Vocabulary
hierarchy n
hierarchic(al)
top-down; syn military style
Vertical organisational structure
horizontal(flat) corporate structure
matrix structure
flatten v
delayering n; syn flattening
headquarters n pl (HQ)
division n; syn unit, arm
overlap v
overlapping a (divisions, responsibilities
accountable a (to smb for smth); to be held accountable
accountability n
subservient a (to)
report v (to); dual reporting
incentive n
reshuffling n; syn rejigging, restructuring
turnaround n
reengineering n
streamlining n
downsizing n
organization charts
profit-and-loss account
to have an upper hand
low-key changes
to shift attitudes
to command a high price
subservient a (to)
UNIT 3. KEEP THE CUSTOMER SATISFIED
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Competencies
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READING AND SPEAKING (1) |
What can you say about the importance of keeping the customer satisfied?
In what way do companies use the Internet to improve their services or products?
Can you name the best customer-focused companies?
1. Read the text and say what mass customization means and give examples.
All Yours
Manufacturing companies are increasingly using the Internet to give customers the impression of personal service. But true customisation needs new production techniques as well.
“Any colour you want so long as it's black," was Henry Ford's approach to customer choice. Click on the website of idtown.com, and you see the next industrial evolution at work. This firm, in Hong Kong, will sell you any of an almost infinite variety of designs of watch, assembled from standard parts, at much the price of a Henry Ford-type watch.
Thanks to the Internet, all sorts of firms are using one-to-one marketing to elicit information about individual customers. Such information could once have been collected only through a direct sales force, and its high cost meant that it was used only for high-value customers. Now, the cost has fallen sharply. And mass customisation allows companies to use such information to produce individually tailored products at affordable prices. "As in so many areas," notes Ward Hanson, author of "Principles of Internet Marketing" and a professor at Stanford Business School, "the Internet allows the democratisation of goods and information."
Until now, these techniques have beenapplied chiefly to services. Banking, stockbroking, communications, on-line information: all increasingly appear on your computer with your name attached. "Anything that can be digitised can be customised," says Joseph Pine, who helped to found Strategic Horizons, a consultancy in Ohio, and also wrote a book on mass customisation. But now, products that cannot be digitised are increasingly receiving the all-yours treatment too. And as the revolution spreads to manufacturing, firms are finding they need to change their entire production process.
The first manufacturers to tailor products to particular customers have, not surprisingly, been selling to other businesses. Mass customisation is more prevalent in business-to-business, because the customer can attach a dollar value to it," says Mr Pine. The simplest approach is to design a product that buyers can customise themselves. However, too many choices, and too much flexibility, create problems for both customers and company.
But the change has not merely affected customers' costs and convenience. Gradually, it has affected the way that customers work too. The manufacturer that has done most to apply this approach in the consumer world is Dell Computer. To the customer, the company's most striking feature is a website that allows the buyer to design an individual computer and then track it through to delivery. But Dell also shows that when you get mass customisation to work, some remarkable things start to happen.
First, the need to hold stocks of parts, partially finished and finished goods falls sharply: inventories at Dell have fallen from 31 days of parts at the end of the financial year to only six days today, says Paul Bell, who runs Dell's operations in Europe. Much of Dell's production, up to the point of final assembly, is outsourced. That makes it essential for suppliers at every link in the chain to be plugged into good information about what customers want, and when. "If all our suppliers are guessing," says Mr Bell, "you end up with inventory, which is the physical embodiment of bad information." Mind you, this process can also bring an opposite problem: delays when Dell runs out of a particular part.
Speed and good communications are thus essential if mass customisation is to work. Get them right, and another prize is yours. In Henry Ford's day, Ford made the car and the customer paid for it. In Michael Dell's day, the customer pays for the computer and then Dell makes it. Thus, in the past quarter Dell has been sitting on 18 days' sales, and the figure is creeping up as the speed of production increases.
