IM Preface - Test Bank Instanttestbanksinstant.eu/samples/Solution Manual for Business... · Web viewMarket maturity progressed quickly within only a few years, driven by demand from

Case Studies to accompany

Business-to-Business Marketing: Analysis and Practice

By Robert P. Vitale, Joseph J. Giglierano, and Waldemar Pfoertsch

Authors’ Comments

It probably comes as no surprise to many instructors that using case studies, particularly in undergraduate courses, is more of a challenge than it once was. Notwithstanding this, we continue to believe that case studies that present real-world situations for student analysis and discussion are an excellent instructional tool.

We do not necessarily subscribe to what may be known as “standard operating procedure” in case analysis. Too often, when a student completes a first reading of a case they jump to what they think is an obvious answer. When this is combined with a web search of the principle companies and markets discussed in the case, the student analysis becomes a regurgitation of first impressions mixed with search results. In light of this, we believe that a good case is a case that can’t be ‘solved” with a web search, that presents instructive situations, is of reasonable interest to students, and if possible, doesn’t have a “standard’ solution. With this framework in mind, here are our considerations in the application of case studies in business-to-business marketing.

Consumer Perspective of StudentsIt is very difficult, at least initially, for students to view circumstances as other than the ultimate consumer. Not only is there difficulty breaking away from the mindset of being “the target,” many companies and channel designs are just unknown to students. To get in the “middle of a case, a cultural shift is often necessary. Reinforcement of the buying center concept is critical to recognizing that the business-to-business buying process is a collaborative effort with many external and internal stakeholders to satisfy. We also find that we must remind students (particularly here in Silicon Valley), that the ultimate solution is not always a web site.

The “Newness” Of The CaseWe continue to hear from many of our case-oriented colleagues of the difficulty finding appropriate new cases for business-to-business marketing. We tend to believe that the value of a teaching case is not always limited by its age. Principles of good marketing haven’t changed, though the 2011 Pearson Education, Inc. publishing as Prentice Hall

Business-to-Business Marketing

Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IMbusiness environment evolves, often requiring different recommended actions in a market. A business situation that is not current often cannot be “googled” for the correct answer.

Note: This is not to say we don’t see value in current business situations. Throughout the semester we seek current business items to reinforce classroom theory. The Wall Street Journal is a particularly good source, and students appreciate its online version.

With regard to older cases, here is a list of some that we have found usefulyou will likely recognize some of them.

Dominion Motors and ControlsThis is an excellent case to demonstrate the influence of external stakeholders and the impact of standards organizations on product development. You can also use this to show that 10 years in a market should not be the same as one year 10 times!

Titan Controls Huntington Electronics

Presents an opportunity to demonstrate how R&D can lead to business diversification.

Steel Products CompanyShort case about “what business are we in and what value do we create.”

Omni Automated SystemsThough one of the more difficult to use today, this case presents differing views of sales cultures–glad-handing versus value creation.

Sealed AirTimeless in many ways, this case demonstrates international segmentation, value from customer perspective, and life cycle issues. Students call this the bubble case–“how big is your bubble?”

Author’s Solution Is Not The Only SolutionYour experiences may provide a different perspective than that of the author’s. You may want to emphasize different aspects of the case. An older case may have an entirely different solution in today’s business environment than what the author envisioned. While we certainly have attempted to provide good teaching notes with the cases presented, you may have another view.

Technology versus Purses and ShoesStudents can find the somewhat technical nature of many business-to-business cases intimidating. A student once remarked “can’t we have cases about things we know about, like purses and shoes instead of chemicals and motors?”

To help defer this bias, reinforce the value aspect and solution potential of the product/offering rather than the technology that

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Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IM

makes it valuable. Example: Ask students to consider a hypothetical customer that wants a box that “when you kick it, it yells.” The customer specifies how hard it must be kicked before it yells, how “big” of a kick it must withstand, how fast it must yell after kicked, how loud, what pitch ... and so on. The customer doesn’t specify the technology that creates the yellit can be a sophisticated motion sensor/electronic amplifier or a trained gerbil yelling into a megaphone (usually brings a good chuckle).

Teaching Notes Included in This Manual

A full discussion is provided for each case in the textbook. Below is a summary of the topics and issues that can be addressed with each case. Note that, as mentioned above, you may have different learning points or may use a case in an entirely different manner than we anticipate. If you are particularly successful with a unique approach, let us know!

LastMile Corporation – Choosing a Development Partner Issues: Crossing the Chasm

Protecting Intellectual propertytechnologyCreating a successful joint venture, value network, or

partnership

B2B e-commerce in China: the S treng th of Alibaba.com Issues: Strategic plan implementation throughout an organization

Recognizing differences between domestic and international marketsGovernment influence in emerging marketsCompetitive branding in emerging markets

Dow Corning Success in China

Issues: Business to Business brandingDifferent brand positioning based on dual market segmentsProtecting a premium brand position

Marketing Plastic Resins: BW and GEIssues: Marketing channel design changes over the product life

cycleCompetitive advantage through field market development and customer education



Different market segments may require a very different channel design to meet customer needs of form, time, place, and possession–Dual distributionDifferent organizations can see the same market differently when viewed through their own culture and paradigm.

Note: This case, when combined with Automotive Headlamps II and Makrolon: The High-Tech Material combine to demonstrate

The different views competitors can have of their markets

Changing channels and customer value over the Product Life Cycle

Managing (or leaving) business at the mature stage of the life cycle

Strategic Business Unit management over the PLC

Automotive Headlamps II (Revised for academic clarity) Issues: Disruptive versus incremental innovation

How innovation is viewed differently by different stakeholders How Marketing Myopia prevented a major supplier from understanding customer needsDifference between market share leadership and Market Ownership“If you don’t innovate your own offering, someone else will.”

Note: This case, when combined with Marketing Plastic Resins: BW vs. GE and Makrolon: The High-Tech Material combine to demonstrate





Mak r olo n : The High-Tech Material

Issues: Ingredient branding in the consumer market of a mature industrial product Branding a product without major differentiated attributes that were available from several sourcesProduct management in the mature stage of the PLC

Note: This case, when combined with Automotive Headlamps II and Marketing Plastic Resins: BW vs. GE combine to demonstrate







Sensacon, Incorporated

This is the capstone case for the book, combining many elements from many chapters.

Teaching notes follow in the same order as listed above.

CASE NOTES: LASTMILE CORPORATION

Synopsis

The founder of LastMile Corporation, Tom Sherman, is pondering how to bring new products to market under conditions of scarce resources for development and launch. The company has proposals from two entities: Midwest Technologies, a major diversified technology company; and ANZ Investment Group, a venture capital investor. Both are potentially attractive suitors. Their initial offers were not entirely appealing. Sherman must decide how he wants to proceed with an attempt to forge a strategic partnership.

Case Questions

What are the other alternatives that LastMile could look at that would create a working relationship between Midwest Technologies and LastMile?

There is a range of possibilities for working with large partner, rather than licensing the technology to them. LastMile could arrange a contract to provide finished product to Midwest, on an OEM basis. Another alternative would be for LastMile to provide product



components to Midwest, who would use the components within their own finished products. A third alternative would be to license the technology, but to obtain financing from Midwest to fund the development and engineering of the products. If control over the technology and the market direction are important issues, a joint venture may be appropriate. A joint venture provides each party with an opportunity to limit risk to specific assets (Midwest–money and market access, LastMile–technology) while exploiting the strengths of the combination. An extreme alternative would be for LastMile to become acquired by Midwest, which would provide funding for product development in-house.

