AboutLeo Lingham Expertise In Managing a business, I can cover all aspects of running
a business--business planning, business development, business auditing, business communication, operation management, human
resources management , training, etc.
Experience 18 years of working management experience covering such areas
as business planning, business development, strategic planning,
marketing, management services, personnel administration.
PLUS
24 years of management consulting which includes business planning, strategic planning, marketing, product management, training, business coaching etc.
Question 1.explain how a such as GE might be classified by sum business marketers as a user customer but by other an OEM customer.
2.compare and contrast the two general procurement strategies employed by the federal government (1) formal advertising and (2)negotiated contract.
3.Brunswick Corporation centralizes its procurement decisions at the head quarters level.Discuss how it would approach purchasing differently than a competitor that decentralizes purchasing across various plant locations.
4.why is the cost of serving a long -standing customer for less than the cost of acquiring a new customer?
5.Discuss some of the possible objectives a manufacturer of business jet airplanes might have for the internet strtegy.
Answer MARIA,
HERE IS SOME USEFUL MATERIAL.
REGARDS
LEO LINGHAM
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Q. 1: Explain how a such as GE might be classified by sum business marketers as a user customer but by other an OEM customer.
KEY ACCOUNTS.
SOME BUSINESS MARKETERS assume the accounts like
GE are important and term such accounts as KEY ACCOUNTS.
-the management of the customer relationships that are most important to a company. Key accounts are those held by customers who produce most profit for a company or have the potential to do so, or those who are of strategic importance. Development of these customer relations and customer retention is important to business success. Particular emphasis is placed on analyzing which accounts are key to a company at any one time, determining the needs of these particular customers, and implementing procedures to ensure that they receive premium customer service and to increase customer satisfaction.
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OEM
SOME BUSINESSES SUPPLY ITEMS TO MANY MANUFACTURERS
IN THE SAME INDUSTRY.
EXAMPLE
-INTEL supplies its products to a number of computer
manufacturers like ''HEWLETT PACKARD'' / COMPAQ / LENOVA
TOSHIBA/ DELL/ and others.
Originally, an OEM (original equipment manufacturer) was a company that supplied equipment to other companies to resell or incorporate into another product using the reseller's brand name. For example, a maker of refrigerators like Frigidaire might sell its refrigerators to a retailer like Sears to resell under a brand name owned by Sears. A number of companies, both equipment suppliers and equipment resellers, still use this meaning.
INTEL is a brand name and the OEMs use this name
to market their products.
Also, there are many other product suppliers, lesser brand name/
no brands at all, who sell to these OEMs.
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Q. 2: Compare and contrast the two general procurement strategies employed by the federal government (1) formal advertising and (2)negotiated contract.
METHOD OF PROCUREMENT: Procurement
is made by one of the following methods, as
described herein:
(a) small purchase procedures;
(b) competitive sealed bids
(formal advertising);
(c) competitive negotiation; (d) noncompetitive negotiation.
1. Small purchase procedures are relatively simple and
informal procurement methods that are sound and
appropriate for a procurement of services, supplies, or
other property, costing in the aggregate not more than
............. The agency shall comply with State or local
small purchase limits under .......... If small
purchase procedures are used for procurement under a
price or rate quotations shall be obtained from
at least three qualified sources.
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2. In competitive sealed bids (formal advertising), sealed
bids are publicly solicited and a firm-fixed-price
contract (lump sum or unit price) is awarded to the
responsible bidder whose bid, conforming with all of
the material terms and conditions of the invitation for
bids, is lowest in price.
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(A) Appropriate conditions in order for formal
advertising to be feasible must be present,
including, as a minimum, the following:
(a) a complete, adequate and
realistic specification or purchase description;
(b) two or more responsible suppliers are
willing and able to compete effectively for
the agency‘s business; and
(c) the procurement lends itself to a firm-fixed-
price contract, and selection of the
successful bidder can appropriately be made
principally on the basis on price. .
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(B) When formal advertising is used for procurement
under a grant, the following requirements shall
apply:
(a) A sufficient time prior to the date set for
opening of bids, bids shall be solicited from
an adequate number of known suppliers. In
addition, the invitation shall be publicly advertised.
