Case-1.1- Schmidt and Co.

Case Summary:Mike Schmidt, the owner of Schmidt & Co, is tensed as to hispresent business condition, especially one of his consumers’present business conditions. Mike’s company deals withbusiness products which are used to reproduce the finalproducts. Ferguson, one of his consumers, is facing salesdecline problem due to some defect of his products. Mike’sDaughter Emily found that due to the gas tank, which isproduced from Mike’s company, Ferguson’s generators ‘sales areslipping. As Ferguson’s sale has an indirect impact on Mike’scompany’s sales figure so it has a responsibility to find outthe market gap. Relationship is the key to a successfulbusiness marketing company. And it is important to locate theneed and demand of final customers to provide best rawmaterials. With a view to increasing market share the businessproducts producer and the consumer product producer shouldhelp each other. Through this case, we will find that howSchmidt assist Ferguson to sustain his business activities.

Questions and Answer Analysis

Q1: What kind of buyer or customer, is Ferguson to Schmdt? Whattype of product does Schmidt sell?

A type of commerce transaction that exists between businessessuch as those involving a manufacturer and wholesaler, or awholesaler and a retailer. Business to business refers tobusiness that is conducted between companies, rather thanbetween a company and individual consumers. This is incontrast to business to consumer (B2C) and business togovernment (B2G). A typical supply chain involves multiple

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business to business transactions, as companies purchasecomponents and other raw materials for use in itsmanufacturing processes. The finished product can then be soldto individuals via business to consumer transactions. Fergusonis users of business consumer to Schmidt as Ferguson will buygas tanks to produce the generators which are the final goods.

Schmidt is selling products which are made by using a plastic-injection manufacturing process like gas tanks, water tanksand others. Schmidt’s products are not actually final goods;their products are used to make the main or final products.Like Ferguson purchases gas tank from Schmidt to makegenerators which would be sold on the market for the finalconsumption.

Q2: What should Schmidt do, assuming that ferguson’s Situation istypical of Schmidt other customer?

As relationship between buyers and sellers tends to bestronger in business marketing so Schmidt should takeFerguson’s problem like their own problem. Because in long runFerguson’s sales figure performance will affect on Schmidt’ssales figure. Ferguson purchases gas tank from Schmidt andthen he produces generators for the final consumption.Ferguson demands one and half gallons which is not perfect forthe final product. But he is using this amount and losing hismarket share. Literally, Mr. Mike thinks that is Ferguson’sheadache not his. But he forgot that if Ferguson’s sales falldown in long run Schmidt’s sale will negatively affected. ButMike’s daughter Emily got the point and recommended his fatherto take some initiatives so that Ferguson loses his sales. Ifthey don’t understand Ferguson’s market, they may lose theirown market.

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Each and every company starts with a vision that the visionreflects the stage of the organization. The company who arenot producing products for the end users are not responsibleto find out the demand of the final consumers. But sometimesthe business marketing companies can add value by adding morefeatures to their product so that their consumer’s product mayperform well at market. Schmidt & Co should come forward tosolve the problem of Ferguson’s. Because business marketinglargely depends on relationship marketing and the main themeof relationship marketing is to assist his/her partner attheir danger period.

Case 2.1 Mac OS Licensing

Case SummaryPage | 3

Apple computer entered into licensing to increase its marketpenetration. The objective was to reduce competition amongcompanies like IBM, Motorola and to create common hardwarereference platform. They hope they will be involved ininnovation and then respond to customer needs. Thus, theyimprove total market share. But the impact of licensingdecreases at one point. The reason is that some small systemproviders were carving away the market share. That’s whyApples annual volume decreased gradually. At that time, Appledecide to follow the acquisition strategy. Verticalintegration is the way that Apple can take to increase themarket share. Industry partnership is also necessary in thiscase.

Questions and Answer Analysis

Questions-1: What did Apple hope to gain by licensing? Is thisoption open in the future?

From the give case, the strategies taken by Apple and thecontribution of these strategies to the success have beendemonstrated. Here, in licensing the Macintosh operatingsystem, Apple was definitely trying to increase the totalmarket penetration of its Macintosh line. The hope was toincrease its market penetration in publishing, design, anddatabase application against competitive pressures from PCpower houses Microsoft and Intel.

No, this option was not open in the future. Though Applestruggled and prodigal founder Steve Jobs began to assert moreinfluence in the company from his place, there were signs thatlicensing would end. The new system providers were carvingaway parts of the market that traditionally belonged to Applealone. The sales data indicated that, instead of expanding themarket, clone makers were carving up Apple’s customer base.Thus, it had been found that licensing would end.

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Questions-2: What were licensees looking for? Where do they gowithout new Apple technology?

The licensees were looking for the following:

Grow market share by associating it products with a brandname and image that transcend the intrinsic retail valueof the product manufactured.

Increase market penetration. Create common hardware reference platform (CHRP). Respond to innovation, competition & customer needs. Build competitive advantages over competitors with weaker

or no brand awareness Generate greater revenue without the start up costs

associated with brand development and promotion. Increase awareness of product offerings. Attract new customers to existing products. . Generate incremental revenues through the sale of

licensed product over and above core non-brandedproducts.

