Business-to-business buying and the internet

To must consumers, excitements about internet buying has focused on website sealing computers, software, clothings, books, flowers or other retail gods. However, consumers-goods sale

s via the web are dwarfed by the internet sales of business goods. In fact, experts predict that business-to business internet trade will reach $134 billion a year by the turn of the century.

General electric is among the pioneers in internet purchasing. Last January, GE’s Information service division (GEIS) launched a Website, which allows buyers in GE’s many division to purchase industrial products electronically. This website lets GE buyers snap out requests for bids to thousands of suppliers, who can then respond over the Internet. Such electronic purchasing save money, time and piles of paperwork. According to account in Forbes, here is how it works:

The machinery at a GE lighting factory in Cleveland broke down GE lighting needed custom replacement parts, fast. In the past GE would have asked for bids from just four domestic suppliers. There was just to much hassle getting the paperwork and pro duction- line blueprints together and sent out to (a long list of) suppliers. But this time they posted the specification and “requests for quotes” on the GE’s website-and drew seven others bidders. The winner was Hungarian (vender) that would not (even) have been contacted in the days of paper purchasing firms. The Hungarian firm’s replacement parts arrived quicker, and GE Lighting paid just $320,000 a 20 percent savings.

So far, GE’s Internet purchasing system has logged more than $350 million worth of purchases by GE division, at a 10 percent to 15 percent saving in costs and five-day reduction in average in order time.

Based on its own success, GE is now opening the website to other companies. However, as a supplier of Internet purchasing services. GE will face formidable competition. As noted in forbs:

GEIS has jumped ahead of such companies as IBM, Microsoft, and Netscape to led the race in to business-to-business internet commerce. The tough part of establishing such a system, says Orville Bailey, who manages GEIS’ internet project, is just getting it started. Buyers do not want to invest in a system unless suppliers are already on board, and vice versa. “It’s the classic chicken-or-the- egg problem,” says Bailey. [Here, GE’s tremendous size gives it] a crucial advantage. GE division spends more then $30 billion a year on other companies’ good and service. So when GE announced last year that it would be soliciting bids over the internet, even the smallest, most technology of its supplies listed. Smiles bailey, “we could build the critical mass” [needed to get the internet commerce network up and running].

With its own network of industrial goods suppliers already hooked into the system, GE is finding it easy to resell the internet purchasing just as GE does. For access to its website,GE information service will charge buyers an initial fee of $70,000 and an undisclosed annual fee based on volume. Suppliers get to sign on to the system free.

The first [outside firm] to sign on is Textron automotive a subsidiary of the $9.3 billion Textron, inc. like GE, Textron automotive buys a lot of row materials and components: resin,asthrays,matel clips, and other parts used in auto dashboards and paneling. By year-end, Textron Automotive hopes to palace all its order-more than$500 million a year –over the GE information service website.

GEIS’s bailey expects various GE units to be buying goods at the time rate of $2 billion a year by a next year and outside firms like Textron auto motive to be doing another $3 billion or so. If a $134 billion market for business-to-business internet commerce by the year 2000does materialize up to $50 billion of that will move over GE’s internet purchasing system. What of the much-ballyhooed retail website?

….Those site will do about$10 billion in 2000.That’s one-fifth the potential volume of GE’s business goods website alone

Thus, the internet promises to change dramatically the face of business marketing. As one expert suggests, “internet presences is becoming as common as business cards and faxes.” To stay in the game, business-to-business marketers will need a well thought out internet marketing strategy to supplement their other business marketing efforts.

Motorola’s customer-driven “six-sigma” quality

Founded in 1928, Motorola introduced the first commercially successful car radio- hence the name Motorola, suggesting, “sound in motion.” During World War II, it developed the first two-way radios9Walkie-Talkies), and by the 1950s, Motorola had become a household name in consumer electronics products. In the 1970s, however, facing intense competition mostly from Japanese firms, Motorola abandoned the radios and televisions that had made it famous. Instead, it focused on advance telecommunication and electronics produces two-way radio pagers cellular telephones, semiconductors, and related technology gizmos. However, by the early 198-, Japanese competitors were still beating Motorola to the market with higher quality products at lower prices.

Since those trying times, however Motorola has come roaring back. It now lead all competitors in the global two-way mobile radio market and ranks number one in cellular telephones with a 35 percent worldwide market share. Motorola is the world’s fifth-largest semiconductor,producer,trailing only Intel,NEC,Toshiba, and Fujitsu.One in danger of being forced out of the pager business altogether, Motorola now dominates that market an astonishing 85percent global market share rather then suffering at the hand of Japanese competitors, ,Motorola’s sales in Japan now exceed $2billion, accounting ,almost 8 percent of total company sales.
How has Motorola achieved such remarkable leadership? The answer is deceptively simple: an obsessive dedication to quality. In the early 1980s, Motorola launched an aggressive crusade to improve product quality first by ten fold then by hundred-fold .It set the unheard–of goal of six-sigma standard means that Motorola set out to slash product defected to fewer than 3.4 per million for every process 99.997 percent defect free. Six sigma become Motorola’s rallying cry. In 1988,It received one the first annual Malcolm Balding National Quality Awards recognizing “preeminent quality leadership.”