(b) The invitation for bids, including
specifications and pertinent attachments
shall clearly define the items or services
needed in order for the bidders to properly
respond to the invitation.
(c) All bids shall be opened publicly at the time and
place stated in the invitation for bids.
(d) A firm-fixed-price contract award shall be made
by written notice to that responsible bidder
whose bid, conforming to the invitation, is lowest.
Where specified in the bidding documents,
factors such as discounts,
transportation costs and life cycle costs shall be
considered in determining which bid is lowest.
Payment discounts may only be used to
determine low bid when prior experience of the
agency indicates that such discounts are generally taken.
(e) Any or all bids may be rejected when there are
sound documented business reasons in the best
interest of the program.
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3. In competitive negotiation, proposals are requested from a
number of sources and the Request for Proposal is
publicized. Negotiations are normally conducted with more
than one of the sources submitting offers, and either a fixed-
price or costs-reimbursable type contract is awarded, as
appropriate.
Competitive negotiation may be used if
conditions are not appropriate for the use of formal
advertising.
If competitive negotiation is used for
procurement , the following requirements shall
apply:
(A) Proposals shall be solicited from an adequate number
of qualified sources to permit reasonable competition
consistent with the nature and requirements of the
procurement.
The Request for Proposal shall be
publicized and reasonable request by other sources to
compete shall be honored to the maximum extent
practicable.
(B) The Request for Proposal shall identify all significant
evaluation factors, including price or cost where
required and their relative importance.
(C) The agency shall provide mechanisms for technical
evaluation of the proposals received; determinations
of responsible offerors for the purpose of written or
oral discussions, and selection for contract award.
(D) Awards may be made to the responsible offeror whose
proposal will be the most advantageous to the
procuring party, price and other factors considered.
Unsuccessful offerors will be notified promptly.
(E) The agency may utilize competitive negotiation
procedures for procurement of architectural/engineering
professional services,
whereby competitor‘s qualifications are evaluated and
the most qualified competitors‘ qualifications are
selected, subject to negotiation of fair and reasonable
compensation.
----------------------------------------
4. Noncompetitive negotiation is procurement through
solicitation of a proposal from only one source, or after
solicitation of a number of sources, competition is
determined inadequate. Noncompetitive negotiation may be
used when the award of a contract is infeasible under small
purchase, competitive bidding (formal advertising) or
competitive negotiation procedures. Circumstances under
which a contract may be awarded by noncompetitive
negotiation are limited to the following:
(A) the item is available from only a single source;
(B) after solicitation of a number of sources, competition
is determined inadequate;
(C) public exigency or emergency when the urgency for
the requirement will not permit a delay incident to
competitive solicitation; and
(D) sole source procurement for supplies, equipment,
construction, and services valued at .................or
more must have prior approval of the agency.
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5. Any other method of procurement must have prior
approval of the agency.
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6. Contract Pricing.
(A) The cost plus a percentage of cost and
percentage of construction cost method of
contracting shall not be used.
(B) The agency shall perform some form of
cost/price analysis for every procurement action,
including modification or change orders.
.07 Small, Minority, and Women‘s Business Enterprises
and Labor Surplus Area Firms.
(A) The agency may solicit qualified small,
minority, and women‘s businesses whenever
they are potential sources.
(B) The agency will procure goods and services
from labor surplus areas when economically
feasible.
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PROCUREMENT RECORDS: The agency shall maintain
records sufficient to detail the significant listing of a
procurement, including the rationale for the method of
procurement, selection of contract type, contractor selection
or rejection, and the basis for the cost or price.
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Q. 3: Brunswick Corporation centralizes its procurement decisions at the head quarters level. Discuss how it would approach purchasing differently than a competitor that decentralizes purchasing across various plant locations.
THE MAJOR FACTORS AFFECTING THE CENTRALIZATION.