The key purpose of the licensees was to create the CommonHardware Reference Platform (CHRP). This move freed Apple fromexclusive responsibility of hardware design and brought inbroad industry participation.

Questions-3: Could the license arrangements have been structureddifferently?

Yes, licensing arrangements could have been structureddifferently. Vertical integration (bringing a function ortechnology within the boundary of the firm) could beattributed as the cause of some of Apple’s problems. Goalstend to be shared and, overall, control of activities isenhanced. The advantage of a vertically integrated company isthe ability to have quality control. The two best reasons forinvesting company resources in vertical integration are to

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strengthen the firm’s competitive position and to boost itsprofitability. Three things are important in the computermarket:

Application/ software Operating system Hardware

Rather than competing with any of these providers,coordination of manufacturing, research, selling and otherfunctions can be enhanced by a firm’s own formal and informalcommunication systems, structured work roles and decisionmaking processes. As Apple controls all aspects of the systemdesign and manufacturing, thus collaboration is necessarybetween different companies, though the single company can “doit all”. The conflict of interest within the company may hurtthe performance of the entire product line. So, industrypartnership is necessary in this case.

Questions-4: How did customers fare under licensing?

Licensing affect customers by the following way:

Increases awareness of the brand and its core productsamongst consumers who otherwise might not be brand aware.

Helps to reinforce brand message and position in themarketplace.

Attracts new customers to the brand name. Allows consumers to acquire authorized rather than

illegal or unauthorized products using the brand name,marks and logo.

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Enhances the importance of the brand name to existingcustomers.

Builds and strengthens the brand image beyond traditionalboundaries and builds brand value.

Case 3.2 Newell Industries

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Case SummaryJill Newell, daughter of founder Jake Newell performs thefunctioning of purchasing. Most off Purchasing were donethrough Sawyer industries, a distributor. But one point Sawyerwas unable to deliver the required new equipment timely. So,Jill Newell of Newell industries was thinking about other bestalternative option. At that moment, Jim came to Jill’s officewith a special gift of tour. He tried to keep relation withJill and promised not to do the previous delay again. Herethis is the considerable matter for Jill whether to accept ornot the gift. This case actually states the supplier statesthe supplier evaluation system and the process of measuring acompany’s person.

Questions and Answer Analysis

Questions-1: Is there an ethical problem with Jill accepting the gift?Why or why not? What factors could influence your decisionregarding the ethics of accepting the gift?

Purchasing is an area where ethics are very important. Nowethics are of particular concern to this purchasingmanagement. In purchasing, there are several key issuesconcerning ethics. Among them, one activity is especiallyworrisome: - gift giving. From the given case, there exists anobvious ethical problem associated with Jill Newell acceptingthe gift. There is an appropriate logic behind this statement.Many believe that giving gifts is an effective activity thatenhances their selling ability by strengthening therelationships. But research indicates that gift giving is notas effective as managers think and may cause problem for

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vendors. Besides that, there is an ethical issue. It impliesan obligation to do business with the selling firm even at theexpense of the purchasing firm. Buyers become biased in makingpurchasing decision. In the case, Jill Newell has taken theresponsibility of purchasing new equipment, most of which werepurchased through Sawyer Jim, owner of Sawyer industries. Butat one point, Sawyer was unable to deliver the required newequipment in time, causing significant problems in production.Again, there were a lot of problems with material handlingsystem. At the time, when Jill was thinking about otheroptions, Jim, the owner of the sawyer met with Jill Newellabout two weeks before Christmas and offered a gift ofattractive tour package. In fact, it is not a fair practiceand in particular this job is unethical.

Now the question is what are the factors that could influenceour decision regarding the ethics of accepting the gift?

Actually, ethical decisions are difficult for many reasons.First, people are not always objective and rational during thedecision making process. Secondly, facts are often overlookedand consequences might not be considered. Finally, personalneeds, company policies, family influence and religiousbackground all shape a person’s value system. However, thefollowing factors could impact the decision of accepting thegift:

Traditionally, gift giving and taking has long been anaccepted and popular practice. About 97 percent of allbuyers accept the gifts simply. They consider onlytemporary benefit. But they do not take into account itslong term effect. They are easily convinced by theirsellers and continue the relationship.

In such a case, buyer may think about the mission of theorganization that could be maintained or hampered byaccepting the gift.

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Buyer may accept or not the gift after considering itsimpact on the production flow and business profit of thecompany.

Another factor is that company policies concerningpurchasing might influence the ethical behavior of thebuyer. How will acceptance of the gift be perceived bythe company members? These polices cover such things asis it acceptable to receive a gift, when is it possibleto accept a gift and how large a gift may be. All thesethings influence employees to take decision regardingaccepting the gift or not.

Buyer may take decision of straight rebuy where othervendors are not considered. They think that vendors arelikely to satisfy them. So, they might not takeappropriate decision by considering ethical conduct.

In contrast to the strategy of remaining loyal, buyersmay consider many vendors when performance or economicrisk is greater. Spreading purchases among severalvendors reduces performance risk.

The above factors could be considered by the buyers of anorganization when making decisions regarding the ethics ofaccepting the gift.

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Questions-2: One problem that Jill may have had is the lack of a formalsupplier evaluation system. What components should such a system have?How would she measure Sawyer’s performance on those components? Thinkas specifically as you can as to how you would measure a company’sperformance.