What are the advantages and disadvantages of these alternatives?

The advantages and disadvantages of the licensing-only option are spelled out in the case. So, too, are the advantages and disadvantages of receiving funding from ANZ.

OEM ContractFor the OEM contract, the advantages are that LastMile would retain the rights to the technology and would have the opportunity to develop the technology and products based on it into the future. LastMile could also market the products to other companies in the market or in related markets. The disadvantages are that development financing would be restricted. They could probably secure venture funding based on having the contract with Midwest. However, this would probably be very expensive money, requiring short- to mid-term payback and at the cost of a significant portion of the company. Also, whether they build finished products or components, LastMile will have to outsource their manufacturing to be able to meet the needs of Midwest. This may drive costs above an acceptable level.

LicensingWith development funding from Midwest, licensing has some attraction to it. LastMile would get the funding needed to “productize” the technology. However, the funding would not extend to marketing and may indeed have covenants requiring exclusivity in the partnership. LastMile would retain ownership of the technology, but would have limited growth potential.

Joint VentureIf a joint venture is considered, LastMile should recognize the need to continue to push the technology envelope independent of the venture. Unless the venture could produce the cash to make this possible, this has some of the same financing difficulties as other alternatives.



AcquisitionIn an acquisition, LastMile would lose a good measure of control over the direction of the technology. However, the money obtained would be substantial and a degree of autonomy for the LastMile organization might be built into the arrangement. The upside potential of LastMile would be subsumed within Midwest. Also, the profit stream would substantially go to Midwest, to be used as Midwest management saw fit. Lastly, both organizations would need to think about the problems in melding two distinctly different cultures. Midwest management will see LastMile as being too loose; LastMile will see Midwest as bureaucratic.

What are the objectives that LastMile would like to accomplish out of such a partnership?

LastMile is looking to grow fairly rapidly. To be a player in this emerging market, they will need to achieve a larger size than they are now. LastMile needs to acquire access to markets. The marketing resources of a large organization are thus attractive.To continue to develop new technology, a degree of stability is probably a desirable state to achieve.The people of LastMile would appear to be interested in continuing to develop the technology and develop it to its fullest potential. It’s “their baby.”LastMile has some longevity already. Tom Sherman probably has a bond with his employees. It is likely that one important objective for him will be to “take care of his people.” This means financial advancement for them, stability and probably retention of as much of the culture as he can manage.

What counter proposal(s) would you recommend?

This will depend on the students’ weighing of the alternatives. They will need to think about the intangibles in the various advantages and disadvantages and find a way to make tradeoffs.

What Happened?

In reality, the real company represented by Midwest in this fictitious case acquired the company that was the model used for LastMile. This occurred in 2000. Even though the acquisition limited the upside potential for the principals of LastMile, they probably did OK, given the technology stock collapse that occurred shortly thereafter.



CASE NOTES: B2B E-COMMERCE IN CHINA: THE STRENGTH OF ALIBABA.COM

Synopsis

In 2007, Alibaba.com had its initial public offering (IPO) at the Hong Kong Stock Exchange. The company raised 1.33 billion HKD, the second largest investment offering since the IPO of Google. High hopes from the investment community have pushed the stock-price even higher since then. Alibaba’s market presence has changed the competitive landscape in China, and the leadership style of Alibaba’s founder Jack Ma sheds light on the challenges and opportunities of China’s e-commerce market. Jack Ma is preparing to further expand his company’s offerings in China and abroad. The question is whether such an ambitious expansion could be continued with existing strategy.

Suggested Assignment Questions1. Does the “bird cage” theory, when applied to China’s Internet policy,

constitute a serious threat to the development of the B2B e-commerce industry?

2. What is the focus of Alibaba’s business and what makes it so different from some US e-commerce companies?

3. Would Alibaba have been as successful today without the leadership of someone like Jack Ma?

4. What are the benefits of the cooperation with China Post?5. What are the current and future benefits of the cooperation with Yahoo?6. Is there room for Alibaba in the global race for online supremacy? What

would you do to secure the future of the company?

Teaching ObjectivesThe case is suitable for MBA-level or advanced undergraduate courses on marketing strategy and communication. It has been used successfully in executive training courses devoted to business-to-business marketing. Finally, instructors will find the case useful for illustrating the opportunities and challenges found in the Chinese market of the past few years, when business structures and legal frameworks were changing rapidly, and market dynamics were hard to predict.

Specific teaching objectives include:

To establish the importance of developing an integrated marketing plan, one that takes into consideration the company’s overall strategic vision, leadership situation, specific market situation, company’s offering and dynamics of the domestic and international market.


Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IM To explore the challenges associated with emerging markets and new

technologies. This includes challenges associated with building a portfolio of brands, managing cooperation and fighting competitive forces.

To demonstrate the differences between mature and emerging market environments and government influences. The case gives the opportunities to specifically look into the Chinese development of the last 10 years and to draw conclusions for other ventures.

To illustrate the competitive challenges foreign companies are facing in non-open market investments and the opportunities for local business.

This teaching note has five sections. The first section provides an overview of the China e-commerce market; the following sections concentrate on company analysis.

Situation Analysis

Business Environment:

In the last 35 years, China has undergone dramatic economic and technological changes. Its political leaders are committed to the goal of catching up and achieving a leading position in the near future. Since many industries are protected by government regulations, foreign companies only have the chance to cater to the Chinese market with local partners. Since China’s entry into the World Trade Organization (WTO) in 2001, various measures have been taken to open up the country to international competition.

With its 1.3 billion people and huge differences of economic wealth in the various areas of the country, the Internet is an important tool for the liberation from geographical constraints within and outside China. Since government institutions seem unsuited to foster technological and entrepreneurial development, private enterprises play an important role in the development of technology and its commercialization. With the emergence of the export- oriented economy in China, e-commerce has become an important business tool for the export-oriented Chinese business community. It has also opened doors for foreigners wishing to participate. Chinese companies’ advantages are based on low cost labor, low capital cost, and rudimentary environmental regulations.

Internet technology is a good example of how quickly and efficiently technology adoption occurs in China. Despite its initially rudimentary telecommunication network system and its short history, China has been quick to embrace e-commerce, enabling phenomenal growth in the sector. The best example of this would be Alibaba, which has experienced unprecedented success under the leadership of Jack Ma. The company has


Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IMpositioned itself as champion of e-commerce in the business-to-business sector in China.

Business Model:

With modest start-up investment, Alibaba established its presence through word-of-mouth communication. The company easily integrated into the existing business activities of many small- and medium-sized Chinese companies. By offering free transactions, it appealed to the low-cost mentality of the local market environment. Step by step, Jack Ma transferred various Internet technologies to the Chinese market (see Appendix 3 in the case study):

Online trading (Alibaba International China)o B2B (Alibaba China)o B2C (Taobao)

Web-based software (Alisoft) Search engine (with Yahoo!) Payment system (Alipay) And many more (see Appendix 2 key development milestones)

The battle with eBay illustrates clearly the commitment and dedication for market leadership.

Why was Alibaba so successful?