1.Efficiency/Savings
2.Product Standardization
3.Favoritism
4.Strategic Procurement
5.Network effects and Standards
6.Markets Dynamics
7.Emergencies
8.Information Costs for Decision Making
9.Bargaining Power
10.Monitoring Contractors’ Performance
11.E-procurement
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1.Efficiency/Savings
Three main channels:
1. Higher volumes (demand side)
• Lower unit costs (supply side) + savings through competitive
processes
• Lower Procurement organizational/transaction costs + savings
• Bigger risks of being “out of the market” for firms depending on
public demand + savings through competitive processes
2. Specialization: Centralized procurement calls for more specialized
expertise
3. Knowledge and Information Sharing: collect, up-date and elaborate
information from seemingly unrelated markets (e.g., printers and PCs;
insurance and banking)
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2.Product Standardization
Two main forces:
1. Better information gathering and processing
• Standardized products go hand in hand with low degree
of demand heterogeneity
2. Higher suppliers’ economies of scale
• Limits to centralization may arise owing to physical
constraints (e.g., electricity purchased by local
authorities that are scattered over a vast geographical
area)
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3.Favoritism
Local authorities can rely on better information on their needs
(when products are not entirely standardized) and on suppliers’
characteristics.
Repeated interaction (most purchases don’t take place only once in
a life time) may favor the emergence of a “personal acquaintance”
between buyers and sellers, and thus some forms of favoritism
(through lobbying, not necessarily corruption).
Centralized competitive procurement processes may suffer less from
favoritism, BUT generate a bigger pressure in terms of information
gathering and processing.
1.STRATEGIC RAW MATERIAL.
2.CORE RAW MATERIALS.
3.ENVIRONMENTAL RELATED MATERIALS.
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5.Networks and Standards
Network industries account for a sizeable share of modern
economies: e-markets (B2B, B2C, and B2G platforms), software
(e.g., Operating Systems), banking (e.g., ATM networks)
Network effect: the value to any member of the network increases
with the size of the network. Coordination among
users is paramount
Centralized procurement may play a crucial role in expanding
existing networks or, more crucially, in coordinating users’ switch
from an old to a new network
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6.Market Dynamics
In rapidly changing markets (e.g., hi-tech, biomedical), officers in
local OFFICES may have access to ‘local’ information (e.g.,
industrial districts).
Officers of Central Procurement Agencies may, however, have access
to better information about ‘global’ trends.
Hybrid models appear best suited to solve such a tension
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7.Emergencies
Urgent need for a commodity or service. Time too tight for the
organization of a competitive tendering: first-aid goods after a
natural disaster.
Degree of centralization depends upon (i) whether the emergency
occurs at local rather than national level; (ii) nature of
commodity/service to be procured.
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8.Decision Information Costs
Information-gathering costs tend to increase with the degree of
centralization.
Decision information costs depend on two main factors:
1. Degree of organizational fragmentation: the more
highly fragmented an organization the higher
information costs for decision taking.
2. Nature of good/service: information costs are
inversely related to the degree of product
standardization
Progress of ICT steadily reduces the cost of information gathering
and processing. This should induce a positive correlation between
e-procurement and centralization.
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10.Monitoring Contractors’ Performance
When quality of contractual performance is “soft” (i.e., difficult to
describe in a contract clause) centralized monitoring looks like an
extremely hard task.
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11.E-Procurement
Development of e-procurement:
• reduces the costs of information collection;
• standardizes the nature of information.
Higher centralization
Moreover, centralization magnifies the benefits of e-procurement.
The value of web-based procurement system is the highest for
organizations which, by introducing e-procurement systems, can
undertake centralized procurement activities that they did not have
before.
===========================
9.Bargaining Power
Demand aggregation raises buyer’s bargaining power via enhanced
competition among suppliers (not necessarily via a higher number
of participants, rather via bigger stakes, that is, bigger contracts).
Higher bargaining power leads, in general, to higher savings even
when economies of scale are mild.
Large volumes may, however, discriminate against small and
medium enterprises which do not have economic capacities to
serve ‘national’ contracts.
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Q.4 : Why is the cost of serving a long- standing customer for less than the cost of acquiring a new customer?
COST OF ACQUIRING A NEW CUSTOMER INVOLVES
EXTERNAL
-advertisement cost
-direct mailing cost
-personal selling.
-presentation material cost.
-follow up visits.
-samples distribution.
-demonstration cost.
etc
INTERNAL
-staff time.
-management time.
etc
ALL THESE ADD UPTO ROUGHLY
[ 7.5 % TO 15% ] of the sales value for the product.
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COST OF SERVICING OF LONG STANDING CUSTOMERS.
