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Cloverbrook and Walmart: Business Marketing

Unlike in consumer marketing, business marketing involves entities that are considerably more complex that individual consumers. One key reason for this is simply that an organization's purchase involves multiple individuals such as buyers, end-users and operations or finance department personnel. Also, business purchases are often either made by, on average, more sophisticated buyers and/or more users with greater sophistication or demanding usability specifications. Yet another key difference is that purchases are seldom isolated events. There is an ongoing service requirement, a set-up and delivery component or simply the opportunity for a potentially infinite corporate lifetime of additional purchases.

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This last difference brings into the discussion the idea that business marketing has much to do with relationships. These relationships should be mutually profitable, and are frequently long-term in nature. Because of these facts, organizational theorists have utilized concepts that had previously been more likely to be a part of a discourse in the social sciences.

Utilizing the framework that businesses marketing does not take place in a vacuum, theorists describe the structure surrounding a firm as a network of relationships. These relationships may be short-term, long-term, supplier, retailer, or construed by virtually any other construct that is useful to elucidate the environment that a firm operates in with regards to power, structure and players and the resulting opportunities and threats.

With regards to Cloverbrook, there are a number of observations in regards to its market or network structure:

1.) Overall, Cloverbrook perceives its relationships down the supply-chain as being adversarial in nature. This is evidenced by the instances in which there were defects in that there is an attitude that seems to be biased against finding the root cause of the problem. It seems that there is a lack of understanding that an error causes problems 'down the line' and not just simply grievances on Cloverbrook.

2.) Cloverbrook currently suffers from an asymmetric balance of power that is not in its favor in regards to the mutual worth that is has with it three key customers. This is evidenced by the forced compliance that occurs on collaboration issues and by the relative 'fear' that Cloverbrook seems to exhibit in relating to these customers.

3.) Potential collaborations with customers seems to be viewed from a cost versus and opportunity perspective with only the short term gain considered. While it is possible that the other firm is simply wanting 'something for nothing', most attempts at collaboration are likely a genuei attempt by the other party at cementing and improving a long-term relationship.

4.) Cloverbrook, as a firm, seems to have an outlook that price is the key determinant of why they maintain customer relationships. This is evidenced by the seeming short-term, transactional view (as opposed to long-term relational perspective) of business operations.

In summary, Cloverbrook's business network could be characterized as being adversarial in nature and asymmetrical in influence.

The customer service function of business tends to be that group of people that manage the supply chain from the factory to the customer. When problems occur such as a late shipment, the wrong price or manufacturing errors, it is not the sales person that sold the order that gets the call but rather the customer service department. As such, this group is an ideal position to gather information that could be utilized in process improvement at virtually any point from pre-fabrication to post-sale service, reliability and satisfaction.

Despite this, the department at Cloverbrook resists proactive problem solving (aka, prevention) and is reactive in nature. In customer service, reactive equates nicely with expensive. Giving a batch or order away or having to do extensive rework is generally not built into costing models and eats directly into an often slim profit margin.

Similar to the idea of being resistant to internal quality efforts is the concern that Cloverbrook views process improvement collaborative efforts with suspicion also. While it is difficult to speculate on 'motive', this is likely due to their own perception that everything is sold on price. While price is certainly important, Cloverbrook seems to miss the point that value is not determined by price alone.

While it is somewhat understandable that is with the power that key customers have over Cloverbrook, they would be a bit reluctant to share information and that their secrets that could be used to marginalize or eliminate them at a later time, it is entirely unreasonable not to desire to improve internal processes.

Though there are many process improvement programs in existence, Cloverbrook should consider a program such as Six-Sigma. While such a program seeks to reduce errors, in practice, many companies in the various industries use this platform as a means to collaborate with supplier and vendors. Examples include such firms as General Electric, 3M and Wal-Mart among hundred of other firms. Having been in existence for several years and being well-known, there are many opportunities for employees to receive training (first green belt then black belt). As it is very quantitative in nature, the payoffs will be very apparent and easily tracked.

One especially notable aspect of the recommendation for this program, the Six-Sigma program in particular, perhaps more than most others, stresses the involvement of top levels of management to endorse the program. This issue is likely one of the most critical issues at Cloverbrook. The overall climate and culture of sub-optimal performance and general mistrust of process improvement, if it did not start at the top, is perpetuated there.

There are a number of means by which Cloverbrook could utilize technology to gain better control of it supply chain. Beginning with the most extreme example and working 'backwards', consider the example of Wal-Mart. In the early 1990's Wal-Mart and one of its leading suppliers, Procter & Gamble became likely the first large scale collaboration between a retailer and a vendor. In this collaboration, Wal-Mart essentially gave its internal sales and supply chain information to Proctor & Gamble so that they could automatically reorder based upon the analytic work done by Proctor & Gamble. In the past, a company would only have its total ship in data rather than real-time, store-level, point-of-sale data. A retailer would spend vast amounts of time working to figure sales forecasts and place orders to the vendor. WalMart, in many ways, simply outsourced this to the mutual benefit of both parties.

In Cloverbrook's case, a solid recommendation is that there be a greater degree of collaborative planning and forecasting so that it is possible to reduce the variances in supply and demand. These meetings need not happen in person but could be facilitated with NetMeeting or some other system of video conferencing. Also, the person on the customer side should be in regular contact with a specific individual or group on the customer service team, giving each party one voice by which relationships can be built and problems first solved and then prevented. In addition, Cloverbrook should meet with the ultimate customer, that is, the end user of their product that they can begin to be customer-centric and understand the pressures that retailers or end-users place upon Cloverbrook's customers.

Utilizing the Six-Sigma process improvement systems, as mentioned earlier, in conjunction with powerful statistical programs such as MiniTab or SPSS could enable the plotting and tight control of manufacturing process variables.

Additionally, utilizing inventory tracking device such as RFID (radio frequency identifier devices) or truck based transponders could enable very precise tracking and locating product so that late or missing deliveries are nearly 100% avoidable.

Moving closer to the WalMart example, it seems entirely possible that Cloverbrook could begin at least a rudimentary means of sharing data both with their suppliers upstream as well as with customers downstream. This practical step would not only reduce the variances that impede efficient and profitable production but would, perhaps even more importantly, demonstrate a willingness to be a collaborative partner in the pursuit of reasonable profit.

In summary, while advanced data collection, analysis and sharing are the ultimate goal of leveraging technology to achieve better results, the most fundamental technology is simply the telephone and, if used correctly will produce startling results.

Works Consulted

Ford, D. et al. (2002) The Business Marketing Course: Managing in Complex Networks. JohnWiley: Chichester, UK.

Pande, P., R. Neuman, & R. Cavanagh. (2000). The Six-Sigma Way: How GE, Motorola, and Other Top Companies Are Honing Their Performance. New York, New York, USA: McGraw-Hill.

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