The goal and following success to achieve this kind of category leadership was without precedent in China. How did Jack Ma make it happen? Students should be able to identify several factors and conditions that enabled his success.

1) Market immaturity–Internet technologies and market could not reach China until its entry into WTO. Only after this time was the country forced to enable free flow of information. Major telecommunication infrastructure investments had to be made to ensure connection to existing networks. Market maturity progressed quickly within only a few years, driven by demand from the expanding export market.

2) Product emergence–After introducing the search engines and transaction platforms, Alibaba placed many more applications in the Internet and into the market. Most of the applications were in the Chinese language catering to the fastest growing Internet community with a big window to the outside world.

3) Buy-in from investment partners–Whatever the motivation, the fact is that this is not an uncommon event in the recent history of Chinese development (refer to Warren Buffet’s investment in BYD the battery producer and electrical car manufacturer).

4) A consistent brand promise–Although Alibaba was offering various products, it never overstated its offerings and assured consistent



delivery. Even after airing TV commercials, Alibaba kept its focus, that it was meeting business and individual needs through dedicated online service.

Problem Analysis

By 2008 (the time the case was finalized), Alibaba had established itself as the leading Internet service provider in China. Working within the strict government controlled environment, they have found ways, in line with official regulations, to promote and support the country’s development. Alibaba’s challenge was to maneuver the company through unknown waters. Most students will identify the problem as being caught between investing into the market and delivering results. However the problem is somewhat more complicated than that.

Customer demand versus revenue development:

Part of the problem has to do with Alibaba’s growth. The expansion was enormous and the requirements of the customers grew; they expected 24-hour online performance all around the globe. Only after cooperation with Yahoo, where almost U.S. $ 1 billion was handed over to Alibaba to run Yahoo’s platform in China, did Alibaba have the financial resources to expand rapidly and meet its customers’ expectations. However, the money would run out at some point.

The downside of cooperation with partners:

The company’s strength was, without a doubt, the cooperation with its partners. Alibaba signed up various credit card and pay-system providers and established a strong cooperation with Bank of China. Their engagement with China Post enabled them to secure timely deliveries. Alibaba has many more partners such as Cisco and Microsoft, even General Electric (GE) wanted to promote their product and presence in China. Although the cooperation helped them to expand their service offerings, it required a large amount of management attention and demanded massive time investment by top management. Jack Ma was continuously traveling and had, in addition, many speaking obligations.

Involvement with the government:

Since Jack Ma had already worked for the government, he knew and understood the dynamics in the political institutions of China, state administrations and state owned enterprises (SOEs) with their own way of decision-making. He was able to use ”Guanxi” to expand his connections, but he also had to play by their rules.


Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IMSo what should Alibaba do?

By now, students should recognize that any decision regarding the business model should be viewed in the larger context of the business situation. Alibaba needs to figure out what kind of business model they should pursue to secure long-term sustainability of its venture.

As difficult as this problem may appear, it is important to recognize that it is not uncommon. During the Internet hype in the industrialized world, many companies experienced similar situations with a few survivors and many failures. So what are the options to establish a sustainable business model for the future?

The foremost issue is the maintenance of the customer relationship. The number of buyers and sellers has to continuously increase to accelerate the options for possible matchmaking. Many studies have shown that when the number of participants in the Internet decreases and the value they receive increases, the probability that they continue to engage with the existing partner rise.

A second way companies address the problem is by asking their partners to contribute more to their partnership, particularly in monetary terms. Not every company is open to this kind of suggestion, but just before company failure, a reliable partner may step in.

A third way is to switch to an advertisement-paying model. Google has managed successfully to cover Internet services with making advertisers and priority listings pay for their services.

And finally, there could be a mix of other options to pursue.

The point of these examples is to illustrate that Alibaba actually has a larger set of options than it is currently considering.

What did Alibaba do?

After the case was written, Alibaba changed its business model and introduced a premium membership fee for “gold suppliers.” Suppliers identified as “gold” according to their sales volume, had to pay a percentage of their revenues. The membership was voluntarily, but Alibaba strongly promoted it. A gold member could maximize their exposure with priority listings, they had exclusive access to buyers’ contact details, and the latest buying leads. Alibaba offered them real-time performance analysis of their online transactions and traffic. Businesses were offered a professional company web site and they could participate at trade shows. The major benefit was the increase of buyers’ confidence with an Alibaba verified company profile. By the end of 2009, more than half a million companies had joined from China and around the world with 36 million registered users.



Alibaba continued to expand its cooperation network. In Dec. 2009, they partnered with Xinhua, the official China news agency to provide information services on domestic and international events, industries and markets, and many more. They also formed a partnership with China Eastern Airline to promote online air-travel sales through Taobao. Taobao also established an alliance with Lenovo to sell PCs and mobile phones. Taobao had reached a market-share of over 80% in 2009 from the rapid expanding online market in China (about U.S. $ 40 billion in 2009).

The Alibaba listed group announced in the 3rd quarter of 2009 a net income of more than RMB 300 million (about U.S. $ 43 million), which was an increase of 50% year-on-year. All other performance indicators were improving strongly and the company had over RMB 6.1 billion of cash (U.S. $ 890 million) in their bank accounts.



CASE NOTES: DOW CORNING SUCCESS IN CHINA

Synopsis

In 2008, Dow Corning was one of the largest providers of silicon products in the world, and the market leader in China. With its dual branding strategy, they had managed to escape commoditization and provide multiple channel access for their diverse customer groups. Due to consistent internal and external brand management, their low-end brand Xiameter was established, which was able to compete with low-cost providers and thus avoid price wars.

Growth in the silicon market has slowed down, however, and Dow Corning is now trying to decide whether to extend its market segmentation to other areas, particularly in China. The question is whether this kind of move would put the dual branding strategy at risk and result in diluting brand equity.

Suggested Assignment Questions

The class assignment could be to develop a list of issues that the management is facing as it aspires to expand market presence and maintain strong brand leadership. This will involve elaborating on brand management options and deciding how to execute in a multi-channel environment.

Challenges for the company would include the following questions:

1. How should Dow Corning make good use of its two brands to grasp the China market to sustain its long-term growth?

2. If the target companies in China cover a broad range of industries–transportation, construction, power & utilities, electronics, personal care, textiles, solar, manufacturing - how should Dow Corning map out its brand strategies and communication activities?

3. With the growing market of personal care in China, will entry into consumer products provide Dow Corning another driver to grow?

4. With increasing Internet users and a fast growing online market, what could Dow Corning do to stand out among those major B2B online service providers?


Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IM5. How can Dow Corning prevent channel conflict if its products would be

available both in its own Xiameter site and China’s major B2B e-commerce sites?

Teaching Purpose

The case is suitable for MBA-level or advanced undergraduate courses on marketing communications and branding, particularly for business-to-business marketing classes. It also has been used successfully in executive training courses devoted to industrial marketing. Finally, instructors may find the case useful for illustrating the challenges of management in China in the last few years, when brand building was still a relatively new management concept, business-to-business marketing was just evolving, and competing on price was a major way to gain market access. Specific teaching objectives include:

To explore the challenges associated with building and managing a business-to-business brand. The case details the strategic planning behind the development of one of the most successful industrial dual brands in the world.

To illustrate the managerial challenges associated with two brands and maintaining efficient operations. The dual branding strategy became the centerpiece for business-to-business and company transformation.

