Advantages and Disadvantages of Membership of a Trading Bloc - Assignment Example

1.Membership of a trading bloc has advantages and disadvantages. a) identify 3 advantages and 3 disadvantages. 5 % Advantages: Trade blocs will result in a number of advantages for the firms. A group of companies working together in trade may seem to get protection from big corporations in terms of survival in price competition. Furthermore, since companies will be working together in an industry, they will benefit from lower production costs and supplier prices as they will have the ability to negotiate better (Boone & Kurtz, 2005). This advantage may arise from the cumulative affect of the demand a trade bloc may have in view of that instead of one company ordering a specific amount of product, many companies require the same product form their supplier and hence putting pressure on the supplier to sustain prices according to the trade bloc member firms (Boone & Kurtz, 2005). Thirdly, a trade bloc may be effective in negotiating in their own favour with the government in terms of taxes and subsidies. A group of companies can put more pressure on the politics and influence political representatives to set policies and statures of law in their favour. Through this way, they may effectively get lower taxed, more subsidies or a tailored wage system and Human resource regulations for themselves (Boone & Kurtz, 2005). Disadvantages: New entrants into the market may face difficulties in surviving if they are not a member of the trade bloc and may never be able to compete in the market. This will derive the market prices to always move in the favour of companies and the consumers and the economy may never reap the benefit of competition in the market (Boone & Kurtz, 2005). The suppliers of these trade bloc companies may have to suffer huge losses and eventually close down as these trade blocs will make up for the majority holding of their business and without them their output may not be sold efficiently. The companies that are members of the trade bloc may internally be unequal in terms that the stronger firms may dictate their terms and the other members may be forced to follow which may eventually harm these companies to sustain losses as compared to reap benefits within the trade bloc (Boone & Kurtz, 2005). b) explain by using examples, how these advantages and disadvantages may influence the way businesses may market their organisations and services to other businesses within the trading bloc. 15% Tradenex, GridNode and Rosetta have collaborate complexly to provide system solutions in terms of e-commerce to different consumers and have successfully integrated their services to utilise their abilities in a better way. The companies use the individual business networks of each company in the specified region to provide full e-commerce services that relate their technologies as one. The three companies are well known in the global market but were not big enough to be key players in terms of Markey share (Fill & Fill, 2004). The three companies act as a single Multinational corporation (MNC) in the market of e-commerce and have been successful in providing a cross platform fully featured list of products that lead to other Business to business marketing tools for corporations. This collaboration has benefited the group as their individual competitiveness has each company to focus on the products that they can make at relatively cheaper price and eventually all their services and products are combined to make a product that is competitive in term of price in the market. This has resulted in higher market share of the three companies in the global market (Fill & Fill, 2004). Internally, between themselves, they function as one supplier to another (between the three) and have complexly integrated their services as a part of a bigger project or product. Their form of marketing among themselves still entails on the basics of service and price and they have moulded their business model to function as competitive and evolving solution providers. This has made the individual companies to continuously evolve better systems and find cheaper resources on their own to provide the best possible combination of price against quality (Fill & Fill, 2004). 2.a business to business organisation needs to gain competitive advantages. Identify and critically discuss how an organisation may do this and evaluate and compare some of the factors that may prevent an organisation from going competitive advantage. 10% Competitive advantage is said to be geared for a firm where the earnings of a company far exceed the costs that are incurred while producing that good or service- these costs also include the financial costs on capitol. However, it may be said that a firm may not be able to sustain competitive advantage in the long run as many other firms may copy the methods that give competitive edge to the specific company. This replication of methods will eventually make more players enter in the industry and dilute the edge that they may have (Coe, 2003). However, a firm may be able to retain this competitive advantage when the value creating process of the firm may be hard to replicate and be adopted by other firms within the same industry. As hard as it may seem, because new entrants and diversifying existing players, may make it impossible for any firm to retain an edge in the long run, it is continuous innovative methods of production and an evolving product life cycle will evolve a firm to have competitive advantage in the form that evolving products may seem to earn higher earnings than stagnant products (Coe, 2003). Michael Porter’s five forces model may be one of the many strategies that may be applied to gain maximum profits in terms of competitive advantage. As per his forces, the source of the competitive advantage may be based on a strategy a company may utilize to differentiate their products form the market. An example of this strategy is the way Proctor and Gamble (PNG) derives its differentiation form market through high quality research into consumer needs and behaviour to strengthen its brand portfolio. These strengths can also come in the form of Patents, for example Viagra, that may restrict new entrants and other firms to implement the same category of products that give decrease a competitive advantage (Coe, 2003). Another factor that may give rise to competitive advantage that a company may enjoy is on the projects and businesses models that require a huge capitol investment and fixed costs. For example, setting up a new power plant or a telecommunication network may naturally pave paths for monopolies or monopolistic competition that firms may experience to gain higher revenues. Not all firms can invest heavily and this will make only the large companies or investment firms to exploit the prices in terms of high revenues. Therefore, for any company to sustain competitive advantage for longer time, the orientation of the product or service should be distinctive and under the shadow of being proprietary (Coe, 2003). 