Car makers, lumbered with more than $100 billion of stocks in America, look on this with envy. "We've learnt a lot from studying Dell," admits Mark Ryhorski, manager for consumer-relationship marketing at Ford in America. “After all, they broke the paradigm that great consumer choice means huge amounts of inventory. The auto industry is a trillion-dollar industry, sitting on 60-100 days of finished goods. Think how much of this country's capital is tied up in that." Conventional car making pumps thousands of cars through each plant to keep costs down. But accumulating stock has to be financed and, as often as not, cleared using special deals, both of which eat into margins.
As a step away from this, Ford announced a partnership with Microsoft last year that will give potential customers a view, not just of their local dealer's lot, but of what regional dealers have, what is on order and what is being built. The trouble is that this is not that many steps away from Henry Ford. What Ford and Microsoft propose is merely a customisation of the stock pipeline. Customising the car itself will be harder: for instance, body colour is determined early on, when the newly bashed metalwork is sprayed. By contrast, the colour of a Smart Car, made by DaimlerChrysler, is decided almost at the last minute, when plastic panels are clipped on to the sides. Without changing their production process, traditional car makers will not really be able to customise their cars.
To succeed in mass customisation, firms must change more than just the order in which things are assembled. "One of the biggest changes is in the design and construction of products," says Frank Filler, an expert in mass customisation at the Technical University of Munich. Companies, he says, need to move to modular production processes, in which each group of steps can be separated or clipped together "like Lego blocks".
One example is in the garment business. Timothy Belton left Andersen Consulting in 1997 to set up Express Custom Tailors, producing tailored menswear to order. He offers "a custom garment in less time than you have to wait for the alterations, at a lower price than off-the-rack."
He put the garment-producing end of his business in Cleveland, Ohio, because the town's tailoring tradition gives it a ready supply of skilled workers. But the production process he uses is Lego-style, not old-style. Instead of making the sleeves of a jacket first and then the body, assembling the garment in a series of steps, his workers make sleeves and body simultaneously, working in parallel with others who are stitching other sections. By breaking the 100 or so operations into modules, a garment can be assembled in five hours. "Saville Row on steroids," is how Mr Belton describes it.
Some firms are developing the link between one-to-one marketing and mass customisation. Reflect was created by Procter & Gamble to develop online sales of beauty-care products. It takes information from its customers and offers them cosmetics, shampoos and so on, all made to their specification. It opened 12 weeks ago, and half its orders are already repeat business.
Part of the appeal to customers, says Richard Gerstein, who runs design and marketing for Reflect, is to enjoy a wider choice than in even a well-stocked department store, where "most brands can sell only 15 or so items." But the producer gains even more. Reflect has complete control of its relations with customers, learning from them as well as being able to market to them without a retailer getting in the way.
The key to exploiting mass customisation is to manage customers at the same time, observes Mr Filler. Don Peppers, an American writer on one-to-one management, makes a similar point: "Customers are no longer passive recipients of a message. They tell you what they want. You stay with me because we have a learning relationship."
It is not easy to turn around a business designed, in the style of Henry Ford, to produce first and sell afterwards, and point it instead towards serving each customer individually. It requires a different corporate structure, built not around products but around different kinds of customers. Henry Ford's mass production transformed manufacturing in the 20th century. Mass customisation may do the same in the 21st.
The Economist, 1stJuly, 2002
2. Explain the following in English.
Any colour you want so long as it's black.
the price of a Henry Ford-type watch
a high-value customer
Anything that can be digitised can be customised.
too many choices, and too much flexibility, create problems for both customers and company.
Inventories at Dell have fallen from 31 days of parts at the end of the financial year to only six days today.
They broke the paradigm that great consumer choice means huge amounts of inventory. The auto industry is a trillion-dollar industry, sitting on 60-100 days of finished goods.
like Lego blocks; Lego-style
Saville Row on steroids
3. Answer the following questions.
What companies excel in mass customization?
What are the limits of mass customization? Is it possible to customize any process or product?
What are possible advantages and disadvantages of mass customization?