To highlight the difficulties associated with maintaining one brand on the one hand and introducing another one based on the same product attributes. One of the big questions for Dow Corning is whether the existing segmentation is sustainable for the future, and if not, how the company could further adapt to it.

To highlight a marketing challenge that students in business-to-business marketing have not experienced. Most students and executives of industrial companies have started to acquaint themselves with the principle of brand management, but this case goes even farther and introduces dual branding and the use of different business models.

Situation Analysis

The sales of the specialty chemicals giant Dow Corning grew during 40 years from its early beginning in 1943 to 2003 to about U.S. $ 2.6 billion (see Exhibit 7). With the introduction of the Xiameter brand in 2001, the company almost doubled its revenues to about U.S. $ 5 billion.



This enormous expansion was based on suitable product and service offering and regional expansion. Since the joint venture between Dow Chemicals and Corning Glass Works, which is a privately held company, there are no detailed figures available for divisions and product groups. After the introduction of Xiameter however, not only sales but also the net income improved considerably, and major investments were announced, especially in the China region.

After the initial success in the early 2000’s, net income slowed down and stayed stable between 2006 and 2007, mainly due to intensive investments.

The introduction of the Xiameter brand caught its competitors by surprise and was not duplicated by competitors such as GE Silicones or Wacker Chemie. None of them were able to make such a bold shift, because they did not have the change management in place and were not willing to take the risk of using e-commerce to drive their future growth. Thus, an important part of the case analysis involves an examination of how Dow Corning was able to make the shift happen and to expand so rapidly in China and the rest of the world.

What was the motivation for Dow Corning to introduce the Xiameter brand?

Generally speaking, there are number of reasons companies build multiple brands. For business-to-consumer brands it is a common practice to cater to different consumer needs; industrial companies favor corporate brands. Dow Corning was already the market leader; it had a competitive product and it had strong relationships with many OEM partners. So why did the management create the Xiameter brand?

The need to drive demand. Dow Corning served many industries, and for each application there were various technological options. Silicones were one of them. When they were engineered into the products and processes they were hard to replace, and did not need the engineering support necessary for any new product development.

Many of the mass applications in electronics or consumer care products had moved their productions to China and other emerging markets, and local supplies with appropriate pricing were needed.

Competitive advantage derived also to a large extent from economies of scale. The manufacturing investments were capital intensive and needed constant capacity utilization. Dow Corning’s size advantage gave it a significant engineering and manufacturing edge. However,



to sustain this advantage the company was under pressure from the low-end market and emerging countries.

The need to create branding differences and not to cannibalize existing business. Because industry applications were in different stages of the lifecycle, different customers had very different needs, and this could even be true within one customer. The Intel Corporation in Seattle needed strong engineering support for its newest chip applications and also needed large product quantities for its mass production outsourced to China.

The desire to establish efficient market channels for customers. Engineering geared solution was in high need of direct interaction with experienced personnel from Dow Corning, and the company had established this successfully over the years. Mass producers in remote places of the world needed efficient communication and trusted delivery dates. The big investment in new IT infrastructure provided the basis for this kind of solution. A business model was needed to commercialize this. In Exhibit 5, the parameters for Xiameter are shown. They formed the basis for the new e-commerce solution. With online ordering, they bypassed the existing direct sales force, avoided the distributors and established direct links with the industrial customers. As for market access, countries were not boundaries; shared global manufacturing sites and its expansion were the basis for reliable delivery.


InnovativeSolutions

Proven Solutions

Cost-EfficientSolutions

Market-drivenPrice

Volume

Compare with Exhibit 3: Two brands under Dow Corning

Time

TN Figure 1: Segmentation and Lifecycle

Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IMStudents should recognize that brand creation and brand maintenance are like the two sides to one coin. By providing two brands with different value propositions, management has to make sure that they are distinctly different and create different values in the various segments.

Why was the dual branding so successful?

As stated before, the decision to establish a second brand beside an established successful existing brand was without precedent in industrial markets, particularly for a specialty chemical manufacturer. How then, could Dow Corning make it happen? Students should be able to identify several factors that enable this management success.

1. Segment differences–Customer analysis had provided the management with insight, which clearly signaled customers’ need. After recognizing and understanding them, the opposite alternative had to be defined.

2. Business Model Clarity–Identifying is one thing and delivering is another. Therefore, the company had to establish clear rules for themselves on how to deal with different customers. This leads to different front offices and organizational units. All departments had to strictly agree to the rules.

3. Brand communication–Not only customers but everybody needs to know the changes and the new offering. Intensive communication was needed to spread the word and to tell the world about the new possibilities.

4. Strong brand leadership–Since Dow Corning was a very engineering driven chemical company, top management was committed to making that change happen. Without support from the headquarters and at the regional level, particularly in China, this would not have been possible.

5. Different brand promises–Finally, students should recognize that Xiameter, as part of the Dow Corning company, had to deliver a distinct set of values to the customers. Based on quality and global supply, Xiameter offered value for money with market-driven pricing.

Problem Analysis

By 2008 (the time the case was staged), Xiameter had established itself as an independent brand of Dow Corning company, and was a leading supplier in China. Given this, what was the key problem confronting Xiameter’s marketing team in 2008? Not too many students may identify the problem since the success of the dual branding strategy was so impressive. However, the problems are indirectly visible.


Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IMC hanging segments : Ironically, part of the problem came through the newly established segmentation selection. In Exhibit 4, the brand differences between the two brands are displayed into overlaying curves. The reduction of the unit cost and the increase of sales volume were favoring the Xiameter brand, which lead to Base Level Offering. The Dow Corning brand stood for Added Value Offering with the opposite sales volume and unit cost trends. In the middle was a space of indifference.

The instructor should let the students guess which brand customers in the middle were leaning towards and how much volume could have been related to this kind of group. In Exhibit 3, they are described as “Cost-effective Solutions.”

Commitment of organizational support and marketing communication : Emerging markets like Brazil and China were not as affected by the global financial crisis in 2007/2008, their growth did now slow down, and demand was going strong. Most companies in the industrial countries suffered and initiated cost-cutting programs, slowed down investments and reduced marketing communication expenses. Raw material prices were cut and local second-source suppliers emerged. Especially in China, competition focused on low prices.

Since margins were already low in 2007 (see Exhibit 1) the management had to face the tough choice to invest in more organization support and marketing communication.

Options Under Consideration

Given Xiameter’s marketing challenges, what are the options the company is currently considering? Based on the information in the case, the company appears to be considering two changes to its marketing strategy:

1) Expand the base level offering for Xiameter to more segments, and

2) Shift the Dow Corning brand to a premium offering.

Expand base level offering : Since the bulk of the volume of silicone is needed by high quantity operations, and efficient delivery channels have been established, customers who could benefit from the Xiameter brand offering can be identified. Most of these customers are served by the competition. If these customers could be “released” from their existing direct sales relationship and could be transferred to the electronic channel offering, the Xiameter offering could be expanded. This transfer would not be an easy one, since strong existing relations exist and conditions are different. Negative competitor reactions are possible, making this a risky proposition.


Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IMEnhance Dow Corning to a premium brand : Innovative solutions always need costly engineering support; high prices are thus justified. The establishment of the Xiameter brand was only possible with the increase of the value offering of the Dow Corning brand. Further expansion may be possible, but requires a shift in resources and strategic thinking.

