International Business and Supply Chain Marketing
Week 1
Relevance of business markets
- Fortune 500: 72% of firms operate in B2B markets
- Business intelligence group: 40% of UK firms operate only in B2B, additional 42%
operate both in B2B/B2C
- EcommerceDB: global B2B e-commerce market is $14.9 trillion (5 times the amount of
B2C e-commerce)
Business-to-business: B2B markets have in common that they deliver their products (goods
and services) directly to other private companies, governmental agencies, or public
organizations. Not to consumers (B2C).
B2B deliver goods (tangible) and services (intangible), such as consultancy and accountancy.
It is not or/or, often a combination of goods and services. Most B2B companies are somewhere
in the middle: offer a product combined with a lot of services. Services are becoming more and
more important in B2B.
Varies sections in B2B: there are B2B-2B companies. These are companies where their first
prior is a business company, the next prior is again a business company. There are also
B2B-2C companies that offer their services to businesses, these businesses deliver them to
directly consumers.
(deliver from) derived demand:
• Resell as is: buy it, do nothing with it, sell it again → trading companies. Don’t add any
value
• Integrate as components (OEM): car manufacturers, assemble a lot of components into
one car
• Modify and sell: transform a product into another product
Installed base (company is the end user):
• Capital items: machine
• Internal consumption: toilet paper, food for employees, electricity
Trading companies buy and sell, don’t add any value.
,Value/Supply chains: combinations of companies that produce, distribute, and eventually
deliver products to the end user.
10 characteristics of B2B relationships.
1. The Pareto principle: 20/80 20% of the causes leads to 80% of results. In B2B you see
20% of the customers lead to 80& of the suppliers’ success.. In this business you
cannot talk about the average customer.
2. Power in the value chain: in some supply chains the customer has the power to decide
to do business yes or no. In some supply chains the suppliers are so powerful, because
there are not too many, because they have a unique product, the suppliers can have
the power. Completely different as in consumer markets, where consumers can say for
you I can choose 10 other suppliers.
3. Growing interdependencies: companies want to manage their costs and competences,
they say we don’t do it ourselves, we outsource and make sure our suppliers do it.
Outsourcing maintenance to suppliers makes the interdependencies grow with the
suppliers. Company itself did not have the competence to do these things anymore and
becomes more and more dependent on suppliers.
4. Intensive relationships: multi layer relationships, you almost never only have contact
with only one person. You have contact with. You want to know how different players
in buyer centre think about us. The
operation manager was very satisfied,
the purchase manager was very
dissatisfied, general manager was in
between because the two different
opinions. Different persons with
power in every company.
5. Multiple source supplierships: to
reduce risk/dependence on one
supplier, they use multiple suppliers
for the same product. They have for
one product one main supplier, but also have one or two alternative suppliers. Always
compare prices and can say to the main supplier if you get too expensive we change
and go to another supplier. Company almost never says I stop a relationship, they
decrease the share and increase the share of a competitor.
, 6. Digitalization: becomes more and more important. Channel management, chat box, are
key issues. Behind of B2C, but is getting more important. In terms of digital products
they are offering, also in communication with their customers, using more digital means.
7. Ambidexterity: as a company you have to walk on two lags. A lot of companies focus
on either customer satisfaction or cost reduction. Ambidexterity says you have to be
both. Have to be a customer oriented organization, also reduce your costs to offer
products and goods at a competitive price.
8. From acquisition to retention: more and more companies are understanding that
keeping your customers is more important than getting new customers. 5 times more
expensive to acquire new customer than keep existing customer.
9. From volume and market share to profitability: can have a lot of revenue, but don’t have
profit, you eventually will have a problem as a company. Companies are more and
more looking at profitability. Profitability of products, but even more importantly
profitability of customers.
10. Commoditization in markets: Chinese producers that offer same machine for 60% of
price of the market leader. Customers are saying why should I keep buying products
for you. More expensive and same product. That means this company is in the
commodity trap. You don’t have any differentiation from your competition, only way to
differentiate is to lower you price. Two strategic directions a company can use:
company can either say I want to go for price leadership (be cheapest), although
production is in the Netherlands, possible to compete with Chinese prices? Other one
is value enhancement, means company tries to add value to their goods and services.
Customers want to pay for the extra value. So price differentiation or value
enhancement.
The commodity trap. Value enhancement leads to more value customers want to pay for.
Therefore value enhancement could be a solution to the commodity trap.
, Value enhancement means you don’t only offer good products, you combine that with high
quality goods with excellent service. Chinese producers cannot compete with that.
Offer total solution example is Swapfiets. You pay a certain amount and they organize
everything for you. Strategic decisions to differentiate from competitors.
____
Creating value vs delivering value.
Creating value, for example what customers do we want to serve, what are our value
proposition, how to differentiate among customers, how to organize and what are the financial
effects of this.
If we define this, we have to deliver. All these issues (10 points) have effects on how you
organize delivering towards your customer. Looking at relationship between seller and buyer.
All these facets are there because they all have consequences. For instance if you want to
escape the commodity trap, you have to think what can I do additionally. You want to provide
excellent services, think about Swapfiets, you have to think about how often will my bike fail,
how many spare products do I need, how many people do I need, what is the demand for
repair. Configuration: where do you locate your inventory, people, trucks. Also when do I need
manpower. How do you organize your internal processes. To be able to have inventory, you
have to relate to your suppliers. The better you are at organizing it, the better you are at
providing the right value, but also to earn some money.