Effective purchasing can be a source of competitiveadvantage for a company. So, every purchasing departmentshould have a formal supplier evaluation system. To evaluatesuppliers, companies compare and weigh benefits using amultiattribute process. This process requires purchasers toenumerate the desired benefits and rate the importance ofeach benefit. Then each vendor is evaluated and scored oneach benefit. The ratings of importance and the vendor’sscores are multiplied for each benefit, and then summed toarrive at a total score. The vendor with the highest scoreis the one whose product is selected. Moreover, thefollowing attributes are most important in evaluating thesuppliers:

Quality products and services in the correct amountswhen needed.

Availability of products and services. On-time delivery. Repair & servicing capabilities. Technical aid & advice. Performance history. Financial health. Organizational motivation and quality of employees. Reputation. Geographic location. Ethical corporate behavior. Honest communication. Competitive prices. Willingness to commit to a partnership. Corporate culture.

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There are some tips that help to track company performance andultimately increase the company’s overall productivity. Fromour viewpoint, we would like to consider the following aspectswhen measuring the company’s performance:

Establish performance indicators or determinecharacteristics.

Develop Supplier Rating and Incentive Program (SRIP). Classify multiple suppliers & vendors. Devise evaluation method like surveys, system metrics and

software applications. Consider alternative strategic partnership arrangements

and select the appropriate partner. Develop performance based evaluation after the products

or services have been delivered. Consider strategic supplier performance review that

includes consistent measurements for establishingpositive relationship with new suppliers and evaluatingcurrent performance of existing strategic suppliersaccording to the expectations of the buying firm.

Consider multiple sources that can guarantee anundisrupted supply of parts. If something goes wrong withone supplier, other can deliver all the needed partswithout a disruption.

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Case SummaryThe CEO of SRI International named Akshay Menon is in a fix indeciding to purchase a scanner for the company. As he is ademocratic minded, he asked to know the perception of severalhigh ranked officers regarding the purchase decision. In thecase we see that there are several options to purchase thescanner. And several parties like finance officers, productionmanagers, HR manager in the company are trying to influencethe CEO to purchase the scanner what is the best as their ownchoice. As several managers suggest several branded scanner,the CEO is facing a great problem in deciding the best option(scanner) to purchase based on his subordinates.

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Case 4.1: SRI International

Questions and Answer Analysis

Question 1: List the roles that each person plays in the buyingcenter. Can you identify where Menon is in making a decision, andwhat he should do next? Other than Menon, who is most importantand why?

In a buying centre, more than one person is involved; thegroup of participants in the company is called the buyingcentre. According to the case, in making the decision aboutscanner several people were involved. Based on the case Itried the best to determine the role of each participant inthe buying centre:

Akshay Menon (CEO): Initiator, Decision Maker George Whitaker (CFO): Controller Margie Cabellero (PM): Influencer George Whitaker (CFO): Influencer Gloria Sigel (HR): Influencer Margie Cabellero (PM): User

It is very difficult to say who is the most important in the

buying centre other than Menon. It is mainly depends on how

decision maker evaluate the perception of whose people. Yet I

think other than Menon, Margie Cabellero (Production Manager)

is important in this situation. In this conflicting situation,

I think Menon should discuss with the persons who are directly

involved with work or work with scanner.

The decision maker Akshay Menon can emphasize mostly on the

perception of Margie Cabellero because he is directly involved

with work and know what will be better for them.

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Question 2: Identify sources of risk for each member of the buyingcenter. What are they risking? How important does that risk seemto be? How would you reduce that risk if you were a scannersalesperson?

Risk is usually thought of in terms of the probability of an

outcome and the importance or cost associated with the

outcome. Risk can be three types in nature. Financial risk or

economic risk is associated with the cost of product and the

potential lost revenue if the product breaks down or doesn’t

perform as advertised. Performance risk is associated with the

overall performance of the new product. And social risk or ego

risk occurs when the product doesn’t meet the approval of an

important reference group. From the case it can determine the

risks from the angle of each members of the buying centre in

the flowing ways:

Akshay Menon (CEO) as a decision maker faced all sorts of

risks mentioned above like financial, performance and

social risk.

Margie Cabellero (PM), on the other hand, faced

performance risk only.

George Whitaker (CFO) faced both the financial and

performance risk.

Gloria Sigel (HR) faced both performance and social risk.

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All of the risks were important from their own angle. But the

financial and performance risk seem to be important to make

the decision.

As one of the salesperson of the scanner I can take several

steps to reduce those risks associated with the purchase

decision and influence them to buy my product in a

satisfactory manner by doing following:

o Most of them actually worried about performance risk. To

reduce that risk I can offer them a free trial of the

product.

o To reduce the financial risk our guarantee and warranty

policy can assure them. Besides I can offer the scanner

them on credit or installment basis payment.

o And finally to reduce the social risk I can introduce

them with some of existing user groups of our scanners.

Besides I can arrange a seminar to reduce the conflict

regarding the purchase decision.

Question 3: Assume you market scanners, and this situation ispretty of what you find. How would this information influence yourmarketing activities? Be as specific as possible.