Keeping Customers
1) Provide more frequent progress reports: Show your customer or client the work you’ve been doing and the results you’ve achieved. This will help answer un-asked questions and allay latent fears.
2) Get some face time: If you deal mostly by email, web-connection or phone, make an effort to meet in person. “Meeting in person says you are interested and gives you an opportunity to literally see things that you can help address,” says King.
3) Ask for feedback: Never assume a customer is completely satisfied. Throughout the work process, ask how your customer feels about what you’re doing. Then take action on any suggestions. Think of yourself as a waiter who checks back periodically throughout the meal to see if everything is okay.
4) Tune your offering: As proud as you may be about your product or service, remember it’s being made or done for the customer. Make certain you know what they want, and when they want it.
5) Be open to change: Especially how, things change. Customers may want to change terms, conditions, purchase orders, payment processes or other things. Customers will appreciate if you show a willingness to work with them on adapting to new conditions.
6] Invite the customer management to visit your company.
7] free samples of new products for testing.
8] free training of the customer staff.
etc
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Q. 5: Discuss some of the possible objectives a manufacturer of business jet airplanes might have for the internet strategy.
THE MAJOR OBJECTIVES OF THE BUSINESS JET
PLANES MANUFACTURER IS TO MANAGE THE
CUSTOMER RELATIONS MANAGEMENT.
THE INTERNET brings in flexibility / reliability/ sensivity into
the customer relationship management .
Customer relationship management (CRM) consists of the processes a company uses to track and organize its contacts with its current and prospective customers. CRM software is used to support these processes; information about customers and customer interactions can be entered, stored and accessed by employees in different company departments. Typical CRM goals are to improve services provided to customers, and to use customer contact information for targeted marketing.
From the outside, customers interacting with a company perceive the business as a single entity, despite often interacting with a number of employees in different roles and departments. CRM is a combination of policies, processes, and strategies implemented by an organization to unify its customer interactions and provide a means to track customer information. It involves the use of technology in attracting new and profitable customers, while forming tighter bonds with existing ones.
CRM includes many aspects which relate directly to one another:
1.Front office operations — Direct interaction with customers, e.g. face to face meetings, phone calls, e-mail, online services etc.
2.Back office operations — Operations that ultimately affect the activities of the front office (e.g.,accounts-billing ,maintenance,planning ,marketing,advertising,finance,manufacturing etc ]
3.Business relationships — Interaction with other companies and partners, such as suppliers/vendors and retail outlets/distributors, industry networks (lobbying groups, trade associations). This external network supports front and back office activities.
4.Analysis — Key CRM data can be analyzed in order to plan target-marketing campaigns, conceive business strategies, and judge the success of CRM activities (e.g., market share, number and types of customers, revenue,profitability ]
Operational CRM
Operational CRM provides support to "FRONT OFFICE '' business processes, e.g. to SALES,MARKETING and service staff. Interactions with customers are generally stored in customers' contact histories, and staff can retrieve customer information as necessary.
The contact history provides staff members with immediate access to important information on the customer (products owned, prior support calls etc.), eliminating the need to individually obtain this information directly from the customer. Reaching to the customer at right time at right place is preferable.
Operational CRM processes customer data for a variety of purposes:
-Managing campaigns
-Enterprise marketing automation.
-Salesforce automation
-Sales management system
Sales (SFA)
Sales Force Automation automates sales force-related activities such as:
-Activity Management: Scheduling sales calls or mailings
-Tracking responses
-Generating reports
-Opportunity management and assessment
-Account management and Target account selling
-Automated sales order processing.
Analytical CRM
Analytical CRM analyzes customer data for a variety of purposes:
-Designing and executing targeted marketing campaigns
-Designing and executing campaigns, e.g. customer acquisition, cross selling ,up-selling .