3.explain 'derived demand along the supply chain' and use example to illustrate how business to business marketers might stimulate derived demand. 10% The demand function of the market is important for generating revenues and profits for any industry- whether a B2C or B2B environment. Primary demand and derived demand, along with the integral relationship between the two are the foundations of business models in every sector of the economy. Whereas, primary demand is the number of units that are required by the total number of final consumers in the market segment, the derived demand is the expectations of other businesses that forecast a growth in the consumption along the source of the primary demand (Minett, 2002). For example, the primary demand of meat will be the total number of end users- that is the meat eaters, that make up for the units of meat consumed. All other demands that may rise out of this primary demand will in relation to the supply chain of meat will make up for the derived demand. To elaborate, lets say that the demand of the meat shop for the meat is related to the quantity that it may sell to the consumers who will eat that meat. This demand will be in proportion to any purchases made form the meat supplier. Hence, the demand of the supplier of processed meat from the processing plant will be based on the demand it gets form all the businesses that sell meat. Similarly, the demand of meat producer will be based on how much the quantity of processed meat is demanded by retailers from the processor (Minett, 2002). This supply chain derived demand of the meat processor and meat producer is illustrated to be derived form the actual demand of the end consumer- who will consume meat- as illustrated in figure 4: 4.Demonstrate, by using examples, the basis on which we might segment business to business markets and explain the differences between macro and micro segmentation and use an example to illustrate the segmentation process. 10% Business to business market segmentation is in many ways similar to Business to consumer market segmentation. However, although the foundations of the ideas are coherent, the actual structure of segmentation is relatively difficult and complex. These complexities have been derived from the nature of business to business models that are infused with technical buying process and criterion. This process has been developed into its complexities due to the nature of products and services being complex and intricate on their own. This complications are further distributed over the role of financing, contracting and the presence of many products and services that compliment each other (Minett, 2002). The visionary goal of each institution that works ion a B2B environment to achieve market segmentation is make a substantial research on the different types of customers. B2B companies’ roles are defined to gain higher revenues and profits by differentiating between current customers and potential customers. This differentiation will influence the pattern of purchases and product offerings to these different segments of their markets where price differentiation within the firm will depend on the relationship of businesses with each other (Minett, 2002). Furthermore, this segmentation will allow all B2B companies to gain the maximum competitive advantage through the use of tailored pricing systems and product offerings that will enhance the ties between the supply and use of the product. For example, a B2B company may find it to be a very lucrative opportunity to offer low prices to its segment of customers that are important in terms of the quantity they demand form the B2B company. Furthermore, this important segment may also be given priority in service by giving them a different helpline and support services that are available throughout the day and all around the year. On the other hand, the segment that includes very low quantity of demand may just be given a general support service which may not be run twenty four hours a day (Coe, 2003). However, B2B segmentation revolves around two step approach of macro and micro segmentation. Macro segmentation is structured to develop along the path of an organisation that is generally involved in buying (Coe, 2003). This need of buying segments the market into the following: Company / organisation size: It is used as a general reference for the to highlight the potential of the market Geographic location: The size of the B2B company enables to determine its culture, values and group hierarchy and communication requirements- The needs of an Asian company will be different than the needs of an American company (Coe, 2003). SIC core (standard industry classification): Classification information of the company may be helpful in detailing of the type of products and services it may require to purchase. However, with diversification, it is hard to correctly relate what other products may be sold to the company. Purchasing situation: This process of macro segmentation may turn out to be unrealistic as it is more theoretical and estimated. This differentiates new customers form existing ones and is a genralized view based on studying markets as a whole (Coe, 2003). Decision-making stage: This process exists in new customers- where the requirement of the new or prospect client is studied to categorise it as a potential good or bad customer. Other factors that influence macro segmentation are: Benefit segmentation, Type of institution, Customers’ business potential, Purchasing strategies and Supply Chain Position (Coe, 2003). As compared to macro segmentation, micro segmentation provides a detailed approach towards understanding the needs of B2B environment and functions. Macro segmentation may not be able to sustain itself without the concepts applied in micro segmentation which studies the details of the needs of an organisation to which business is conducted. In micro segmentation, decision making units are closely studied to give tailored services, prices and products and achieve business objectives. Micro segmentation includes the processes of: Buying decision criteria (product quality, delivery, technical support, price, supply continuity), Purchasing strategy, Structure of the decision-making unit, Perceived importance of the product to the customer’s business (e.g. automotive transmission, or peripheral equipment, e.g. manufacturing tool) and Attitudes towards the supplier: Personal characteristics of buyers (Coe, 2003). 