Trade Management

Module 1.

Main Topics: Corporate Environment Competitive Advantage Competitive Strategies Markets Industrial V Consumer E-Commerce

Trade Management

Corporate Environment

Trade Management

Trade Management

Business Organization

Trade Management

Competitive Analysis

Trade Management

Industry Environment (Porter’s Five Forces) The Bargaining Power of Your Customers

# of competitors? # of customers?

The Threat of New Entrants into Your Industry The Bargaining Power of Suppliers

Unique product? Threat of Substitute Products or Services Rivalry Amongst Existing Firms

Advertising, Differentiation, Price competition

Trade Management

Competitive Advantage

Definition: A competitive advantage is an advantage

over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices

Trade Management

4 Generic BusinessStrategies (Michael Porter)

Best Cost Provider Strategy

Trade Management

Competitive Strategies Strategy- Differentiation

Select one or more criteria used by buyers Position business uniquely to meet those criteria Option:

Charge a premium price that more than covers the higher production costs and extra value-added features

Examples: BMW, Mercedes, Bang & Olufsen

Trade Management

Competitive Strategies Strategy- Cost Leadership

Become the lowest-cost producer in the industry Usually associated with large-scale businesses offering “standard”

products with relatively little differentiation that are perfectly acceptable to the majority of customers

Aim to maximize sales to gain market share Used when not a lot of products are different and business has

significant buying power Examples: Nissan, Tesco, Dell Computers, Walmart

Trade Management

Competitive Strategies Strategy- Differentiation Focus

Business aims to differentiate within just one or small number of target market segments

Special needs of segment mean that there are opportunities to provide products that are clearly different from competitors who may be targeting a broader group of customers

Needs to be a Valid basis for differentiation Examples: Any successful niche retailers – Apple, UnderArmour

Trade Management

Competitive Strategies Strategy- Cost Focus

Business seeks a lower-cost advantage in just one or a small number of market segments

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”)

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

Market Structure

Industrial Market

• Geographically Concentrated• Fewer buyers• Big buyers• Small # of large buyers

Consumer Market

• Dispersed• Mass markets• Free market• Large # of buyers

Trade Management

Markets: Industrial V Consumer

Buyer Behavior

Industrial Market

• Evaluated for functional, rational/task motive to buying • Purchasers are experts and focus is on performance/service• High interaction with supplier• 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

Markets: Industrial V Consumer

Products

Industrial Market

• Technical complexity high• Customized • Service, delivery and availability is important

Consumer Market

• Standardized• Service, delivery and availability is somewhat important

Trade Management

Markets: Industrial V Consumer

Decision Making

Industrial Market

• Distinct observable stages• Multiple influencers and decision makers

Consumer Market

• Unobservable• Mental stages, not very clear• Emotional

Trade Management

Markets: Industrial V Consumer

Pricing

Industrial Market

• Competitive bidding• Multistage negotiation• Sharing of information:

• Cost data• Specifications (technical)• Funding?• Cost + plus (profit)

Consumer Market

• Normally MRP & MOP• Concept of list price• Discounts to overload inventory

Trade Management

• 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

E-Commerce Today

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E-Commerce Growth

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• 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

Unique Features E-Commerce

Trade Management

• 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

Unique Features E-Commerce

Trade Management

• 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

Unique Features E-Commerce

Trade Management

• 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

Unique Features E-Commerce

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

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Disintermediation to Consumer

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Private Industrial Network

Health care products: set up by Johnson & Johnson, G.E. Medical Systems, Baxter International, Abbott Laboratories, and Medtronic Inc.; called the Global Health Care Exchange (ghx.com)

Defense and aerospace products: created by Boeing, Raytheon, Lockheed-Martin, and Britain’s BAE Systems; called the Aerospace and Defense Industry Trading Exchange (exostar.com)

Food, beverage, consumer products: set up by 49 leading food and beverage firms; called Transora (transora.com)

Retail goods: setup by Sears and France’s Carrefour; called Global Net Xchange, for retailers (gnx)

Trade Management Internet Exchanges

Trade Management

Net Marketplace

Trade Management Types of E-Commerce Transactions

Business Consumer

Business B2BGM/Ford/Daimler’s Covisint exchange

B2CAmazon, Dell, Net

Grocer.com

Consumer C2BPriceline, Travelocity

C2CEbay

Access Control and SecurityAccess ControlAuthentication

Security Measures

Content ManagementDynamic ContentGeneration

Data Repository

Catalog ManagementPricing Calculation

Product Configuration

Catalog Generation

Profiling and PersonalizingProfile Management

Personalization

Behavior Tracking

Search Management

Content-Based Search

Parametric-Based Search

Role- and Rule-Based Search

PaymentShopping Cart

Payment Method Support

Payment Verification

Workflow ManagementBuying Process Automation

Document Management

Rule- and Role-Based Content Routing Event

NotificationEvent-Driven Transaction Messaging

Message to e-mail Message Boards Newsgroups

Collaboration and Trading

Mediation Negotiation

Bidding/Auctioning Collaborative Buying

Online Community

Trade Management E-Commerce Processes

Improved, lower cost information

Lower entry costs

Available 24/7, virtually anywhere in the world

Availability expands markets for both buyers and sellers

Decreases the cost of paper-based information

Reduces the cost of communication

Provides richer communication than traditional means

Fast delivery of digitized products

Increased flexibility of location

Trade Management Benefits of E-Commerce

Lack of system security, reliability and standards

Lack of privacy

Insufficient bandwidth

Integrating e-commerce software with existing software is still a challenge

Lack of trust in unknowns on the other end of the transaction, integrity of the transaction itself, and electronic money that is only bits and bytes

Trade Management Limitations of E-Commerce