B2B Chapter 1

Business Market
Management

3
rd
edition
Guiding Principles
Chapter 1
Copyright 2009 Pearson Education
Publishing as Prentice Hall

Business Market Management, 3
rd
edition Chapter 1-2
Section I:
Introduction and
Overview

rd
edition Chapter 1-3
Chapter 1: Guiding Principles
Overview

I. Values as the Cornerstone of Business Market
Management

II. Managing Business Market Processes
III. Doing Business Across Borders
IV. Working Relationships and Business Networks
V. Summary

rd
edition Chapter 1-4
Guiding Principles
Crafting
Market
Strategy
Understanding
Firms as
Customers
Marketing
Sensing
Managing
Market
Offerings
New
Offering
Realization
Business
Channel
Management
Gaining
New
Business
Sustaining
Reseller
Partnerships
Managing
Customers
Regard Value as the Cornerstone
Accentuate Working Relationships & Business Networks
Focus on Business Market Processes
Stress Doing Business Across Borders
Understanding
Value
Creating
Value
Delivering
Value
Business Market Processes

rd
edition Chapter 1-5
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.

rd
edition Chapter 1-6
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

rd
edition Chapter 1-7
I. Value as the Cornerstone
of Business Market
Management


What is Value in Business
Markets?
1. Monetary
2. Economic, technical, service, and social
net benefit
3. The exchange for price paid

rd
edition Chapter 1-8

rd
edition Chapter 1-9
Fundamental Value Equation
(Value
f
Price
f

) > (Value
a
Price
a
)

Offerings
f
Offerings
a

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.


rd
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


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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


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II. Managing Business
Market Processes

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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

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Processes Defined by Allaire
Management
Processes
How the CEO runs the company
How management interacts with employees
How decisions get made
How communication takes place
Business
Processes
Focus is on reengineering efforts
Large, crosscutting collections of activities (product design,
order fulfillment, customer service)
Work
Processes
Basic building blocks of business processes
How the work actually gets done

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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


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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.

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Core Business Processes
Product
Development
Management
(PDM)
Understanding customer requirements and preferences
Anticipating how they will change
Constructing solutions that customers are willing to pay for
Supply Chain
Management
(SCM)
Incorporates acquisition of all physical and informational
inputs
Efficiently and effectively transforms processes into
customer solutions
Customer
Relationship
Management
(CRM)
Addresses all aspects of
Identifying customers
Creating customer knowledge
Building customer relationships
Shaping customer perceptions about the organization
and its products

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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


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

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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


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Understanding Value
Marketing Sensing: process of generating
knowledge about the marketplace that
individuals in the firm use to inform and
guide their decision making


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

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

rd
Delivering Value
Gaining New
Business
Differentiating business opportunities, prospecting for new
business, assessing the fit with supplier offerings and
priorities, gaining the initial order, and fulfilling it to the
customers complete satisfaction
Sustaining
Reseller
Partnerships
A supplier and its reseller fulfilling commitments they have
made to deliver value to customer firms, strengthening this
delivered value, and working progressively together to
continue to fulfill changing marketplace
Managing
Customers
Differentiating transactional and collaborative customers,
delivering offerings that fulfill the respective requirements,
and preferences of a portfolio of customers in a superior
way, and getting a fair return in exchange

rd
Business Marketing

Understanding that
advances in marketing
work processes &
marketing relationships
are needed to realize &
profit from
understanding of value.

Marketing

The true meaning of
Marketing [is] knowing
what is value for the
customer.

--Peter Drucker
(1980)

rd
Updated: the four Ps
Product Pricing
Flexible market offerings that
consist of naked solutions
Offerings are responsive to
customer requirements and
preferences
What a market offering is worth to the
customer

Promotion Place
Marketing communications are
focused
Tailored to varying requirements for
gaining and sustaining customers &
resellers
Shape and reinforce suppliers value
Design customer-driven distribution
channels
Channel offerings build marketplace
equity
Implement cooperative channels
arrangements that are adaptive


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III. Doing Business Across
Borders

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Doing Business Across Borders
Language and Culture
Cross-Border Negotiation
Dispute Resolution
Currency Exchange and
Payment Risk

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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.


rd
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


rd
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

rd
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


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
rd
edition

Chapter 1-34

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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

Differences from domestic negotiation
1. Culture
2. Unfamiliar and uncomfortable settings
3. Influence of ideology
4. Greater involvement of government in business
5. Defining which countrys laws govern the business transaction
6. Instability and sudden change in foreign market
7. Dispute resolution
8. Foreign currencies
rd

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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


rd
Currency Exchange and Payment
Risk
Currency for transactions
Suppliers country currency
Customers country currency
Third party currency
Letter of credit (LC)
Confirm letter of credit

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IV. Working Relationships
and Business
Networks

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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

rd
Work Teams
Teams create value in their
collective work-product that could
not be produced outside the team
setting


rd
Working Relationships
Transactional
Relationships
Customer and supplier focus upon the timely exchange
of basic products for highly competitive prices, and/or
one end
Collaborative
Relationships
Achieved through partnering. Customer firm and
supplier firm form strong and extensive social,
economic, service, and technical ties. Mutual goals:
lowering total costs and/or increasing value.

rd
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 dispute-
resolution mechanism

rd
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

rd
Business Networks
Business Network: a set of two or more
connected business relationships

Alliance Network: a clique
of interrelated and coordinated
business relationships

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Connected Relations for Firms in a
Dyadic Relationship
Customer
Business
Unit
Other
Supplier Units
Other Units in
Focal Customer
Firm
Suppliers
Supplier
Other
Ancillary
Firms
Third Parties
in Common
Other
Ancillary
Firms
Supplementary
Supplier

Other
Customers
Competing
Supplier
Other Units in
Focal Supplier
Firm
Other Units in
Focal Supplier
Firm
Customers
Customer
Supplier
Business
Unit
Focal Relationship

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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


rd
Analyzing Business Networks
Actors Network Horizon

Actors: firms, customers, suppliers,
regulatory agencies
Perform the activities and control resources

How extended actors view of the network is
Depends on the actors experience and the
structural network features
Activities Network Context
Transaction, order management cycle
Create value through transforming
resources
Structured in terms of the actors, activities,
and resources
Resources Network Identities
Anything that actors explicitly value
Technical know-how, equipment,
personnel, capital
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

rd
V. Summary

rd
Summary
Overview of business market management
Four guiding principles of BMM:
1. Value
2. Business market processes
3. Business across borders
4. Working relationships and business networks


rd
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.

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