Since the recovery from the global financial crisis did not follow an example of any previous crises, it is necessary to come up with an original solution, which the student may develop by drawing an example from other industries.

What happened?

After the case was written, Dow Corning made the decision to expand its investment in China and broaden the scope of the Xiameter brand. They authorized additional funds to promote the brand through PR and personal promotion with the top management. They conducted more customer research and clustered their segmenting according to the new findings by expanding the application area for Xiameter. Tom Cook got promoted and his area of responsibility increased.



CASE NOTES: MARKETING PLASTIC RESINS: GE AND BW

Note: As described earlier, this case, when combined with Automotive Headlamps II and Makrolon: The High-Tech Material combine to demonstrate:

The different views competitors can have of their markets Changing channels and customer value over the Product Life Cycle Managing (or leaving) business at the mature stage of the life

cycle Strategic Business Unit management over the PLC

Synopsis

This case presents what we believe to be many unique study opportunities. While it involves real companies, students are unlikely to find any information via Internet or other data searches about the outcome, thus requiring some really thoughtful analysis of the information provided in the case. Borg-Warner Chemicals was a profitable, separate SBU of Borg-Warner Corporation, a major manufacturer of transmissions, transfer gear cases, and propulsion products for the vehicle industry. BW was also diversified into other businesses such as armored car security transportation services. Shortly after the time period of the case, Borg-Warner was taken private by investors. Soon after, Borg-Warner Chemicals was put up for sale in an effort to raise cash for the leveraged buyout. In what was rumored to be a biding war between competitors (notably GE and DuPont, though DuPont denied it), GE acquired BW Chemicals. Borg-Warner Chemicals ceased to exist. GE also changed the name of Plastic Service Centers to “Polymerland,” effectively eliminating any identification with the prior organization (this created some interesting product line changes, discussed later in this case note).

Borg-Warner was eventually taken public again, re-christened as Borg-Warner Automotive. Internet searches will reveal that the new BW has no involvement with the plastics industry.

Learning Objectives

Recognize that marketing channel design changes over the product life cycle.

Recognize that different market segments may require a very different channel design to meet customer needs of form, time, place, and possession.

Understand that different organizations can see the same market



differently when viewed through their own culture and paradigm. Understand the use of a Field Market Development (FMD) team.

Case Analysis

There are really four logical outcomes of this analysis, only two of which students will identify easily. These two outcomes are:

1) Supporting the BW position and recognizing distributors as a valid marketing channel for plastics; and

2) Supporting GE in the continued use of direct channels (Note that students will often overlook that BW continued to use direct channels for larger customers, effectively segmenting the market by customer purchase volume and variety sought).

To entice students to look beyond these two obvious solutions, I point out that there is at least “one solution, perhaps an opportunity, in Exhibit C3-1.” Here are those possibilities.

3) If students support BW and believe it has the correct channel for plastic resins, and they understand the value of industrial distributors, they should see the possibility of another distributor. Though simplified from the real situation, the products of the companies shown in the exhibit can be combined to create an adequate product assortment in all categories (such as the combination of Amoco, Dow, and Monsanto products would create, particularly since, in the case, these companies do not have distributors to serve smaller customers). This scenario was, in fact, the approach taken by Ashland Chemicals when they developed General Polymers into a nationwide distributor of thermoplastic resins. Today, General Polymers is one of the primary competitors of Polymerland. Interestingly, Ashland was not looking for distribution for its own products, but recognized the business opportunity presented.

4) The fourth outcome is the acquisition of BW Chemicals by GE Plastics. Without the buyout/refinancing of BW, this would not have been a likely scenario. Management at GE Plastics was strongly committed to their sales teams and their efforts to develop larger markets for their products. Thus, the cultures of the organizations did not readily support a vision of a combination.

Discussion QuestionsThe discussion questions at the end of the case are designed to be

thought provoking for students rather than specifically answered in their written analysis. By discussing these questions among group members (or if individual assignments, it may be appropriate to devote part of a class to


Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IMan exchange of ideas) students often discover details that they might not otherwise see.

1. From the information provided, describe the market environment as viewed by GE and BW. Are both views the same (consistent with each other), or are they different? If they are the same views of the environment, why are the approaches to the market dramatically different? If they are different, which view do you feel is more useful?

The market as viewed by GE and BW is consistent for large customers, but significantly different for smaller customers. An effective case analysis should segment the market by size and variety of plastics purchased. GE may not have recognized the unique needs of smaller users, particularly if the buying patterns that were considered included only GE Plastics offerings.

2. Consider customer needs as viewed by GE and BW. Do they see needs as being the same? Are they segmenting the market the same? Have they targeted the same segments? Are they interested in the same market?

Obviously, these competitors have not segmented the market in the same manner, though they do approach many common customers. Large customers are approached similarly–molders get direct sales representation and specifying influences receive missionary sales/field market development attention.

3. Does selection of target markets impact channel design?

This is obviously a major learning objective of the case. The fact that BW has a very good design in PSCs for smaller customers and GE uses a very effective design for larger customers, which the rest of the industry (including BW) attempts to emulate. Is an ideal solution possible?

4. From what you can discern in this case, describe and compare the goals of BW and GE.

a. How do their goals impact their channel structure?b. Do their goals impact how they view the market? Are their

views realistic? c. It may be of assistance to consider how their goals and market

view compare to others in the market, such as DuPont. Are certain channel structures more suited to certain goals?



A hard-line answer to this question would be that GE saw customers through its own needs and goals–growing the market. General Electric is a market share-driven company. To better understand circumstances behind this question, it may help to recognize that GE was, by some standards, a “newcomer” to the engineering plastics market.

DuPont, among others, always had brand recognition in the industry and was an early pioneer in plastics applications. However, by the time of this case, GE Plastics had surpassed DuPont in the sale of engineering thermoplastics (when products used in fibers is excluded–this distinction was always one of contention) through their aggressive added-value focused market development efforts. The FMD team of the GE organization was a major contributor to this growth.

5. Consider the service mix BW and GE intend to provide. Relate these services to promotion strategy and marketing functions. Is the mix of services consistent with their and/or your view of customer needs?

The GE service was strongly slanted towards larger customers, particularly from a design and application development viewpoint. BW seemed similar, but better appreciated by smaller customers. Whether this was consistent with the market’s needs can lead to a lively class discussion.

6. What role does the FMD specialist play in the marketing organization of GE? What potential conflicts do you see in the dual field structure of GE (having both field market development personnel and field salespeople in sales territories)? Consider all viewpoints–the custom molder, the plastics end user, and the individuals serving as either FMDs or salespeople.

In Chapter 11particularly the development and uses of the Marketing Operations Forecastand in Chapter 12–in which the role of the relationship/value creator is discussed–the text describes in general terms the role of field marketing personnel. In this case, students should be sensitive to the potential conflicts from different viewpoints.

Custom molders found less flexibility when contracting to provide components to a customer who had worked with GE. Particularly prior to the time when specifying influences developed “or equivalent” material specifications, molders were unable to find alternatives and were forced to pay “list price” for GE Plastics products.



Most end-users (specifiers) were pleased with the assistance provided by the field marketing team. This did, however, change later in the PLC and may have been one of the motivating factors in GE Plastics move to distributors. Customers became very knowledgeable about the products, particularly as the products moved nearer the maturity stage. There was less need for customer education and “hand-holding.” The development of “or equivalent” specifications accelerated during this period.

