b mkt class mod 1 demensions

8/12/2019 B Mkt Class Mod 1 Demensions

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Introduction to

BusinessMarketing


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Learning Resources

Business marketing : RobertDwyer & John F Tanner

Industrial Marketing : Robert R

Reeder , Edward G & Betty HReeder

Industrial Marketing : Krishna K

Havaldar


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What is business

marketing?!

Marketing products or services toother companies , governmentbodies , institutions and other

organizations. Consumer marketing : marketing of

products and services to individuals

, families and households.


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Areas Industrial markets Consumer markets

Marketcharacteristics

Geographically concentratedRelatively few buyers

Geographically distributedMass markets

Productcharacteristics

Technical complexityCustomised

Standardised

Servicecharacteristics

Service , timely delivery and availabilityis very important

Service , delivery andavailability is somewhat

importantBuyer behavior Involvement of functional areas of both

buyer and sellerInvolvement of familymembers

Purchase decisions made rationally Purchase decisions madeon personal needs

Technical expertise Less technical expertise

Channelcharacteristics

More directFewer intermediaries

IndirectLot of intermediaries

Promotion Personal selling Advertising

Price Competitive bidding List prices or MRP


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Industrial demand :

Derived

Industrial customers buy goods andservices for use in producing othergoods and services. Eventually ,

whatever is produced is sold to theconsumers. Thereby , demand forindustrial goods and services is

derived from consumer goods andservices.


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Joint demand : occurs when oneindustrial product is useful if otherproduct also exists.

Cross elasticity of demand : The concept of elasticity

Cross elasticity of demand is the

responsiveness of the sales of oneproduct to a price change in anotherproduct


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Types of industrial

customers

Industrial customers are generallyclassified into 4 groups.

Commercial enterprises

Government customers Institutional customers

Cooperative societies


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Industrial customers

Commercial enterprises : privatesector , profit seeking organizationsconsisting of :

Industrial distributors Original Equipment Manufacturers

(OEMs)

Users


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ass ca on oindustrial products and

services There are many methods by whichindustrial products and services areclassified. The method that is most

accepted classifies products andservices based on how products orservices enter the production

process , and their relative costs. Materials and parts

Capital items

Supplies and services


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Materials and parts

Materials that enter productdirectly.

Raw materials

Manufactured materials ( acids , fuel ,steel , chemicals)

Component parts ( spark plugs ,

bulbs , LCD Display units )


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Capital items

Capital items are those which areused in the production processesand they wear out over certain time

frame. Heavy equipment ( turbines ,

generators , furnaces , boilers , earthmovers)

Accessories / light equipment (computer peripherals , hand tools etc)

Plant and building (offices , plants ,

warehouses , parking lots etc)


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Supplies and services

Supplies and services support theoperation of the purchasingorganization. They do not become

the part of final product. Supplies ( coffee , soaps , oils and

grease , pencils etc)

Services ( building maintenance ,auditing , legal , courier , marketingresearch , catering)


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Industrial customers

purchasing orientations

Business buyers ( industrialcustomers) do not have the samepurchasing orientation , or overall

purchasing philosophy whichguides them through thepurchasing decision.


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Rawmaterial

suppliers

Component andsubasse

mbly

Finalassembl

y

intermediaries Consum

ers / end

users

SCM Orientation

Procurement Orientation

BuyingOrientatio

n


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Buying orientation

The purchasing firm with buyingorientation has narrow and shortterm focus.

Lowest Price : selects lowest pricesupplier

I win you lose is the negotiation style

Gain power : the buying firm gainspower over suppliers by using tacticssuch as commoditisation and multisourcing


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Procurement

orientation

Purchasing firm has a strategicfocus and is proactive. Both Qualityimprovementsand Cost reductions

are sought after. Collaborative relationships

Working closely with other functional

areas


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upp y a nmanagement

orientation Includes coordination and integration ofpurchasing function with other functions withinthe company and also with other organizations.

Focuses on improving the whole value chain

from raw materials to end users (products) Deliver value to end users

Outsource non core activities

Support collaborative relationships with suppliers


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Industrial marketing

environment

Interfacelevel

Public

Macroenvironment

Government


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Interface level

Involves key participants whoimmediately interface with anindustrial firm in facilitating

production , distribution andpurchase of firms goods andservices.