The buying centre described in the case is an average example

of purchasing scanner. And it is true that there are a lot of

conflicts regarding the purchase decision in such type of

buying centre. Conflict can have constructive or destructive

outcomes. These sorts of destructive outcome hamper the

marketing activities from the perspective of marketer. From

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the perspective of a marketer, the influences of such

conflicts on marketing activities are given below:-

Segmenting difficulties: For such type of conflicts

marketer of the product can’t determine the actual buyer

and the most influencer. As a result they can’t persuade

the appropriate parties of buying centre.

Targeting difficulties: No selling effort can be fruitful

without targeting the actual party who has a great effect

on the decision maker. A dealer of such type of buying

centre has to face targeting problem in sales pipeline.

Positioning difficulties: All parties of buying centre

works as a conflicting brain and a conflicting brain

can’t receive a specific marketing stimuli significantly.

So positioning strategy of a dealer is hampered to meet

the purchasing decision of buyer.

Difficulties in communication: In such situation a dealer

may be confused to communicate with actual parties to

demonstrate the product. A dealer may not be aware to

whom and how to communicate to persuade the influencing

parties. And sometimes traditional communication system

may not work in such situation.

Overall dissatisfaction: A purchasing decision based on

such conflicting brain may arise different problems in

working place. If a party is ignored in such purchasing

decision, the party always tries to find fault of the

purchasing decision. As a result, most of the time

dissatisfaction is found among employees toward both

purchasing agent and dealer of the product.

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In the conclusion stage, it can be said that a marketer needs

to consider all threats regarding the marketing of the product

to such buying centre. And a marketer needs to be tactical and

strategic to handle such type of buying centre.

Case- 8.2: Hi-Flier product

Case SummaryHi-Flier Products is a distributor of electronic componentswhich are used in the assembly of computers, televisions, andall types of appliances. Pruitt realized that the Konoltaproducts were the biggest drain on profits. But Konolta didnot introduce new products in that year. For that reason,Pruitt and his sales team can not increase prices in thatyear. Along with they had to discount 18 percent to get salesand beat Hibachi (Korean manufacturer). At the same time,Pruitt was excited about the possibilities with Singh, theIndian manufacturer of specialty ceramics. Within 8 monthsthey got 12 percent of total sales. To get this sale, they hadto pay discount. But the early results were very promising.

Questions and Answer Analysis

Questions-1: What factors should HI-Flier take into account whenconsidering whether to drop Konolta?

In case of dropping the Konolta, Hi- Flier can consider thefollowing factors:

Select a Milking Strategy:

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A "milking" strategy involves getting the most out of theproduct in terms of sales without spending any additionalfunds to support the product. This strategy works best if asizable market remains that is loyal to the product and notvery price sensitive. A customer base with thesecharacteristics allows a marketer to ride through the declinestage for some time while earning sizeable profits. Konoltahas still now a sizable market. So Hi-Flier can milk Konoltain order to increase this product.

Adapt to decreasing demand:Demand for the product decreases during the decline phase. Asit decreases, it often becomes less predictable. Just as it’simportant to capture the upward trend of the growth phase,it’s equally important to capture the rate of the decline sothat marketer can adjust capacity and inventory levels. Sohere Hi-Flier can adapt to decreasing demand.

Reduce the price:

Product prices tend to also decline in this phase. However, insome cases, prices may actually increase as the product andcompeting products become hard to find. Often, when a firmannounces a product’s exit from the market, consumers purchasethe product before it becomes extinct. This buy-it-before-it’s-gone mentality may temporarily raise the konolta’s price.

Attract the new market:

As Konolta is in decline stage, so it can attract the newmarket by adding new features, colors etc. This strategy willbe helpful for Hi-Flier to stay in the market.

Consolidate the supply chain:Hi-Flier may probably be looking for ways to reallocate thesupply chain to other products they are making or developing.So Hi-Flier may consolidate suppliers to produce the lowervolumes and to reduce costs.

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Question 2: At what stage of the PLC is the Konolta line? The Singhline? What can Pruitt do to speed acceptance of Singh products?When will he know that discounting is no longer needed?

Konolta line is the Decline stage of PLC whereas Singh line isthe Introduction stage of PLC.

Pruitt is excited about the possibilities of Singh, Indianmanufacturer of ceramics. Within 8 months, it has achieved 12percent of total sales. Pruitt can do the following steps inorder to speed the acceptance of Singh products.

Streamline Each Stage:

Streamlining each stage means being as efficient as possiblein each stage of design process. As Singh products are inintroduction stage, so Pruitt should focus on each stage ofsupply chain to be efficient than competitors.

Launch the products world wide:

Global launch means faster sales acceleration, which leads toa faster return on the new product investment. If Singh linecan be launched globally, it would be possible to speed up thesales volume of the products.

Selective distributors:

As Singh products are in initial stage, Pruitt can useselective distributors in order to reduce distribution costalong with maintain a high good relationship with thosedistributors.

Use upgrades strategically:

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As customers need changes dramatically, companies need to useupgrades in order to adjust with changing needs. Here Singhline products should be updated to match with customers’needs.