CASE NOTES: AUTOMOTIVE HEADLAMPS II

THE PARADIGM SHIFT FROM STANDARDIZED GLASS SEALED BEAMS TO TODAY’S PLASTIC CUSTOM DESIGNS

Note: As described earlier, this case, when combined with Marketing Plastic Resins: BW vs. GE and Makrolon: The High-Tech Material combine to demonstrate:

The different views competitors can have of their markets Changing channels and customer value over the Product Life Cycle Managing (or leaving) business at the mature stage of the life

cycle Strategic Business Unit management over the PLC

Synopsis

This case provides an excellent basis for discussions of: How innovations are viewed differently by different stakeholders The difference between Market Ownership and market share

leadership How marketing myopia can cause a major supplier to lose

significant business at a major customer

How innovations are viewed differently by different stakeholdersCompetitive pressures in the automotive industry push manufacturers to keep styling and design fresh and innovative. It was a natural evolution for Ford to move to plastic headlamps (“forward lighting”). The existing glass sealed beam headlamps were the only remaining lamp on the vehicle that did not incorporate the separate bulb and envelope design practice. As

This case was originally presented as “Automotive Headlamps” in our first business-to-business marketing book. After several semesters of classroom use, the case has been re-written to clear up some areas of particular confusion to students. To begin with, the case starts out with descriptive backgrounds of the major players. The names of different divisions of the respective companies have been clarified and reduced in number. As a result of some of the changes for academic clarity, the corporate structures may not be as accurate as the previous version of the case. The changes have made the case more clearly understood by students.


Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IMvehicle designs began to stress aerodynamics, the flat surface of the traditional glass sealed beam headlamps were considered limiting, both aesthetically and functionally. This change to plastic/aero lamps was, to Ford, a natural progressionan incremental innovation.

On the other hand, the General Electric Lamp Division, the leader (by volume) in the market for most types of lighting, saw the plastic aero lamp as a major challenge. Not only did it incorporate a halogen lighting element that GE Lamp was not ready to produce in volume, they had recently rebuilt the manufacturing lines that produced the glass seal beam. Departing from the existing product would be a major disruption for the division.

The difference between Market Ownership and market share leadershipGE Lamp was the market share leader in lighting – most all types. Certainly in the automotive market, GE Lamp either supplied the major share of headlamps (Ford, Chrysler, others) or supplied glass subassemblies to other headlamp manufacturers (Guide Lamp Division of General Motors). GE Lamp was very good at producing glass headlamps at the lowest possible cost. They believed (driven by accounting and finance we suspect) that it was in their best interest to stop, or at least slow significantly, the introduction of the plastic aero lamp. The GE Lamp sales organization was put in the position of telling Ford that it was wrong, the aero lamp was a styling gimmick, the lamp wouldn’t work, it wouldn’t meet safety standards, and so on; rather than working with the customer in a joint development.

Had GE Lamp been operating as a market owner, they would have recognized the “next generation” of products in the automotive market. Ford saw GE Lamp as its lighting supplier/partner with significant expertise in lighting technology. GE Lamp saw themselves as a seller of glass sealed beam lamps.

Disruptive versus incremental innovation

How marketing myopia can cause a major supplier to lose significant business at a major customerGE Lamp grossly underestimated the Ford determination to innovate forward lighting. After some initial joint development (which GE had successfully completed long before Ford became involved), GE Lamp backed away from the project. Ford was left without a lighting supplier for the new lamp. In the long run, GE Lamp would lose most all of its OEM business at Ford as a result of this. While GE Lamp and GE Plastics might have been two different SBUs of one corporation, Ford viewed them as one entity. GE Lamp actions put the entire GE Value Image in jeopardy at Ford. Ford was forced to develop their own Value Network to complete the project.


Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IMCase AnalysisWhat really happened

Ford did go ahead with the project. They “drafted” Sylvania, a supplier that was eager to enter the automotive headlamp business and saw this as a major opportunity. Faced with the demand of a major customer that they work with a third party, GEP eventually provided plastic technology assistance through Ford to Sylvania, who took on the lighting challenge (up to this time, Sylvania had not been a major factor in automotive lighting). Ford eventually manufactured the plastic components in its own facilities. Ford had started a major disruptive innovation in the automotive lighting industry.

With the driving force of styling and positive durability test results, Ford Motor Company, its internal champion and a growing group of allies built the confidence necessary to take the next step: a fully integrated, plastic unit designed to fit and complement the desired style of a new model. The 1984 Lincoln Continental Mark VII was the first American car to have flush, aerodynamic plastic headlamps. This created a unique appearance, gave the Mark VII a distinctive “face,” and created a competitive advantage.

Still, it should be noted that since it was the first North American car to use flush-mounted, aerodynamic styled headlamps with replaceable bulbs, Ford took a significant risk. The integrated plastic headlamp concept was not fully approved at the time this car was designed, so to play it safe, Ford had a dual program as a backup. With significant added expense, Ford built prototypes of this car with the new lamps, as well as with conventional rectangular glass sealed beam units as well. Fortunately, all approvals were in place in time for actual production to begin as planned.

Ford became convinced that they had a leading competitive advantage. Now, the door was open, and proliferation came quickly. Ford began designing and specifying “aerodynamic headlamps” on their new models. Included were the first generation Taurus and Sable (one of Ford’s most effective new vehicle platforms in current times), the Tempo and Topaz compacts, Windstar minivans, and many to follow. Harder and more durable coatings for lenses were also developed and implemented.

In order to stay competitive, Chrysler, GM and others followed suit. The GEP Detroit and HQ people worked closely with their counterparts in Europe and Japan to lead the translation of this new business and make sure that GEP captured the resultant materials business generated. European OEM’s gradually moved to plastic, despite the objections of their glass-oriented suppliers. Japanese manufacturers, who typically used glass sealed beams, gradually converted as well. Today, the business that resulted for GEP (and later, other suppliers of polycarbonate and competing plastics) generates more than $100 million of sales annually. GEP captured and maintained leadership in this segment,


Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IMand, until the sale of the Plastics group by GE, enjoyed the majority share of the plastic headlamp business. The additional business that resulted for the manufacturers of the actual headlamp units added hundreds of millions of dollarsnot counting the replaceable bulb capsules for OEM and aftermarket use.

Innovation Leads to Industry Structural Change

Of particular note is that the change from glass sealed beams to plastic replaceable bulb headlamps caused a structural change in the headlamp supplier community. Though GEP benefited significantly, GE Lamp did not embrace the ideas of either halogen bulbs or plastic constructiondespite being first with the plastic unit on the 1980 Lincoln! As a result, GE went from being the dominant supplier of automotive headlamps in the U.S. to a small playerwith essentially no OEM business, and a declining share of the aftermarket. Sylvania, who had previously not made headlamps, became a major supplier. Ford’s Sandusky, OH plant, already manufacturing and supplying its parent other lamps in plastic, began manufacturing plastic headlamps to supply increasing Ford demand. As more vehicle lines went to the new look, independent lamp suppliers began filling demand at Chrysler, who was quick to follow. GM and its Guide Division dragged their feet for a while, then began to convert modelsfirst with replaceable bulb “composite” designs using glass lenses bonded to plastic reflectors/housingsthen later with all plastic designs.