Motorola initial efforts focused on manufacturing improvements. The goal was to prevent defecates by designing products for quality and making things right the first time and every time. Meeting the six-sigma standard meant that everyone in the organization had to strive for quality improvement. Thus, total quality hs become an important part of Motorola’s basic corporate culture. Motorola spends $160 million annually to educate employees about quality, and then rewards people when they make things right. The company also forces its suppliers to meet exacting quality standards. Some suppliers grumble, but those that survive benefits greatly from their own quality improvement. As an executive from one of Motorola’s suppliers puts it, “if we can supply Motorola, we can supply God”
More recently, as Motorola has developed a deeper understanding of the meaning of quality, it initially focus on preventing manufacturing defects has evolved into an costumer-driven quality and costumer value. “Quality,” notes Motorola’s vice president of quality has to do something for the customers. If a product does not work the way the designer planned it. Our definition of the defects is “f the commuter doesn’t like, it’s a defects.”

Thus since 1980s, the fundamental aim of Motorola’s quality movement has been total customer satisfaction. Instead of focusing just on manufacturing defects, Motorola’s surveys customers about their quality needs analyzes customer complaints, and studies service record in a constant quest to improve value to the customer

Some skeptics are concerned that Motorola’s obsession might be too expensive. Not so, claim Motorola in fact the reverse is true –superior quality is the lowest-cost way to do thing. The cost of monitoring and fixing mistakes can far exec the cost of getting things right in the first place. Motorola estimate that is quality efforts have result in cumulative saving of more than $9 billion during the past six years.

Therefore, Motorola’s quest for quality continuous. By the year2001, Motorola is shooting for the near-perfection- a mind-boggling rate of just one defect per million.(Gopal )

The rise and fall of new coke:what's the problem

In 1985, the Coca-Cola Company made a classic marketing blunder. After 99succesfull years, it set aside its longstanding rule-“don’t mess with mother cook”-and dropped its original formula coke! In its place came new coke with a sweeter smoother taste.

At first, amid the introductory flurry of advertising and publicity, new coke sold well. But sales soon went flat, as a stunned public reacted. Coke began receiving sacks of mail and more then 1500phone calls each days from angry from consumers a group called “old cola drinkers” staged protests, handed out T-shirt, and threatened a class action suit unless Coca-Cola brought back the old formula. Most marketing experts predicted that new coke would be the “Eddies of the eighties.” After Olney three months, the coca cola company brought old coke back. Now called “coke classic,” it sold side by side with new coke would remain its “flag ship” brand, but consumers had a different idea. By the end of 1985, classic was outselling new coke in supermarket by two to one.

Quick reaction saves the company from potential disaster. It stepped up efforts for Coke classic and slotted new coke into a supporting role. Coke classic again became the company’s main brand –and the countries leadings soft drink. New coke became the company’s “attack brand” –its Pepsi stopper-and ads boldly compared new Coke taste with Pepsi’s. Still, new coke managed only a 2 percent market share. in the spring of 1990,the company repackaged new coke and relaunched it as a brand extension with a new name coke II. Today, coke classic captures more than 20 percent us soft drink market; coke II holds a miniscule 0.1percent

Why was new coke introduced in first place? What went wrong? Many analysts blame the blunder on poor market research.
In the early 1980s, although coke was still the leading soft drink, it was slowly loosing market to Pepsi for years, Pepsi had successfully mounted the “Pepsi challenge” a series of televised taste testes showing that consumers preferred the sweeter taste of Pepsi. By early 1985, although coke led in the overall market, Pepsi led in the super market sell by 2 percent (That doesn’t should like much, but 2 percent of the huge soft drink market amounts to more than $1 billion in retail sales!).Coca kola had to do something to stop the lose of its market share, and the solution appeared to be a change in coke’s taste.

Coca-cola began the largest new product research project in the company history. It spends more then 2 years and $4 million on research before settling on a new formula. It conducted some 200,000-taste tests 30,000 on the final formula alone. In blind tests,60 percent consumers chose the new coke over the old and 52 percent chose it over Pepsi. Research shows that new coke would be a winner and the company introduced it with confidence. So what happened?
Looking back, we can see that Coke defined its marketing research problem narrowly. The research locked only test; it did not explore consumer’s feelings about dropping the old Coke and replacing it with a new version. It took no account of the intangibles-Coke’s name, history, packing, cultural heritage and image. To many people, Coke stands alongside baseball, hot dogs, and apple pie as an American institution. Coke’s symbolic meaning turned out to be more important to many consumers than its taste. Research addressing a broader set of issues would have detected these strong emotions.

Coke’ managers may also have used poor judgment in interpreting the research and planning strategies around it. For example, they took finding that 60 present of consumers preferred New Coke’s taste to mean that the new product would win in the marketplace, as when a political candidate wings wit 60 percent of the vote. But it also meant that 40 percent still linked the original formula. By dropping the old Coke, the company trampled the taste bunds of the large core of loyal Coke drinkers who did not want a change. The company might have been wiser to leave the old Coke as a brand extension, as it later did successfully with cherry Coke.
The Coca-Cola Company has one the largest, best managed, and most advanced marketing research operation in America. Good marketing research has kept the company atop the rough-and-tumble soft drink market for decades. But marketing research is far from an exact science. Consumers are full of surprise and figuring them out can be away fully tough. If Coca-Cola can make large marketing research mistake, any company can.