Make a mind map of the text “All Yours.” Put “mass
customization” in t
he
centre. Compare the results with your peers.
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READING AND SPEAKING (2) |
5. Read the following text and answer the question in the headline.
Should We Admire Wal-Mart?
By Jerry Useem
Some say it's evil. Others insist it's a model of all that's right with America. Who are we to believe? There is an evil company in Arkansas, some say. It's a discount store — a very, very big discount store — and it will do just about anything to get bigger. You've seen the headlines. Illegal immigrants mopping its floors. Workers locked inside overnight. A big gender discrimination suit. Wages low enough to make other companies' workers go on strike. And we know what it does to weaker suppliers and competitors. Crushing the dream of the independent proprietor — an ideal as American as Thomas Jefferson — it is the enemy of all that's good and right in our nation.
There is another big discount store in Arkansas, yet this one couldn't be more different from the first. Founded by a folksy entrepreneur whose notions of thrift, industry, and the square deal were pure Ben Franklin, this company is not a tyrant but a servant. Passing along the gains of its brilliant distribution system to consumers, its farsighted managers have done nothing less than democratize the American dream. Its low prices are spurring productivity and helping win the fight against inflation. It is America's most admired company.
Weirdest part is, both these companies are named Wal-Mart Stores Inc.
The more America talks about Wal-Mart, it seems, the more polarized its image grows. Its executives are credited with the most expansive of visions and the meanest of intentions; its CEO is presumed to be in league with Lex Luthor and St. Francis of Assisi. It's confusing. Which should we believe in: good Wal-Mart or evil Wal-Mart?
One consistent refrain is that Wal-Mart squeezes its suppliers to death — and you don't have to do much digging to find horror stories. Evil Wal-Mart's original sin was to open stores that sold things for less. This was a powerful idea but hardly a new one. The basic discipline of discounting had been around for at least a century — honed by department stores in the 1870s, by the Sears and Montgomery Ward catalogs in the 1890s, and then by chain stores like Woolworth and A&P. Though founder Sam Walton added a twist — a small town, he realized, could support a big store — he didn't invent the rules of discounting. He just followed them better than anyone else.
Not surprisingly, that's how the people running Good Wal-Mart see their story. They cast their jobs in almost missionary terms — "to lower the world's cost of living" — and in this, they have succeeded spectacularly. One consultancy estimates that Wal-Mart saves consumers $20 billion a year. Its constant push for low prices, meanwhile, puts the heat on suppliers and competitors to offer better deals.
The consumer — as an entity with distinct rights and wishes — didn't exist before the first mass retailers called it into being. Wal-Mart swore fealty to the consumer and rode its coattails straight to the top. Now we have more than just a big retailer on our hands, though. We have a servant-king — one powerful enough to place everyone else in servitude to the consumer too. Gazing up at this new order, we wonder if our original choices made so much sense after all.
Fortune, March 8, 2004
6. Comment on the following.
A big gender discrimination suit.
Crushing the dream of the independent proprietor — an ideal as American as Thomas Jefferson.
Its farsighted managers have done nothing less than democratize the American dream.
Its CEO is presumed to be in league with Lex Luthor and St. Francis of Assisi.
Wal-Mart swore fealty to the consumer and rode its coattails straight to the top.
The consumer — as an entity with distinct rights and wishes — didn't exist before the first mass retailers called it into being.
7. Explain the following.
notions of thrift, industry, and the square deal
to pass the gains along to consumers
to be credited with expansive visions
the rules of discounting
constant push for low prices
to put the heat on smb.
T
RANSLATION
8. Translate the text “Should We Admire Wal-Mart?” in writing.
9. Translate the following extracts paying attention to:
a) emphatic structures
What Ford and Microsoft propose is merely a customisation of the stock pipeline.
What has kept the educated job market from falling off the cliff so far is continued hiring by some key industries.
If the Conoco/Phillips fusion does trigger yet another round of consolidation however, it is unlikely to be as earth-shattering as the previous one, for one simple reason: the oil industry's premier league is too far ahead.