Today, vehicle-specific plastic headlamps with replaceable lamp capsules are the norm on most vehicles throughout the world. At a recent meeting of the IDSA (Industrial Design Society of America), a panel of automotive design managers concurred that today’s automotive designs have de-emphasized the grille, and emphasized unique headlamp designs, which have become the “eyes” and more of the “face” that gives the vehicle its character. Plastics have made this possible. Incidentally, at the end of that meeting between GEP and the Department of Transportation, the GEP representative asked why this discussion hadn’t happened before between DOT and a vehicle manufacturer. The official replied, “Usually they come down here to Washington with a bunch of lawyers and engineers. So we match them with our lawyers and engineers. We have a big meeting, but nothing really happens. You came down here by yourself, asked a few questions, and proposed a course of action. The two of us had a good talk, and decided to do something.”


Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IMKey Factors of Success

There were several key factors that led to this success. Among them were: The operating premise of the key GEP people involved was that such

innovation in the creation of new applications for the company’s products was expected, necessary, desirable, possible and would be rewarded; (GEP had a culture of Market Ownership while GE Lamp fell into the myopia trap).

A few, dedicated marketing and technical people (in Detroit and HQ) that had the belief, desire, commitment, creativity and tenacity to achieve their goal;

The questioning of assumptions and conventional wisdom; Finding, developing and supporting a champion at the target customer; Meeting with each constituency/stakeholder inside and outside the

vehicle manufacturer to determine the reality base of assumptions, e.g., styling/design, product planning, marketing, engineering (product, advanced, materials, safety, etc.), purchasingplus SAE, DOT and NHTSA;

Refusing to take “no” (or “we don’t do it that way,” or “you can’t change that”) for an answer;

Following up and addressing every objection; Determining the real benefits to the customer, and to whom, within the

customer organization; Learning and understanding the customer’s organization; Mapping and weighing the influences, deciding on who could benefit

most and become the “customers within a customer;” Taking an unconventional approach, visiting and understanding all

influences involved; Citing both the benefits and limitations openly, and addressing both; Identifying, recruiting, supporting and working closely with a champion

at the vehicle manufacturer (an advanced engineering manager involved with lighting);

Obtaining and utilizing the resources available within the company (time, money, people);

Securing political support within management to sponsor the activities and offset negative political issues in other parts of the company that disagreed with the strategy;

Focusing on getting a lead application, on one new vehicle, at one vehicle manufacturerthen rapidly translating the success to other vehicles and manufacturers.

Lessons Learned

Dedicated resources, committed to their goal can achieve it. Conventional wisdom is conventional, but not necessarily wise. Assumptions are to be constructively challenged. “It can’t be done” can be overcome with “Why not?” and “We can.”


Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IM Identify the real benefits and to whom. That’s where the sale is. Pick the most likely target and concentrate efforts there. Focus on getting a first, visible, market-leading applicationthen repeat

and translate it as quickly as possible. Increased cost can be overwhelmed by more increased benefits. Impossible is an opinion, not a fact. Innovation was rewarding to GEP and the key people that made it

happen. Message to incumbents: As Peter Drucker once said, “Defending

yesterdaythat is, not innovatingis far more risky than making tomorrow.”



CASE NOTES: MAKROLON: THE HIGH-TECH MATERIAL

Synopsis

In 2001, having experienced other companies such as Intel, Microsoft and Gore-Tex gain market success through Ingredient Branding, Bayer AG opted to apply this concept to their Makrolon brand. More than 40 years after its market introduction, the popularity of polycarbonates was still high, but the increase of raw material cost and competition prompted management to take this step. In doing so, questions about suitable marketing concepts and the future of the whole business unit were raised.

Suggested Assignment Questions

Since the industry is currently restructuring itself, the instructor is advised to become familiar with current developments to prepare for the “what happened” part of the case. The following questions could be used:

1) What was the original motivation behind Bayer’s decision to launch the Makrolon Ingredient Branding concept?

2) What factors were responsible for the success and failure of the efforts?

3) What was the brand promise and how was it materialized?4) How did they manage the Ingredient Branding concept and what

other options does the management have?

Teaching purpose

This case can be taught effectively to business bachelor, MBA or executives in marketing courses that stress brand decisions, particularly in business-to-business marketing, but also High-Tech Marketing, or Marketing of Innovations.

The specific teaching objections include:

To explore the challenges associated with building and managing an Ingredient Brand. The case analyzes the situation of the chemical industry and elaborates on the management decision related to that.

To illustrate the challenges for the management in relation to industry developments and the chosen marketing strategy. Makrolon had been marketed for many years as a purely business-to-business brand, the new concept created a different situation.



To highlight the difficulties associated with brand recognition and brand strength. Since only a small portion of the polycarbonate usage was sold as branded product, discrepancies were unavoidable.

To highlight a crucial decision making process that students are rarely asked to make. Most students are very enthusiastic when asked to develop positive growth plans for the future, but sometimes, it is also necessary to say no and stop a project that is not living up to its full expectation.

Situation Analysis

Many students are familiar with the success of the Ingredient Branding campaign of Intel and have the tendency to assume that success is possible for every industry and that all management have the capacity to carry out such a campaign. Unfortunately, this is not the case. As we know from other successful examples, the following criteria exemplified in TN Figure 1 have to be met.

TN Figure 1 Requirements for InBrands

Requirements for InBrands

The performance of the ingredient is substantial to the function of the final product.

The ingredient differentiates the final product from those of the competitors by adding exceptional functional performance.

The relationship between the brand and the ingredient brands varies in relation to the development stage.

In the Intel Ingredient Branding example, many outside experts were critical of the success of their innovative marketing concept. The same could be said for Makrolon; in this case, the inside management showed strong resistance, since a chemical company is mainly geared only to be concerned about capacity utilization and distribution optimization. Brand management does not belong in the realm of a typical chemical company. Therefore, it is interesting to find out what the motivation for the Makrolon promotion was.


Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IMFrom its invention in 1953 until today, polycarbonates have become a major part of people’s lives. They are widely used in the modern chemical industry and have very unique features:

Temperature resistance Impact resistance Transparency

These features distinguish it from commodity plastics like PVC (polyvinyl chloride) or PU (polyurethane). The uniqueness may have inspired the management to define them as a basis for differentiation to customers.

Avoidance of commoditization may have been another reason. According to the case, a large number of competitors are present in the market. The biggest competitor is GE Plastics, with the brand name of Lexan. Lexan was also invented in 1953 and has been dominating the U.S. market. Even though Makrolon stayed out of the U.S. market, heavy competitive pressure from Asian and Latin American suppliers may have prompted the ingredient brand development from Bayer as a counter measure.

In which areas was Makrolon successful?

Bayer AG was marketing Makrolon for almost 50 years as an industrial product when they decided to choose an Ingredient Branding concept. The concept was applied in the following selected areas:

CDs/DVD Sports goggles Disposable medical products

They selected only a few partners for joint promotion; the case names less than 10 industrial partners that manufactured final products with Makrolon. The Material Science division of the Bayer AG provided them with promotional information and allowed them to use the logo depicting the Bayer cross, which was well known to the final customer due to the world famous aspirin. This case highlights the win-win intention of the partners, although it should be noted that there was no financial contribution by Bayer.