3rdpart of question:

Pruitt is now discounting the Singh products in order to getpeople to try the products. This strategy is used to createawareness among the customers. As Singh products are unknownin the markets, So Discounting is the appropriate right now.But this strategy will not be profitable for the company forlong time period. When the products will reach in the maturitylevel or at least decline level, Pruitt should movediscounting to other strategy. Along with when sufficientnumbers of customers will be well known about the products,they can also move from discounting.

Question 3: Pruitt’s company is a distributor- they do not makeanything. What does this mean in terms of new productdevelopment? What role should Pruitt play in identifying andbuilding relationships with lead users?

Pruitt is a distributor which means that they represent eithersuppliers or customers and generate new ideas in new productdevelopment process. New product development process shouldinclude distributors because they often serve as lead users’role. As Pruitt deals with final customers, they know whatcustomers want. According to this knowledge Pruitt cangenerate new ideas in order to develop new products. In caseof new product development, Pruitt performs such activities asa distributor.

1. Fill up the gap in partner marketing skills.2. Drive partner adoption for supplier offerings, 3. Gain visibility into developing new ideas.

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4. They play a vital role in keeping lines betweenmanufacturers and users.

2nd part of question

Lead user is one develops its own solutions to problems usingavailable technology in a new or innovative way.Lead usersface needs that will be general in the marketplace, but theyrecognize these needs months or years before the market isaware. Companies that seek a product innovation position inthe marketplace should look for lead users among theircustomers.Lead users are defined as users of a given productor service type that combine two characteristics: (1) leadusers expect attractive innovation-related benefits from asolution to their needs and so are motivated to innovate, and(2) lead users experience needs that will become general in amarketplace, but experience them months or years earlier thanthe majority of the target market.

Pruitt company can identify & build relationship with Leadusers by anumbers of ways which by a are given below:

Pruitt can arrange conferences of trade associations.These conferences often include seminars concerning themost pressing problems facing a particular industry.Because lead users are those users that have foundsolutions to problems before others in their industry, SoPruitt may find them presenting their solutions atconferences. By solving particular needs of lead users,Pruitt can make long time relationship with them.

Pruitt can develop cross- functional team to work withlead users in order to make more profitable relationshipwith lead users. Say for example, 3M has been successfulin making relationship with lead users by usingstructured cross-functional team.

It can develop strong CRM strategy that will facilitatePruitt to identify the changing attitudes among the users

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of products. Therefore they can response based on therequirement of customers.

As a business marketer Pruitt can bring lead users inproduct design. If they can do this, it will beprofitable for them to build strong relationship withlead users.

Question 4: What strategies can Pruitt take to stabilize hisrelationships with customer and grow account share?

There are many strategies that Pruitt can build relationshipwith the customers to generate more repeat sales including:

1.Customer Satisfaction:

This is the first order of business for any organizationinvolved in sales. Keep the customers satisfied. Pruitt is nowgiving discounts in order to attract customers. So they shouldcontinue these facilities to keep customers until them beingloyal.

2.Build Trust and Keep it:

Building trust should start from the initial transaction allthe way to the after-sales stage. It’s a constant process ofreinforcing the relationship with the customer. Customers willtrust Pruitt if they know It is not just after making a saleor closing a deal. Trust helps to stabilize relationship withtarget customers.

3.Offer customer rewards:Customer loyalty or reward programs work well for many typesof businesses, from retail to cruise and travel. The mosteffective programs offer graduated rewards, so the more

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customers spend, the more they earn. By offering customerrewards, Pruitt can stabilize relationship with customers.

4.Hold special events:Special events create opportunity for companies to bringcustomers together. So Pruitt Company can hold special eventsto make relationship with customers grow much account share.

5.Deploy a CRM solution:Customer interactions happen across multiple channels anddepartments. Customer relationship management (CRM) softwareis designed to collect, organize, analyze, and disseminateinformation about customers. Pruitt needs to develop CRMstrategy as strong as possible to stabilize relationship withcustomers.

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Case-9.1 Still Service Center

Case Summary

Traditionally metals were distributed by small companies. Butwith the passage of time this traditional distribution systemis experiencing changes. Today, manufacturers just focus onproduction and administrative work whereas distributors aretransforming to complex distributors performing as servicecentres. Service centres are evolving from simple distributorsto complex providers of processing and informationtechnologies. These transformation leading the firms tooutsourcing.

Questions and Answer Analysis

Questions-1: Based on globalization trends, technological advancesand economic policy, what are some of the key avenues for growthwe might see in mental distribution in the next five years?

Today, the world has been globalized with the use ofinformation technology. Every spheres of our life has beenaffected by the continuous touch of technology. Now, in themetal industry, we see the domination of service centres. Itseems both the distributors, and end users are focusing ontheir specific products.

The word today has been greatly dependent on technology. Nowservice centres are performing a lot of tasks like stamping,

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cutting, transforming plate steel, coiled metals, transformingbars etc. All these work require extreme use of precisetechnologies. So, technologically developed service centresare the key avenue ofgrowth in metal industry in next fiveyears.

In this 21st century, the world is facing small and largerecession. Many developed countries are now in economicdifficulties. Therefore, we are now watching countries makingrules and regulations according to their economic needs.Somewhere, there are more taxes and tariffs. Somewhere it isless. So, another key avenue of development is to look forplaces where companies can outsource service centres to cutcosts to offer low cost to the customers in the competitivemarket.