Input suppliers Distributors

Facilitators

Competitors


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publics

Publics are distinct groups that have anactual or potential interest or impact oneach firms ability to achieve its

respective goals.

Publics have the ability to help or hindera firms effort to serve its markets

Financial publics

Independent press Public interest groups

General publics

Internal publics


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The macro environment

The dynamic forces of the macroenvironment have a major impacton both the publics and interface

levels of the industrial environment. Economics

Ecology

Physical environment Culture

Technology


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Government

Government , charged withadministering and controllingnations , enables and facilitates ,

but also hampers and disallowsindustrial actions.

The government laws , regulations

and activities affect all participants


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Primary functions of a government are to : Protect companies from each other

Protect consumers from unfair business practices

Protect the larger interests of society againstunrestrained business behavior

Promote income equality in society

Provide economic stabilization through control ofunemployment and inflation.

These functions involve: Regulating agencies (SEBI , IRDA, Company Law

Board)

Laws / policies(MRTP Act)

Program funding (R&D Support) Import / export regulation (FEMA, quota , trade

barriers)

Levying taxes (service , octroi , VAT)

Providing social programs ( Benefits , CSR)

Controlling interest rates (Monetary and Fiscal policies)


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Environmental analysis

Environment

Ecological andphysical

internal external

micro macro


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Case 1. Edward F. Crow Company

The Edward F. Crow Company is an industrial distributorlocated in Memphis, Tennessee. Its principal product lines

include materials handling equipment such as conveyors andtransfer stations, electric motors and controls and powertransmissions, and, finally, weighing scales, particularly thoseused as part of conveyor lines.

The firm covers a territory consisting of parts of nine states:

Tennessee, Kentucky, Alabama, Mississippi, Louisiana,Arkansas, Missouri, Illinois, and Indiana. Memphis is the hubof a trading area called the mid-South.

The firm was founded in 1937 by the late Edward F. Crow whohad earned his mechanical engineering degree from Case

School of Applied Science (now Case Western ReserveUniversity) in the 1920s. Before carting his own firm, he hadbeen a design engineer and then a sales engineer for a majormanufacturer of conveyors.

This case was prepared by Ernest F. Cooke, Professor of Marketing,Layda College, Maryland. Reprinted by permission.


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When he passed away about five years ago, operation ofCrow was taken over by one of the lawyers who was handling

the estate. There were no heirs interested in or capable ofrunning the firm.

Over the last five years, annual sales have decreased fromslightly less than $3 million to slightly more than $2 million(see Exhibit 1). Because of inflation, actual physical volume

has decreased even more (about 40 percent). Five years agothe corporation was very profitable, but last year Crowsuffered a very small loss.

Five years ago there were five outside sales people. Asconditions worsened, the sales force diminished in size, the

last outside salesperson quit last week, and only two insidesalespersons are left. They are both very competent but areoverworked. As a result, the firm lost an opportunity to bid onseven large electric motors for the Tennessee Valley Authoritywhen the closing date was missed.


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Income Statement, 1978 versus 1982 ($000)1978 1982

Sales

Motors and so on $669 $412Parts, repair and service for motors, and so on 642 516Materials handling/installations* 870 615Scales 361 224Parts, repair, and service for scales 374 298Total net sales $2,916 $2,065

Cost of goods soldMotors and so on 458 288Parts for motors and so on 237 196Materials handling 556 406

Scales 243 155Parts for scales 111 94Total cost of goods sold 1,605 1,139

Gross margin $1,311 $ 926


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Income Statement, 1978 versus 1982 ($000)1978 1982

Operating expensesService and repair, labor and overhead** 501 412Warehouse and distribution expense 212 201General administrative and selling expense*** 318 319Basically fixed costs'Total operating expense 1,031 932

Operating income [loss] $ 280 $ [6]Interest expense less interest revenue [13] [4]Net income [loss] before taxes $ 293 $ [2]Income tax [refund] 132 0Net income $ 161 $(2)

*Actual materials handling sales are larger than indicated on the income statementbecause they usually include electric motors and controls, power transmissions, andsometimes scales. When these components are included as part of a materials handlinginstallation, the sales dollars are shown under the category scalesormotors m so on.**About 10% of this is assembly labor and warranty labor associated with material handlingsales.***Basically fixed cost and includes the engineer's salary.