Creating a unique selling proposition:

There is no doubt that Makrolon created a notable awareness in the market with the three selected product areas shown above. The case states that 31% awareness in Europe was achieved. However, did the awareness materialize in a sizable pull effect? The answer is not given in the case, but


Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IMif you start calculating the “non-brand-promoted” applications of Makrolon, students may easily figure out that the pull effect could only be marginal.

Value Chain Enhancement:

The case particularly highlights the example of the UVEX Winter Holding, a company that is very well known to the final customer through its sports division, which manufactures and distributes sunglasses, goggles and helmets for skiing, cycling and other fun sports. Their brand mantra is “protecting people” and Makrolon is the material of choice for their sunglasses and helmets, etc. With a very dedicated approach to sport sponsorship, they reach millions of viewers during high profile events. The Makrolon ingredient supported their overall marketing effort, and the material enhanced their value creation.

However, when analyzing the value chain contribution in other examples with different partners, it is not as noticeable that Makrolon is the crucial ingredient. It becomes inconsequential whether Makrolon or other polymers with similar specifications were used.

Issue Analysis

By August 2006, before the global financial crisis (the case was written in 2007), Bayer AG had one of its best years. The turnover grew over €20 billon and Makrolon Science Division had net external sales for the first time of more than €10 billion (see Appendix Fig 2). A major part of this turnover was generated by Makrolon. However, when oil prices began to rise, the bottom line was heavily affected since the main source of raw material was crude oil. The EBIT of the Material Science division dropped by 25% that year (see also Appendix Fig. 2).

Consumer demand also started to diminish and Makrolon showed real signs of weakness. The bigger challenge came from a more surprising side. GE sold its plastic division to Saudi Arabia’s SABIC and helped to create an integrated petrochemical powerhouse1. With direct access to the main raw material, crude oil, the new conglomerate had many means to offer value to its customers. Lexan’s leading position in the U.S. was unchallenged and with new ownership, they had opened up new regional areas for growth. Other competitors, not just Makrolon, were also negatively affected.

Makrolon’s Value Chain Position:

1 The purchasing price for GE plastic on May 21, 2007 was $11.6 billion. GE plastic had revenue of about $6.6 billion in 2006.


Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IMAs stated before, Makrolon enhanced the value creation for its customers in only a few cases. When students analyze the usage of polycarbonates in their day-to-day products, like mobile phones, computers or cars, they may realize that Makrolon is often used as a component that ends up in systems or gets integrated into the final product, losing its recognition. For illustration, see Fig. 7 of the teaching note.

TN Figure 2 Value Chain Position Makrolon

Compared with Intel, Makrolon’s position in the value chain is at least one position farther away from the final user and therefore, the impact of its product performance is much less visible.

Options Under Consideration

After evaluating the internal and external factors for the support of the Ingredient Branding program, there appears to be two extreme options for the Bayer Material Science Division: (1) step up the Ingredient Branding efforts, (2) look for alternative roads to success.

Step up Ingredient Branding efforts:

As shown in Fig. 6 of the case, there are ample possibilities to use Makrolon in the final customers’ product. The picture shows sports equipment, shoes, clothes, etc. Other application areas like medical equipment or automotives probably have similar potential. Currently, Makrolon is already being used in many of these applications, but they are not branded to the final


Intel

Makrolon

Raw Materials Supplier

Components supplier

SystemSupplier

FinalProductManu-facturer

Consumer

Full file at http://testbanksinstant.eu/ Solution-Manual-for-Business-to-Business-Marketing-IMcustomer. Makrolon may have the potential, but does Bayer have the means (including the management potential) to make this happen?

Other options for consideration:

In principle, there are numerous options that the management can pursue. In many other areas of Bayer’s offering, they are moving up the value chain and expanding their coverings to more value added offerings, which means more investments and long term commitment. It is also possible to go back to business-to-business branding and reduce involvement with the final customer; a pure commodity approach with minimum marketing engagement.

What Should Bayer Material Science Do?

By now, students should recognize that any decision regarding branding to the final customer needs specific knowledge about value chain dynamics and the likelihood that the management can create the pull effect in order to make the Ingredient Branding concept successful.

Some students will point out that financial involvement may be necessary to really create a win-win situation. They may also stress that establishing a viable competitive position at a lifecycle stage soon entering saturation point may not be desirable.

Other students may think that the overall strategy concept of the Material Science division may have to be reconsidered.

What Happened?

After the case was written, Bayer Material Science made the decision to abandon its entire ingredient branding efforts to the final customer and cut all marketing expenses. The marketing department was closed and the employers moved to other divisions.

Now, the company only concentrates on business-to-business selling and focuses on selected industries: construction (roofing, glassing and floor mats) automotive (headlights, etc.) medical technologies (corrective eye glasses and lenses), nutrition (water bottles and containers), data storage (CDs, DVDs), and sports equipment. They also revitalized their sheeting for roofs and green houses, which are sold as commodity by the meter.

In the aftermath of the financial crisis, capacity had to be reduced and the processes streamlined.





CASE NOTES: SENSACON INCORPORATED

High Technology Evolves to High Volume

“Capstone Case”

Sensacon is a composite of the continuing examples throughout the textbook. Starting in Chapter 8, the development and growth of the fictitious company are used as examples of the application chapter material in the real world. The reader is led through each step and event faced by the company. In effect, the textbook is the teaching note for this case.

The complexity of Sensacon makes it possible to apply the case in many different ways, providing you with basic elements to focus on the particular area your students/market and personal experiences dictate. Therefore, we have not created a specific “solution” to the case.

At the end of the case composite, Allen Chen, the new CEO of Sensacon, challenges his team with the question “What are your ideas on how to defend our brand and grow the company significantly and what future challenges face Sensacon?”The case composite stops with this challenge. However, in the chapters, the Sensacon story continues. Any plan addressing the challenge of the new CEO should contain elements of the following:

Re-branding for better identity. The brand name “SensorSUV” is not very descriptive. In the textbook, the name is replaced with the more descriptive name InflationGuard. The revised branding better identifies the product by what it does and more easily allows extension to beyond the SUV market.

Channel development, including channel member education, to meet the needs of the OEM, service, and aftermarket accessory market segments (dual distribution) is essential. Students may be surprised at the amount of effort required in the development of a product for consumers that was originally marketed in high volumes to industry. While the core product remains the same, price, place, promotion, form and time all must be tailored to the individual segments.

Consider comparing the learning curve of Sensacon to the experience of Apple with the Lisa computer (opening vignette, Chapter 14).

Consider using Exhibit 14-2 (a & b) and Exhibit 14-8 to encourage the discussion of the many channel flows and functions that must be considered and the expenditures necessary to be successful. Discuss if Sensacon should



own their own channel, use an Administered system and so on.

Promotions: Chapter 15 discusses some of the promotional needs of Sensacon. Sensacon’s use of trade shows and PR have been important to the company’s positioning strategy. Now, different tactics will be necessary (leave behind materials for sellers, web development suitable for consumer use, etc.).

Sensacon is a case that you can tailor and focus to your particular situation. Most of the fundamentals are included throughout the textbook. Almost any topic discussed (make or buy, intellectual property rights, direct sales versus manufacturers’ representativesor bothdepending on channel and so on) can be applied to the case.




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IM Preface - Test Bank Instanttestbanksinstant.eu/samples/Solution Manual for Business... · Web viewMarket maturity progressed quickly within only a few years, driven by demand from