5.a) discuss the concept of added value in business to business markets. 10% B2B companies at many times strive to differentiate themselves through either improving the product or improving the services that will make more revenues for them in the B2B environment. Many companies use tools such as customer services and other support services that are tailored to the needs of respective organisations. Value addition may also be achieved through offering profit and loss sharing pricing mechanisms in B2B organisations where the supplier is intrinsically linked to the market forces and as on one hand the supplier may gain from an edge in the market demand but in contrast may also have to sustain some loss (Fill & Fill, 2004). Added value is also seen in terms of the quantity that may be purchased or sold to another company. The bigger customers may be served better in terms of the ability of the supplier to produce the required amount that is needed by the customer at the same standard of quality. This may provide as an edge as the customer may not have to go to many different suppliers to get the quantity it requires. The textile industry is a prime example of such models where cotton, and yarn is in continuous need and businesses need these raw materials to produce fabrics form a consistent supplier that achieves the quality standards every time an order is placed (Fill & Fill, 2004). Furthermore, value addition factors in a B2B environment may also be used in terms of relationships that are built relative to the odd orders that a customer may place along with regular products or services. The ability to provide these services in a B2B environment will allow companies to add value to the products and services that they offer and gain higher profits and returns (Fill & Fill, 2004). b) does the concept differ between business to business and business to consumer markets? Explain how 10% c) Does the marketing of products and services differ between business to business and business to consumer market- discuss using examples.10% Value addition in a B2C environment is mainly factored form the image that is produced through advertisements and the environment that is given at the actual sale point the experience of the customer at the retail outlet in a B2C environment makes up for the majority of the value addition. The major difference in a B2B and a B2C environment in terms of value addition rises out the opportunity in B2C models to deal with all clients to experience the same level of service at the retail point (Boone & Kurtz, 2005). Therefore, generally, B2C companies may find it difficult to tailor the environment and image of the company for specific segments- working under the same brand. In a B2C environment the value addition is mostly associated with the perception of the product in the consumer whereas in a B2B model, the value addition is more inclined towards the actual quality and services associated with the product that make the differentiation (Boone & Kurtz, 2005). 6.if we are trying to win business by following the tendering methods what contribution would a marketing campaign make to our efforts critically discuss.10% Tendering the products and services in a B2B environment will cause a massive load on the process of selection of suppliers. However, in order to attract the suppliers and other businesses that will actually give value addition in terms of service, a marketing campaign will play a vital role. The tendered companies will gain information and benefits of the tendering company and will be inclined to get the attractive information about benefits and other associated advantages that a company may offer its suppliers or distributors (Boone & Kurtz, 2005). The suppliers will be more comfortable in establishing associations with businesses that have a repute and a name in the market. Furtherrmore, a marketing campaign will give the macro level information about the company and help other key suppliers to take interest in the tender opportunity (Boone & Kurtz, 2005). 7.identify the pricing factors that need to be considered in business to business markets and how they are different to business to consumer marketing and why might a supplier be able to charge different prices for products and services in different regions and countries. (7p's most important pricing) Pricing in B2B environment is dependant upon the quantity of the goods that are purchased whereas on the other hand the in a B2C model, pricing is not tangible with quantity and does not affect the amount of business driven in term of customers. The product plays an integral role. For example in the textile industry, the yarn sample is actually run first before placing an order with a supplier and the results of the performance of the yarn are the basis of the price setting. Whereas, in a B2C model, the product is priced and the environment is created to make up for any deficiencies in the quality of the product along with service (Boone & Kurtz, 2005). Promotion is an integral part of all B2C models, whereas B2B models only give price breaks in terms of the total demand of the products. All other P’s of marketing are similar in the models (Boone & Kurtz, 2005). Works Cited: Minett, S. 2002. B2B Marketing. Financial Times/PrenticeHall Fill, C. & Fill, K. 2004. Business-To-Business Marketing: Relationships, Systems and Communications. Financial Time Prentice Hall Boone, L. E. & Kurtz, D. L. 2005. Contemporary Marketing. South-Western College Pub. Coe, J. 2003. The Fundamentals of Business-to-Business Sales & Marketing. McGraw-Hill Read More