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2-2 Chapter 2 The Character of Business Marketing 2-McGraw-Hill/Irwin Business Marketing, 4/e Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved

2-3 CESSNA AIRCRAFT COMPANY TURNAROUND STRATEGY INTEGRATED THREE CRITICAL PROCESSES: 1. 1.NEW PRODUCT DEVELOPMENT 2. 2.STRATEGIC SOURCING 3. PRODUCTION 3.SUSTAINING PRODUCTION 2-McGraw-Hill/Irwin Business Marketing, 4/e Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved

2-4 SUPPLY CHAIN MANAGEMENT SCM INVOLVES... INFORMATION SHARING JOINT PLANNING COORDINATION OF EFFORTS TO ELIMINATE WASTE BE INNOVATIVE IMPROVE QUALITY PROVIDE FLEXIBILITY 2-McGraw-Hill/Irwin Business Marketing, 4/e Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved

2-5 BUSINESS TO BUSINESS: WHAT DETERMINES A SUCCESSFUL RELATIONSHIP? THE SELLER’S MOTIVATION TO RELATE THE BUYER’S MOTIVATION TO RELATE IF THEY AREN’T EQUALLY MOTIVATED IT WON’T BE AN EQUAL RELATIONSHIP MOTIVATION ! 2-McGraw-Hill/Irwin Business Marketing, 4/e Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved

2-6 BUSINESS TO BUSINESS: THE TYPES OF RELATIONSHIPS BUYER’S MOTIVATION TO RELATE IS WHEN SELLER’S MOTIVATION TO RELATE IS LOW HIGH LOW SELLER’S ADVANTAGE RESULTS IN STRATEGIC PARTNERSHIPS TRANSACTIONAL RELATIONSHIPS RESULTS IN BUYER’S ADVANTAGE HIGH 2-McGraw-Hill/Irwin Business Marketing, 4/e Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved

2-7 High Low Seller’s motivation to relate Buyer’s motivation to relate High Low Seller’s market Seller-maintained relation Joint relationship maintenance Buyer-maintained relation Buyer’s Market Discrete exchange (spot contracts) No exchange EXHIBIT 2-2 THE REALM OF RELATIONSHIPS 2-McGraw-Hill/Irwin Business Marketing, 4/e Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved

2-8 STRATEGIC PARTNERSHIPS OCCUR WHEN BOTH PARTIES HAVE MUTUALLY STRONG INTERESTS IN MAINTAINING AN ONGOING EXCHANGE 2-McGraw-Hill/Irwin Business Marketing, 4/e Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved

2-9 JIT RELATIONSHIPS A SUPPLIER PRODUCES AND DELIVERS PRECISELY... THE NECESSARY QUANTITIES AT THE NECESSARY TIME WITH THE NECESSARY PERFORMANCE SPECIFICATIONS... EVERYTIME 2-McGraw-Hill/Irwin Business Marketing, 4/e Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved

2-10 GOING FOR HIGH PERFORMANCE RELATIONSHIPS DEVELOP A COMMON GROUND BUYERS Want: Reliable delivery without interruptions Reliable products with low rejection and defect rates Efficient lead times SELLERS Want to: Sell Large Volumes Sell similar amounts over time Manage their selling and support expenses 2-McGraw-Hill/Irwin Business Marketing, 4/e Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved

2-11 REQUIREMENTS FOR HIGH PERFORMANCE RELATIONSHIPS GOES BEYOND THE FINANCIAL CONSIDERATIONS: INTEGRITY FAIRNESS LOYALTY FLEXIBILITY INPUT INTO YOUR PARTNER’S STRATEGY PARTNER’S INPUT INTO YOUR STRATEGY COMPLIANCE WITH PROCEDURES AND AGREEMENT HONOR COMMITMENTS STAND BEHIND YOUR PRODUCTS 2-McGraw-Hill/Irwin Business Marketing, 4/e Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved

Exhibit McGraw-Hill/Irwin Business Marketing, 4/e Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved THE RELATIONSHIP DEVELOPMENT PROCESS 1.Awareness 2. Exploration 3. Expansion 4. Commitment No interaction. Unilateral considerations of potential Partners Interaction between the parties occurs. A gradual increase in dependence reflects probing and testing. Termination of this fragile association is simple One party has made a successful request for adjustment. Both parties are satisfied with some customization involved. Additional benefits from products, services, or terms are sought from the current partner rather than from an alternative partner Some means of sustaining the relationship result contracts, shared ownership, social ties, inputs are significant and consistent. Partners adapt and resolve disputes internally Relationship phase Phase characteristics Source: Adapted from F. Robert Dwyer, Paul H. Schurr, and Sejo Ob, “Developing Buyer-Seller Relationships.: Used with permission from the Journal of marketing, published by the American Marketing Association, vol 52 (April 1987), p.21. Expectations development Attraction Communication & bargaining Power & justice Norm development Shared values and decision- making structures support joint investment in relation. 0 Seller’s dependence on buyerBuyer’s dependence on seller 0

2-13 TWO CHOICES FOR STAYING IN A BUSINESS RELATIONSHIP 1. 1.YOU WANT TO. THE REWARDS ARE FINANCIAL, STRATEGIC OR PSYCHOLOGICAL 2. 2.YOU HAVE TO. THE COST TO EXIT IS TOO HIGH OR THERE ARE NO ALTERNATIVES 2-McGraw-Hill/Irwin Business Marketing, 4/e Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved

2-14 SUGGESTIONS FOR MAKING BUSINESS- TO-BUSINESS RELATIONSHIPS LAST MAKE ON-SITE VISITS TO YOUR PARTNER TRADE PERSONNEL AND OFFICES MANAGE TOTAL DEPENDENCE WITH AN ALTERNATE SUPPLIER MAKE THE PLEDGE OF CONTINUOUS SERVICE DEVELOP A RELATIONAL CONTRACT PROVIDE OWNERSHIP BY BRINGING FUNCTIONS OR TECHNOLOGY WITHIN BOUNDARIES OF PARTNER’S FIRM 2-McGraw-Hill/Irwin Business Marketing, 4/e Copyright © 2009 The McGraw-Hill Companies, Inc. All rights reserved