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At present (1983), volume is broken down as follows:

1. Electric motors and controls and power transmissions 20 %2. Parts, repairs and service for motors, and so on 25 %3. Materials handling equipment, including parts and design

services but not including motors, controls, transmissions,or scales. 30 %

4. Scales 10 %

5. Parts, repairs, and service for scales 15 %

Over the last five years, dollar sales decreased in all five categories.The share of total sales held according to category has changed, withnew motors and scales dropping from 35.3 percent to 30.8 percent,

all parts and repair increasing from 34.8 percent to 39.4 percent, andmaterial handling holding steady at 29.8 percent.


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In addition to the two inside sales people, employees include a

purchasing agent, a parts manager, a service manager, and sevenservice and repair people, an engineer who designs materials handlingsystems, some warehouse and delivery people, and clerks who handlebookkeeping, billing, and correspondence. There has been turnoveramong these employees; consequently, problems have arisen due tobeing short of help as well as having inexperienced help For example,

there is a one-month backlog in billing for completed service work duea shortage of help and inexperienced help

The purchasing agent also acts as office manager. The engineer hasincreased the amount of his customer contact because of decrease inoutside sales people.


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The firm is the exclusive distributor i the mid-South for Primax, a

foreign manufacturer of electric motors whose East an Gulf Coast port-of-entry is New Orleans. Primax has a distribution center in Memphisthat serves the entire country. Crow's annual Primax sales, five yearsago, totaled 400 units contrasted with sales last year of 200 units. Itssales quota last year was 200 units. So far this year, sales have beenat an annual rate of 200 units averaging $1,000 per unit.

Crow also represents several division of Reliable Electric, amanufacturer of electric motors, control, transmissions, and so on.Sales of Reliable products this year are running at an annual rate of$300,000 including parts. Almost 10 percent is small powertransmission components purchased from Reliable's Lodge Divisionfor materials handling installations.


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The firm is the distributor for several different manufacturers ofmaterials handling equipment and scales. These manufacturers are

competitors in some of their lines. In these cases, Crow sometimesuses more than one manufacturer for a given installation of materialshandling equipment or scales. For most manufacturers, the firm is theexclusive distributor in the Memphis area even though they carrycompetitive lines.

In the almost 40 years that Mr. Crow ran the firm, he had built up anexcellent reputation among suppliers and customers. Although thisreputation has deteriorated somewhat in the last five years, the firmstill enjoys a good reputation. If the situation continues to deterioratemuch longer, it will reach a critical stage. It may even become anirreversible situation.

Recently the Fearhank-Moose Scale Company, which manufacturers aline of portable industrial scales, canceled its contract with Crowbecause it felt that Crow was not doing justice to its line of scales.Subsequently, Fearhank signed up with another Memphis industrialdistributor who is in direct competition with Crow.


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You have just purchased a controlling interest in the firm and have

appointed yourself president, chief executive officer, and chiefoperating officer. The lawyer who was president is no longer with thefirm. There is no doubt that he was ill-equipped to run the business. Itrequires someone, like you, with marketing and management know

how!


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Class Exercise 1 Team 1 :

You are the marketing team of Symantec , renowned for the anti-virus software norton antivirus.

Latest market research , based on IP tracking of customers have revealed the following facts. Product name

Market % (product volume / total sales)

Geographical distribution ( highest of user lists)

Norton antivirhome edition

71%

Asia

Norton Antivirsmall business edition

26%

North America & europe Norton antivirenterprise edition

2%

scattered

On further investigation, following facts are revealed

Most of the IT companies in developing worlds (India & Thailand) use antivirhome edition.

There are many cases of IT service providers in India , violating the license and distribution of these products.

Norton enterprise edition , which is specifically designed for large enterprises , has little acceptance.

The cases of copyright violations and license violations through malicious code / hacking has increased.

The estimated impact on sales in Asia due to software piracy is 62%.

The hacked version cannot update itself to latest virus definitions , hence the brand value of Norton antivirus too isaffected.

You are now required to :

Come up with reasons for huge popularity of norton-home with the IT service providers.

State whether a whole new product for these regions (Asia) needs to be developed. If so , state reasons.

Prepare a presentation outlining the benefits of norton-enterprise over the home version , which needs to bepresented at the next summit of CEOs of IT companies.

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