In general, 2013 was a down year for metals prices, reflectingrising supply and weaker growth in some key emerging markets.Moving into 2014, there have been some encouraging signs thatglobal economic growth should see some progress, as evidencedby continued albeit slow improvement in the Organization forEconomic Co-operation and Development’s (OECD) globalcomposite leading indicator and a rise in the global PMI indexto 53.3 in December 2013, its highest level since May 2011.  

However, the previous super-cycle drivers of a weakening U.S.dollar namely voracious double-digit Chinese consumptiongrowth and a related flood of commodities investment demandappears unlikely to reappear anytime soon as a tide that“lifts all boats.” Consequently, looking forward, we expectmore heterogeneous price performance among metals related totheir specific price-versus-cost curve and supply/demanddynamics.

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Case 10.1 Budget Time

Case SummaryThis case is concerned with the allocation of marketingcommunication budget. Here we notice a meeting to review thebudget of a company. This case basically interprets the toolsof constructing different budget, how we can evaluate it andwhat are the effective strategies to implement them. It alsorepresent problems that we face in budgeting. Marisa, themanager for managing trade show and special event is stronglybelieve that a little change in the trade show schedule andthe increase in budget can change the story of company

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profitability. But all other managers of department are notagreeing to go with her. This create very inconvenientsituation for Marisa.

Questions and Answer Analysis

Questions-1: What type of information does Marisa need to justifyher proposed budget? Where would she go to get that information?

A marketing communication budget provides a formal process forplanning, tracking and measuring the impact of organization’sexpenditures on marketing communications activities such asadvertising, direct marketing, online or events. The budgetsets out the funding required to meet communicationsobjectives and provides a method of managing the expenditureover a budget year. Here in the case, Marisa is a new and isresponsible for managing trade shows and other special eventsin the organization. She requested trade show budget that was30 percent higher than the previous year. At this point, othermarketing communication managers ignored that proposal. Theythink that trade shows are just a wild party. So, theyrequested Marisa to cut her budget. But Marisa felt sure thatshe could increase the number and quantity if leads enough tohandle 12 percent increase in sales that management hadalready asked for. Now the question is how Marisa couldjustify her budget.

Deciding where and how to spend communication budget is knownas “Communication budget allocation”. The marketingcommunications manager generally justifies a budget based onperformance, which requires learning which tasks work when andwhy. Here, Marisa should demonstrate the effectiveness oftrade shows by describing how her proposed budget couldfacilitate the profitability of the organization by achievingtheir sales goals. Is trade show exhibit and attendance

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delivering a desirable return on investment? In fact, thereare many other meaningful ways to evaluate trade show success.The most obvious indicator of trade show success is the numberof leads generated, and those leads that result in finalsales. There are several lead-tracking and sales managementsoftware packages that can assist with this endeavor. Marisacould consider these other important methods of evaluatingtrade show success:

Meet with existing customers, which is an excellent wayto reinforce the relationship. Contact customers who planto attend, or cannot attend, and make arrangements tomeet with them before, during or after the show.

Leads are the key measure of success, but at-show salesand orders must also be included. The same can be saidfor contracts, since trade shows are an excellent placeto lay the groundwork for future contracts.

Count the number of visitors who stopped at your booth. Use trade shows to conduct own market research. Solicit

opinions and suggestions from booth visitors. Takeadvantage of this captive and well-informed audience tolearn what people really want in today’s marketplace.

Identify strategic partners. Trade shows are an idealopportunity to meet prospective partners, and Marisa caneven conduct preliminary interviews.

Gain insight into industry trends, future developments,emerging technologies, and new players on the scene. Thecompany will gain a competitive advantage that can servewell in the coming months if Marisa keeps her eyes andears open.

Research competitors. Take advantage of trade showpresence to conduct some competitor reconnaissance.Gather useful and relevant information that will benefitthe company’s own trade show and marketing strategies.

. Learn from other exhibitors, and acquire new products,technologies and processes that will improve yourbusiness.

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Evaluate the success of trade show exhibit by seekinghonest feedback from visitors. Use the trade show togather suggestions for improvement, and then fine-tuneexhibit for even greater effectiveness at future shows.

Lead generation and final sales will always be a key elementto calculate trade show return on investment. However, itshould be remembered that there are many other important meansto evaluate the success of trade show attendance.

Marisa could get information from the following sources:

Company records. Forecasts of future results. Competition in the marketplace. Secure funding. Performance of other companies. Target customers.

These are some effective source from which Marisa can getinformation.

Questions-2: Similarly, how would any other marketing managersjustify their budget requests?

Other marketing managers could justify their budget requestsby demonstrating the campaign efficiency. Measuring marketingcommunication is essentially driven by the quest to assessboth efficiency and effectiveness. Being effective meansproducing powerful effects. Financial transparency is often agood way to reinforce the idea that marketing managers own themarketing plans. It is essential for the managers to betterunderstand and articulate reasonable key success factors forcampaigns to come ahead. This helps both the company andvarious vendors supporting the initiatives.

