Trade  Management
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Module  1.
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Main  Topics:
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Corporate  Environment
Compe88ve  Advantage
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Compe88ve  Strategies
Markets  Industrial  V  Consumer
E-­‐Commerce

Trade  Management
Corporate  Environment

Trade  Management

Trade  Management
Business Organization

Trade  Management
Competitive Analysis

Trade  Management
How the five forces impact profitability
Rivalry
Supplier Power

Trade  Management
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The  Bargaining  Power  of  Your  Customers
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#  of  compe8tors?
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#  of  customers?
The  Threat  of  New  Entrants  into  Your  Industry
The  Bargaining  Power  of  Suppliers
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Unique  product?
Threat  of  Subs8tute  Products  or  Services
Rivalry  Amongst  Exis8ng  Firms
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Adver8sing,  Differen8a8on,  Price  compe88on

Trade  Management
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Compe88ve  Advantage(Variable)
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Defini8on:
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A  compe88ve  advantage  is  an  advantage   over  compe8tors  gained  by  offering   consumers  greater  value,  either  by  means   of  lower  prices  or  by  providing  greater   benefits  and  service  that  jus8fies  higher   prices
What  advantages  come  to  mind?

4 Generic Business
Strategies
(Michael Porter)
Trade  Management
Best Cost Provider Strategy

Trade  Management
The  right  mind-­‐set  for  competition
Be  number  1
BE  THE  BEST
Focus  on  market  share
Serve  “best  “  customer  with  “best”   product
Compete  by  imita8on
ZERO  SUM
A  race  that  no  one  can  win
BE  UNIQUE
Earn  higher  returns
Focus  on  profits
Meet  diverse  needs  of  target   customers
Compete  by  innova8on
POSITIVE  SUM
Mul8ple  winners,  many  events

Trade  Management
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Compe88ve  Strategies
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Strategy-­‐  Differen8a8on  (Uniqueness)
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Select  one  or  more  criteria  used  by  buyers
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Posi8on  business  uniquely  to  meet  those  criteria
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Op8on:
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Charge  a  premium  price  that  more  than  covers  the  higher   produc8on  costs  and  extra  value-­‐added  features
Examples:  BMW,  Mercedes,  Bang  &  Olufsen

Trade  Management
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Compe88ve  Strategies
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Strategy-­‐  Cost  Leadership
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Become  the  lowest-­‐cost  producer  in  the  industry
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Usually  associated  with  large-­‐scale  businesses  offering
“ standard ”  products  with  rela8vely  li^le  differen8a8on   that  are  perfectly  acceptable  to  the  majority  of   customers
Aim  to  maximize  sales  to  gain  market  share
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Used  when  not  a  lot  of  products  are  different  and   business  has  significant  buying  power
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Examples:  Nissan,  Tesco,  Dell  Computers,  Walmart

Trade  Management
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Compe88ve  Strategies
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Strategy-­‐  Differen8a8on  Focus
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Business  aims  to  differen8ate  within  just  one  or  small   number  of  target  market  segments
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Special  needs  of  segment  mean  that  there  are   opportuni8es  to  provide  products  that  are  clearly   different  from  compe8tors  who  may  be  targe8ng  a   broader  group  of  customers
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Needs  to  be  a   Valid  basis  for  differen8a8on
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Examples:  Any  successful  niche  retailers  –  Apple,
UnderArmour

Trade  Management
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Compe88ve  Strategies
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Strategy-­‐  Cost  Focus
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Business  seeks  a  lower-­‐cost  advantage  in  just  one  or  a   small  number  of  market  segments
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The  product  will  be  basic-­‐perhaps  a  similar  product  to   the  higher-­‐priced  and  featured  market  leader,  but   acceptable  to  sufficient  consumers.  ( “ me-­‐too ’ s ” )
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Examples:  Private-­‐label  goods  manufacturer  of  over  the   counter  health  products  for  Walmart,  Rite-­‐aid  or  Motel
6  (No  frills  hotel)

Trade  Management
Markets:  Industrial  V  Consumer
Industrial Market
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Fewer buyers
•   Small # of large buyers
Consumer Market
•   Dispersed
•   Mass markets
•   Free market
•   Large # of buyers

Trade  Management
Markets:  Industrial  V  Consumer
Industrial Market
•   Evaluated for functional, rational/
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is on performance/service
•   Formal processes (tenders etc)
Consumer Market
•   Social/psychological factors are important
•   Family & social factors
•   Limited personal relationship with supplier
•   Less of formal process

Trade  Management
•
Industrial Market
•   Technical complexity high
•   important
Markets:  Industrial  V  Consumer
Consumer Market
•   Standardized
•   Service, delivery and availability is somewhat important

Trade  Management
Markets:  Industrial  V  Consumer
Industrial Market
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•   Distinct observable stages
makers
Consumer Market
•   Unobservable
•   Mental stages, not very clear
•   Emotional

