Dr. Dawne MartinAugust 30, 2011

Groups for Project Overview of Project content Thursday: Meet at Hale Library, Room

301 at 8:05 For Tuesday, September 6 – Read and prepare

Exhibits Plus, p. 524 Videos

◦ the bakery charlie chaplin ◦ http://adland.tv/commercials/ibm-charlie-chaplin-

bakery-1985-030-usa◦ MacIntosh 1984 ad

http://www.youtube.com/watch?v=OYecfV3ubP8

To identify what business issues drive the Business-to-Business market

To understand how buyer and seller relationships are developed and maintained

To understand the necessary ingredients for the development of relationships

To understand how purchasing is playing a role in developing relationships

Situation Analysis◦ SWOT Analysis

Assumption and Missing Information◦ Information to fill in the gaps in SWOT

Statement of Problem(s)◦ Symptom – observable manifestations of problem◦ Problem - -why the symptoms occurred◦ Brief – one to two sentences – clear indication of

what needs to be addressed

Development of Alternatives◦ Either/Or Decision◦ Strategic – identify basic direction for firm

Evaluation of Alternatives & Recommendation◦ Criteria

Does it address the problem? Is it consistent with the mission statement? Feasibility & probability of success?

◦ Cost and revenue implications

Implementation – specifics of how you will enact the solution

Evaluation and Control◦ Set clear objectives

What do you expect the recommended solution to accomplish?

What is the timeframe for implementation and results?

◦ Benchmarks to track performance◦ Contingency plans

Supply and demand of products◦ Buyers’ estimate of value◦ Sellers choice of customers and markets

Supply Chain Management◦ Efficiency gains◦ Effectiveness

Under what market conditions are relationships likely to be formed?◦ Transaction size◦ Complexity of product◦ On-going need

What motives are there to create relationships?

• Why would the buyer’s motivation to build relationships be low? High?•Why would the seller’s motivation to build relationships be low? High?

Seller Reduced costs of

sales Better planning for

growth & production Information on

customer needs Eliminate price

competition Profitability

◦ Referrals◦ Price premiums◦ Operating expenses

Buyer Reduced costs of

buying Reduced perceived

risk Partner for

resources & customization

Sustainable competitive advantage

One-Time Market

Transactions

Long-Term Relationships

Market Exchanges

Strategic Partnerships

Functional Relationships

TransactionsSocial relationships

Safeguarded & corporate relationships

Investment of resources

Long-term vision

RelationshipCharacteristics

MarketExchange

FunctionalRelationship

StrategicPartnership

Time Horizon Short-term Long-term Long-term

Trust Low Medium High

Investment inRelationship

Low Medium High

Nature ofRelationship

ConflictBargaining

Cooperation Collaboration

Risk inRelationship

Low Medium High

Potential Benefits Low Medium High

Office Supplies O-Rings Data Entry Services Custodial Services Applications Engineering Storage Racks Payroll Software Office Furniture Small Electric Motors (Components

Dwyer, Schurr and Oh (1987), Developing Buyer-Seller Relationships, Journal of Marketing.

Power: Ability of one to get another to do what it would not do otherwise◦ Dependence

Justice: Rendering what is merited or due

Providing Information

Reciprocation Relationship Building

Block◦ Understanding drivers

in other’s business◦ Roles in relationship◦ Other’s strategies◦ Problems or concerns

Norms: Standards of behavior and guidelines for interaction

Common Goals◦ Incentive to pool

strengths & abilities Opportunities for

Shared Goals◦ Competitive Advantage◦ New market

opportunities◦ New products

Trust: Belief that party will fulfill its obligations in the relationship

Aspects of Trust◦ Dependability◦ Capability & Expertise◦ Concern for Other

Developing Trust◦ Going beyond expectations

Commitment: Actively contribute to relationship

Investments◦ Money◦ Skills◦ People◦ Expertise◦ Market access◦ Shared processes

Based on perceptions of commitment◦ Site visits◦ Depth & breadth of contacts◦ Exchange of personnel◦ Dependency balancing -- cultivating relationships

with other suppliers◦ Supplier pledges or long term contracts◦ Relational contracts

Steady supply & delivery◦ JIT◦ Concurrent-Manufacturing◦ Electronic Data Interchange (EDI) or E-commerce

Quality and standards Total cost Total Cost of Ownership

◦ Economic Order Quantity & Forward Buying◦ Value Analysis

Purchasing Philosophy◦ Adversarial purchasing philosophy◦ Partnership or Preferred Supplier philosophy◦ Single Sourcing

1994 - Licensed Mac Os to increase market penetration in publishing, design and database applications

1995 - Mac clones began to take Apple market share in existing customers

1997 - Apple acquired PowerPC and ceased licensing

Questions:◦ What did Apple hope to gain by licensing?◦ What were licensee looking for?◦ Could the license been structured differently?◦ How did customers fare under licensing?

2007 Pet Food Poisoning◦ ZAB accused of mixing melamine into wheat

gluten to increase the apparent protein content of gluten Melamine believed to be contaminated by other

poisons Exported through textile company to avoid

inspection of food products by China◦ Menu Foods food purchased gluton from

ChemNutra, who purchased from Suzhou Textiles Silk Light & Industrial Products – who purchased from ZAB

FDA inspects 1% of food supply, how is it that episodes like this are so rare?

Is this episode a result of only global sourcing?

Can the market fix this problem, or is more regulation required?