For example, we can consider the advertising budget foradvertising manager. In order to keep the advertising budgetin line with promotional and marketing goals, a business ownershould start by answering several important questions:

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1. Who is the target consumer? Who is interested inpurchasing the product or service, and what are thespecific demographics of this consumer (age, employment,sex, attitudes, etc.)? Often it is useful to compose aconsumer profile to give the abstract idea of a "targetconsumer" a face and a personality that can then be usedto shape the advertising message.

2. What media type will be most useful in reaching thetarget consumer?

3. What is required to get the target consumer to purchasethe product? Which appeals are most likely to persuadethe target consumer?

4. What is the relationship between advertising expendituresand the impact of advertising campaigns on product orservice purchases? In other words, how much profit islikely to be earned for each dollar spent on advertising?

Answering these questions will help to define the marketconditions that are anticipated and identify specific goalsthe company wishes to reach with an advertising campaign. Oncethis analysis of the market situation is complete, a businessmust decide how best to budget for the task and how best toallocate budgeted funds.

In summary, measurement makes it easier for the marketing teamto figure what worked and what did not. As important, it helpsto report results to senior management and justify next year’smarketing budget.

Questions-3: What type of budgeting does it seem the companydoes now? What should the company do? What challenges will tomface in implementing a different budgeting process? How shouldTom go about that implementation?

From the case, we have found that the company is approachingobjective-and-task method for budgeting. It is also known asbudget buildup method. The best method for budgeting in orderto reach strategic objectives is the objective-and-taskmethod. To establish a budget by this method, one needs acoordinated marketing program with specific objectives based

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on a thorough survey of markets and their potential. Becauseof the importance of objectives in business, the task andobjective method is considered by many to make the most senseand is therefore used by most large businesses. The method hasthree steps:

Defining objectives. Determining objectives. Estimating costs.

In this situation the company should do the following:

The decision maker should balance what can be affordedwith what is desired.

The marketing director should examine the effectivenessof particular strategy.

Information should be collected regarding marketingcommunication tools and the method should be strategydriven and learning based.

With this method, a business needs to first establish concretemarketing objectives, often articulated in the "sellingproposal," and then develop complementary advertisingobjectives articulated in the "positioning statement." Afterthese objectives have been established, the advertiserdetermines how much it will cost to meet them. Of course,fiscal realities need to be figured into this methodology aswell. Some objectives (expansion of area market share by 15percent within a year, for instance) may only be reachablethrough advertising expenditures beyond the capacity of asmall business. In such cases, small business owners mustscale down their objectives so that they reflect the financialsituation under which they are operating.

There are several allocation methods used in developing abudget. The most common are listed below:

Percentage of Sales method Objective and Task method Competitive Parity method Market Share method Unit Sales method All Available Funds method

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Affordable method

It is important to notice that most of these methods are oftencombined in any number of ways, depending on the situation.Because of this, these methods should not be seen as rigid butas building blocks that can be combined, modified, ordiscarded as necessary. Remember, a business must be flexible—ready to change course, goals, and philosophy when the marketand the consumer demand such a change.

Percentage of Sales Method

Due to its simplicity, the percentage of sales method is themost commonly used by small businesses. When using this methodan advertiser takes a percentage of either past or anticipatedsales and allocates that percentage of the overall budget toadvertising. But critics of this method charge that using pastsales for figuring the advertising budget is too conservative,that it can stunt growth. However, it might be safer for asmall business to use this method if the ownership feels thatfuture returns cannot be safely anticipated. On the otherhand, an established business, with well-established profittrends, will tend to use anticipated sales when figuringadvertising expenditures. This method can be especiallyeffective if the business compares its sales with those of thecompetition (if available) when figuring its budget.

Objective and Task Method

The objective task method, or objective and task method ofbudgeting, is a process for creating a marketing budget. Itfollows several steps that begin with identifying and rankingspecific objectives that a business wants to accomplishthrough advertising. Next, the objective and task methodrequires leaders to determine how they will meet theirobjectives, and which tasks it will require. Finally, based onestimates for the cost of performing these tasks, leaders canallocate money within the marketing budget to each task thatseeks to fulfil an objective.

Competitive Parity Method

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While keeping one's own objectives in mind, it is often usefulfor a business to compare its advertising spending with thatof its competitors. The theory here is that if a business isaware of how much its competitors are spending to advertisetheir products and services, the business may wish to budget asimilar amount on its own advertising by way of stayingcompetitive. Doing as one's competitor does is not, of course,always the wisest course. And matching another's advertisingbudget dollar for dollar does not necessarily buy one the samemarketing outcome. Much depends on how that money is spent.However, gauging one's advertising budget on otherparticipants' in the same market is a reasonable startingpoint.

Market Share Method

Similar to competitive parity, the market share method basesits budgeting strategy on external market trends. With thismethod a business equates its market share with itsadvertising expenditures. Critics of this method contend thatcompanies that use market share numbers to arrive at anadvertising budget are ultimately predicating theiradvertising on an arbitrary guideline that does not adequatelyreflect future goals.

Unit Sales Method

This method takes the cost of advertising an individual itemand multiplies it by the number of units the business wishesto sell. This method is only effective, of course, when thecost of advertising a single unit can be reasonablydetermined.