Trade  Management
Industrial Market
Markets:  Industrial  V  Consumer
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•   Competitive bidding
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Cost data
•   Funding?
•   Cost + plus (profit)
Consumer Market
•   Normally Maximum Retail
Price (MRP) &Market
Operative Price (MOP)
•   Concept of list price
•   Discounts to overload inventory

Trade  Management
E-Commerce Today
•   E-commerce: Use of the Internet and Web to transact business; digitally enabled transactions
•   Began in 1995 and grew exponentially; still growing at an annual rate of 25 percent
•   Companies that survived the dot-com bubble burst and now thrive
•   E-commerce revolution is still in its early stages

Trade  Management
E-Commerce Growth

Trade  Management
Unique Features E-Commerce
•   Ubiquity
•   Internet/Web technology available everywhere: work, home, etc., anytime.
•   Global reach
•   The technology reaches across national boundaries, around
Earth
•   Commerce enabled across cultural and national boundaries seamlessly and without modification

Trade  Management
Unique Features E-Commerce
•   Universal standards
•   One set of technology standards: Internet standards
•   Effect:
•   Disparate computer systems easily communicate with each other
•   Lower market entry costs
•   Interactivity
•   The technology works through interaction with the user
•   Effect:
•   Consumers engaged in dialog that dynamically adjusts experience to the individual
•   Consumer becomes co-participant in process of delivering goods to market

Trade  Management
Unique Features E-Commerce
•   Information density
•   Large increases in information density—the total amount and quality of information available to all market participants
•   Effect:
•   Greater price transparency
•   Greater cost transparency
•   Enables merchants to engage in price discrimination

Trade  Management
Unique Features E-Commerce
•   Richness
•   Supports video, audio, and text messages
•   Effect:
•   Possible to deliver rich messages with text, audio, and video simultaneously to large numbers of people
•   Video, audio, and text marketing messages can be integrated into single marketing message and consumer experience

Trade  Management
Unique Features E-Commerce
•   Personalization/Customization
•   Technology permits modification of messages, goods
•   Effect
•   Personalized messages can be sent to individuals as well as groups
•   Products and services can be customized to individual preferences
•   Social technology
•   The technology promotes user content generation and social networking
•   Effect
•   New Internet social and business models enable user content creation and distribution, and support social networks

Trade  Management
Unique Features E-Commerce
•   Digital markets reduce
•   Information asymmetry
•   Search costs
•   Transaction costs
•   Menu costs
•   Digital markets enable
•   Price discrimination
•   Dynamic pricing
•   Disintermediation

Trade  Management
Disintermediation to Consumer

Trade  Management
Private Industrial Network

Trade  Management
Internet  Exchanges
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Health  care  products:  set  up  by  Johnson  &  Johnson,  G.E.
Medical  Systems,  Baxter  Interna8onal,  Abbo^  Laboratories,   and  Medtronic  Inc.;  called  the  Global  Health  Care  Exchange
(ghx.com)
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Defense  and  aerospace  products:  created  by  Boeing,
Raytheon,  Lockheed-­‐Mar8n,  and  Britain ’ s  BAE  Systems;   called  the  Aerospace  and  Defense  Industry  Trading  Exchange
(exostar.com)
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Food,  beverage,  consumer  products:  set  up  by  49  leading   food  and  beverage  firms;  called  Transora  (transora.com)
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Retail  goods:  setup  by  Sears  and  France ’ s  Carrefour;  called
Global  Net  Xchange,  for  retailers  (gnx)

Trade  Management
Net Marketplace

Trade  Management
Types  of  E-­‐Commerce  Transactions
Business Consumer
Business
Consumer
B2B
GM/Ford/Daimler’s Covisint exchange
B2C
Amazon, Dell, Net
Grocer.com
C2B
Priceline, Travelocity
C2C
Ebay

Trade  Management
Where  customers  gather  information!
Purchases in stores Purchase online

Trade  Management
E-­‐Commerce  Processes

Trade  Management
Benefits  of  E-­‐Commerce
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Improved,  lower  cost  informa8on
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Lower  entry  costs
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Available  24/7,  virtually  anywhere  in  the  world
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Availability  expands  markets  for  both  buyers  and  sellers
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Decreases  the  cost  of  paper-­‐based  informa8on
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Reduces  the  cost  of  communica8on
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Provides  richer  communica8on  than  tradi8onal  means
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Fast  delivery  of  digi8zed  products
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Increased  flexibility  of  loca8on

Trade  Management
Limitations  of  E-­‐Commerce
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Lack  of  system  security,  reliability  and  standards
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Lack  of  privacy
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Insufficient  bandwidth(future  problem)
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Integra8ng  e-­‐commerce  sonware  with  exis8ng  sonware  is   s8ll  a  challenge
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Lack  of  trust  in  unknowns  on  the  other  end  of  the   transac8on,  integrity  of  the  transac8on  itself,  and  electronic   money  that  is  only  bits  and  bytes