 1-39 . Working Relationships and Business Networks Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 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 Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-40 . Work Teams  Teams create value in their collective work-product that could not be produced outside the team setting Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-41 . Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-42 . and/or Relationships Customer and supplier focus upon the timely exchange one end Achieved through partnering. and technical ties. Customer firm and Collaborative supplier firm form strong and extensive social. Mutual goals: lowering total costs and/or increasing value.Working Relationships Transactional of basic products for highly competitive prices. Relationships economic. service. 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 Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-43 . Collaborative Relationship Development Exchange Episodes: critical incidents when parties engage in actions related to the development of a relationship 1. 3rd edition Chapter 1-44 . Creating and claiming value 4. Setting boundaries 3. Defining purpose 2. Evaluating exchange outcomes Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-45 .Business Networks Business Network: a set of two or more connected business relationships Alliance Network: a clique of interrelated and coordinated business relationships Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 3rd edition Chapter 1-46 .Connected Relations for Firms in a Dyadic Relationship Other Supplier Units Other Ancillary Firms Third Parties in Common Other Ancillary Firms Supplementary Supplier Supplier’s Supplier Supplier Business Unit Focal Relationship Customer Business Unit Customer’s Customer Other Units in Focal Customer Firm Other Customers Competing Supplier Other Units in Focal Supplier Firm Other Units in Focal Supplier Firm Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. Organized around developing and realizing an envisioned market opportunity 2. Increasingly international in composition Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management.  customers.Business Network Characteristics 1. 3rd edition Chapter 1-47 . Multiplex relations where firms are:  suppliers.  and competitors to one another 3. 3rd edition . order management cycle Create value through transforming resources Network Context Structured in terms of the actors. personnel. How extended actor’s view of the network is regulatory agencies Depends on the actor’s experience and the Perform the activities and control resources structural network features Activities Transaction. equipment. and resources Resources Anything that actors explicitly value Technical know-how. suppliers. capital Copyright © 2009 Pearson Education Publishing as Prentice Hall 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 Business Market Management. activities.Analyzing Business Networks Actors Network Horizon Actors: firms. customers. 3rd edition Chapter 1-49 .V. Summary Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 4. 3.Summary   Overview of business market management Four guiding principles of BMM: 1. 3rd edition Chapter 1-50 . Value Business market processes Business across borders Working relationships and business networks Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. 2. mechanical.All rights reserved. or otherwise. without the prior written permission of the publisher. Printed in the United States of America. or transmitted. Copyright © 2009 Pearson Education Publishing as Prentice Hall Business Market Management. No part of this publication may be reproduced. photocopying. 3rd edition Chapter 1-51 . electronic. stored in a retrieval system. in any form or by any means. recording.