All Available Funds Method

This aggressive method involves the allocation of allavailable profits to advertising purposes. This can be riskyfor a business of any size it means that no money is beingused to help the business grow in other ways (purchasing newtechnologies, expanding the work force, etc.). Yet thisaggressive approach is sometimes useful when a start-upbusiness is trying to increase consumer awareness of itsproducts or services. However, a business using this approach

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needs to make sure that its advertising strategy is aneffective one and that funds which could help the businessexpand are not being wasted.

Affordable Method

With this method, advertisers base their budgets on what theycan afford. Of course, arriving at a conclusion about what asmall business can afford in the realm of advertising is oftena difficult task, one that needs to incorporate overallobjectives and goals, competition, presence in the market,unit sales, sales trends, operating costs, and other factors

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Case 11.2 Calfornia ContractManufacturing

Case SummaryTom Ngyen and Sylvia Hurtado are the two partners of CCM(California Contract Manufacturing). With great effort andhard work they have managed to reach in a position where theyneed a larger and steadier flow of sales to stay in business.What they actually do is making precious cutting of metals forparts used in computers watched, manufacturing equipment, andmaterials handling equipment. Although they have served manyhigh tech companies, there are plenty of low tech companies intheir area that could benefit from CCM’s precious cutting. Nowthey are planning to attend two major upcoming tread shows‘The Southwest Business Expo’ and ‘American ContractManufacturers’ (Amcon)’

Questions and Answer Analysis

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Question-1: What should Tom and Sylvia expect from each show?Should their goals be the same for both shows? Why or Why not?What should their goal be? Be specific and state how you wouldmeasure performance for those goals?

As trade shows provide opportunity of dialogue with such buyerto whom sales person cannot reach. It is also an opportunityto meet potential customers, strengthen relationship withexisting customers and get acquainted with the trade press.Tom and Sylvia are expecting to get familiar with the regionallow tech and high tech companies for generating more leads.

Different business activities serve different goals. So,attending two different tread shows with one goal is not wise.The Southwest Business Expo is a horizontal trade show whichincludes many industries and professions. Everyone, frominsurance companies to contract manufacturers, transportationfirms to mining companies will be there. On the other handAmerican Contract Manufacturers’ (Amcon) trade show is avertical trade show which focuses on one industry orprofession, contract manufacturing. So, goals for the twotrade shows should be different from each other for a betteroutput.

Seeing current customers, creating new customers andstrengthening relation with the press are the three majorgoals of trade show. They will attend The Southwest BusinessExpo first which is actually a horizontal trade show. If Iwere in place of Tom and Sylvia I would set up the plan forgetting acquainted with the small medium and large techcompanies in ‘The South Business Expo’. And I would do sobecause this expo is a vertical expo where there will becustomers and professionals from all business profiles. So, my

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strategy for this expo would be creating new customers andstrengthening relation with the press.

After that when I am attending the ‘American ContractManufacturers’ trade show, I would focus on my existing orcurrent customers. Because, all the traders in Amcon tradeshow are horizontal and belong to the same industry as I do.So, there my customers will need more focus there in order tobe satisfied enough to stay with me.

Question-2: The Company doesn’t have the money for the preshowand post show mailings. Which should the company do and why?Should it do the same thing for both shows? What should thecompany do if it doesn’t do mailings?

Preshow and post show mailings are the two ways of interactionwith the customers regarding a trade show.

As a start-up company, the ‘California Contract Manufacturing’might not have enough money both the preshow and the post showmailing. If there is a dilemma, I think such kind of start-upsshould focus on the post show mailing in order to showextensive customer orientation to the new customers.

Taking the same strategy might not be a good idea. If notusing mailing, they can follow upleads in different levels.Post show follow-up isa critical element in the trade showmarketing mix. In industries such as fashion, toys andhardware, retailers place orders at the show. At most businessmarketing shows, however, few sales are made in United States.So, getting the sales force to follow up on leads generated atthe show is an important function.

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Although post show follows up in an important activity, it isoften get lost in the rush to get ready for the next show.Especially this case occurs for the new companies like CCM.So, it is important that they (CCM) perform an effectivefollow up and not let the generated leads to die.

Question-3: By choosing trade show Tom and Sylvia have decidedagainst several other methods of getting their company known tomarketplace. Evaluate their decision, comparing other promotionalternatives.

By choosing trade show Tom and Sylvia have decided againstseveral other methods of getting their company known tomarketplace like advertising, publicity, Public affairs(lobbing, community involvement).

Actually, they have only gone against the advertisement to gettheir company known to marketplace. But in case of B2Badvertisement marketing is not done as extensively as the B2Cones. And for advertising in different media will attractcomparatively fewer percentage of customer. It would cost highto advertise in different media as well. Moreover, ifadvertised, the company would not be able to hold theattention of all the potential customer simultaneously in thesame place.

So, in that sense their decision for the trade show is thebest choice. Because the cost of managing a trade show islower than the total advertisement cost. In trade show theycan hold the attraction of all the companies in southwest asthe show is a vertical show where there will be all businessfirs of their (Tom and Sylvia’s) locality.

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Moreover, attending trade show helps to build public relation,publicity and community involvement. So, through trade show,they have managed to do all the other methods exceptadvertising.

So, from the overall consideration, it is a good choice to gofor trade show.

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