Trade Management
 Module 1.
 Main Topics:
 Corporate Environment
 Competitive Advantage
 Competitive Strategies
 Markets Industrial V Consumer
 E-Commerce
Trade Management
Corporate Environment
Input
Activity
Output
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 Business
Strategies
(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
Consumer Market
• Geographically Concentrated
• Fewer buyers
• Big buyers
• Small # of large buyers
• Dispersed
• Mass markets
• Free market
• Large # of buyers
Trade Management
Markets: Industrial V Consumer
Buyer Behavior
Industrial Market
Consumer 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)
• 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
Consumer Market
• Technical complexity high
• Customized
• Service, delivery and availability is
important
• Standardized
• Service, delivery and
availability is somewhat
important
Trade Management
Markets: Industrial V Consumer
Decision Making
Industrial Market
Consumer Market
• Distinct observable stages
• Multiple influencers and decision
makers
• Unobservable
• Mental stages, not very
clear
• Emotional
Trade Management
Markets: Industrial V Consumer
Pricing
Industrial Market
Consumer Market
• Competitive bidding
• Multistage negotiation
• Sharing of information:
• Cost data
• Specifications (technical)
• Funding?
• Cost + plus (profit)
• Normally MRP & MOP
• Concept of list price
• Discounts to overload
inventory
Trade Management
E-Commerce Today
•
E-commerce: Use of the Internet and Web to transact business;
digitally enabled transactions
•
Began in 1995 and grew exponentially; still growing at an annual
rate of 25 percent
•
Companies that survived the dot-com bubble burst and now thrive
•
E-commerce revolution is still in its early stages
Trade Management
E-Commerce Growth
Trade Management
Unique Features E-Commerce
•
Ubiquity
•
•
Internet/Web technology available everywhere: work, home, etc.,
anytime.
Global reach
• The technology reaches across national boundaries, around
Earth
• Commerce enabled across cultural and national boundaries
seamlessly and without modification
Trade Management
Unique Features E-Commerce
•
Universal standards
• One set of technology standards: Internet standards
• Effect:
•
•
Disparate computer systems easily communicate with each
other
• Lower market entry costs
Interactivity
• The technology works through interaction with the user
• Effect:
• Consumers engaged in dialog that dynamically adjusts
experience to the individual
• Consumer becomes co-participant in process of delivering
goods to market
Trade Management
Unique Features E-Commerce
•
Information density
• Large increases in information density—the total amount and
quality of information available to all market participants
• Effect:
• Greater price transparency
• Greater cost transparency
• Enables merchants to engage in price discrimination
Trade Management
Unique Features E-Commerce
•
Richness
• Supports video, audio, and text messages
•
Effect:
• Possible to deliver rich messages with text, audio, and video
simultaneously to large numbers of people
• Video, audio, and text marketing messages can be integrated
into single marketing message and consumer experience
Trade Management
Unique Features E-Commerce
•
Personalization/Customization
• Technology permits modification of messages, goods
• Effect
•
•
Personalized messages can be sent to individuals as well as
groups
• Products and services can be customized to individual
preferences
Social technology
• The technology promotes user content generation and social
networking
• Effect
• New Internet social and business models enable user content
creation and distribution, and support social networks
Trade Management
Unique Features E-Commerce
• Digital markets reduce
•
Information asymmetry
•
Search costs
•
Transaction costs
•
Menu costs
• Digital markets enable
•
Price discrimination
•
Dynamic pricing
•
Disintermediation
Trade Management
Disintermediation to Consumer
Trade Management
Private Industrial Network
Trade Management
Internet Exchanges
 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
Net Marketplace
Trade Management
Types of E-Commerce Transactions
Business
Consumer
Business
B2B
GM/Ford/Daimler’s Covisint
exchange
B2C
Amazon, Dell, Net
Grocer.com
Consumer
C2B
Priceline, Travelocity
C2C
Ebay
Trade Management
E-Commerce Processes
Access Control
and Security
Access Control
Authentication
Security Measures
Profiling and
Personalizing
Profile
Management
Content
Management
Dynamic Content
Generation
Data Repository
Catalog
Management
Pricing Calculation
Personalization
Product
Configuration
Behavior Tracking
Catalog
Generation
Search
Management
Content-Based
Search
Parametric-Based
Search
Role- and RuleBased Search
Payment
Shopping Cart
Payment
Method Support
Payment
Verification
Collaboration
and Trading
Mediation
Negotiation
Workflow
Management
Buying Process
Automation
Document
Management
Rule- and RoleBased Content
Routing
Event
Notification
Event-Driven
Transaction
Messaging
Message to e-mail
Message Boards
Newsgroups
Bidding/Auctioning
Collaborative
Buying
Online Community
Trade Management
Benefits of E-Commerce
 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
Limitations 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