-Analysing customer behavior in order to make decisions relating to products and services
(e.g. pricing, product development ]
-Management information system (e.g. financial forecasting and customer profitability analysis)
Analytical CRM generally makes heavy use of data mining and other techniques to produce useful results for decision-making
[Sales Intelligence CRM
Sales Intelligence CRM is similar to Analytical CRM, but is intended as a more direct sales tool. Features include alerts sent to sales staff regarding:
-Cross-selling/Up-selling/Switch-selling opportunities
-Cuatomer drift
-Sales performance
-Customer trends
-Customer margins
-Customer alignment
Campaign Management
combines elements of Operational and Analytical CRM. Campaign management functions include:
Target groups formed from the client base according to selected criteria
Sending campaign-related material (e.g. on special offers) to selected recipients using various channels (e.g. e-mail, telephone, SMS, post)
Tracking, storing, and analyzing campaign statistics, including tracking responses and analyzing trends
Collaborative CRM
Collaborative CRM covers aspects of a company's dealings with customers that are handled by various departments within a company, such as sales, technical support and marketing. Staff members from different departments can share information collected when interacting with customers. For example, feedback received by customer support agents can provide other staff members with information on the services and features requested by customers. Collaborative CRM's ultimate goal is to use information collected by all departments to improve the quality of services provided by the company.
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CRM help it to understand CUSTOMER behavior
The better a business can manage the relationships it has with its customers the more successful it will become. Therefore IT systems that specifically address the problems of dealing with customers on a day-to-day basis are growing in popularity.
An effective CRM systems provides a good understanding of
THE CUSTOMER BUYING DECISION MAKING PROCESS.
Behind the visible act of making a purchase lies a decision process that must be investigated.
The purchase decision process is the stages a buyer passes through in making choices about which products and services to buy. :
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5 STAGES OF CUSTOMER BEHAVIOR
1.problem recognition,
-PERCEIVING A NEED
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2.information search,
SEEKING A VALUE
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3.alternative evaluation,
ASSESSING VALUE
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4.purchase decision, and
BUYING VALUES
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5.post-purchase behavior
VALUE IN CONSUMPTION OR USE
========================
A. Problem Recognition: Perceiving a Need
Perceiving a difference between a person's ideal and actual situations big enough to trigger a decision.
Can be as simple as noticing an empty milk carton or it can be activated by marketing efforts.
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B. Information Search: Seeking Value The information search stage clarifies the options open to the consumer and may involve
Internal search
Scanning one’s memory to recall previous experiences with products or brands.
Often sufficient for frequently purchased products.
External search
When past experience or knowledge is insufficient
The risk of making a wrong purchase decision is high
The cost of gathering information is low.
The primary sources of external information are:
Personal sources, such as friends and family.
Public sources, including various product-rating organizations such as Consumer Reports.
Marketer-dominated sources, such as advertising, company websites, and salespeople
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C. Alternative Evaluation: Assessing Value The information search clarifies the problem for the consumer by
(1) Suggesting criteria to use for the purchase.
(2) Yielding brand names that might meet the criteria.
(3) Developing consumer value perception.
A consumer's evaluative criteria represent both
the objective attributes of a brand (such as locate speed on a portable CD player)
the subjective factors (such as prestige).
These criteria establish a consumer's evoked set
the group of brands that a consumer would consider acceptable from among all the brands in the product class of which he or she is aware
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D. Purchase Decision: Buying Value
From whom to buy
which depends on such considerations
Terms of sale
Past experience buying from the seller
Return policy.
When to buy
which can be influenced by
store atmosphere
time pressure
a sale
pleasantness of the shopping experience.
Do not buy
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E. Postpurchase Behavior: Value in Consumption or Use
After buying a product, the consumer compares it with expectations and is either satisfied or dissatisfied.
Satisfaction or dissatisfaction affects
consumer value perceptions
consumer communications
repeat-purchase behavior.
Many firms work to produce positive postpurchase communications among consumers and contribute to relationship building between sellers and buyers.
Cognitive Dissonance. The feelings of postpurchase psychological tension or anxiety a consumer often experiences
Firms often use ads or follow-up calls from salespeople in this postpurchase stage to try to convince buyers that they made the right decision.
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F. Involvement and Problem-Solving Variations
NO. OF BRANDS EXAMINED
NO. OF SELLERS CONSIDERED
NO. OF PRODUCT ATTRIBUTES EVALUATED
NO. OF EXTERNAL INFORMATION SOURCE USED
NO. OF HOURS/ DAYS SPENT
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Consumers may skip or minimize one or more steps in the purchase decision process depending on
the level of involvement
the personal, social, and economic significance of the purchase
Three characteristics of high-involvement purchase
is expensive,
can have serious personal consequences, or
could reflect on one’s social image.
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