If chief executives had taken the depressed market valuations of the 1970s and 1980s seriously, there would have been virtually no investment. Fortunately they did not do so. Unfortunately, they did take the overvaluations of the late 1990s quite seriously and promptly proceeded to waste resources on a vast scale. In both environments, however, wise managers would have paid little attention to the market gyrations, just as wise shareholders would have shielded their managers from its temptations.
What worries Nestle’s chief executive far more are accusations that the Swiss group is swapping a consistent, long-term strategy of controlled expansion for an unbridled acquisition spree to pep up its growth rate — and that it is doing so just when dullness is back in fashion in the business world.
Only when one of the shareholders began asking questions was the company forced into initiating an investigation. What was unveiled and made public yesterday might have been expected to have already disturbed some investors.
b) to be + Infinitive
Speed and good communications are thus essential if mass customisation is to work.
Yet a huge strength of American firms is their ability to reap scale economies and roll out brands across the world's largest single market. If Europe is to benefit fully from the euro, it needs to follow suit. And that is more likely to happen if Europe's companies find it easier to merge across borders.
The Carlsberg Foundation controls the brewing business and is obliged to maintain the ownership of the Carlsberg holding company above 50 per cent. It might need a clever structure to sell. If the Carlsberg Foundation is to protect its investment, it is time to make sure it has done the necessary groundwork.
Imposing Japanese-style quality and efficiency is a must if Renault is to have a shot at re-entering the US, a goal the French company has set for some time after 2010.
10. Render the following text in English. Find examples of mass customization in Russia, if any, and make your own assessment of the attempts to keep the customer satisfied.
Ничего личного: почему наши компании не готовы к кастомизации
Елена Крюкова
Кастомизация – модная тенденция, медленно и неотвратимо ползущая к нам с Запада. Подгонка привычного стандартизованного продукта под требования отдельного клиента там обычная практика. Российский бизнес тоже начал осознавать: в современном мире товар принято «клиентить». Но пока большинство отечественных компаний плохо понимает, как можно персонализировать свой продукт. Ещё труднее им подсчитать, что выгодней – штамповать типовой товар конвейерным способом либо пуститься в кастомизацию.
«Кастомизация не что-то инновационное, скорее, наоборот, с неё начинался рынок: костюмы и платья шились у портных по индивидуальному заказу, ювелирные изделия, мебель, предметы интерьера и прочее изготавливались непосредственно под клиента, – говорит Ирина Сироткина, генеральный директор имидж-агентства “Ген Гениальности”. – Достигнув определённой зрелости, рынок перестроился на другой вид маркетинга, ориентированный на снижение издержек и оптимизацию производства. На время кастомизация оказалась за бортом прогрессивных течений. Сейчас всё чаще говорится о её возвращении.
Люди “наелись” ширпотреба и хотят индивидуального подхода. Нижние этажи пирамиды Маслоу благополучно отделаны и заселены, верхние просят обставить их со вкусом. Человек мечтает быть яркой личностью и иметь возможность реализовать свои прихоти и капризы. Западные тенденции показывают перспективность кастомизации, однако России положительного опыта пока недостаёт. В то же время в мегаполисах уже сформировалась прослойка потребителей, которую можно считать целевой аудиторией для кастомизированных товаров. Они не желают покупать типовые вещи».
Потребность в продуктах, идеально подогнанных под индивидуальные желания или вкусы, имеет решающее значение там, где речь идёт о ежедневных или очень крупных покупках. В автобизнесе кастомизацию не только поставили на поток, но и сделали дополнительным источником прибыли.
Марианна Оболенская, директор по внешним связям «Никс – компьютерный супермаркет», где ПК собираются по индивидуальным требованиям, считает: чем выше уровень благосостояния людей, тем сильнее их желание персонифицировать свои приобретения – дома, автомобили, одежду. «Покупатели-мужчины требуют самые производительные, навороченные конфигурации. Они ценят то, что мы даём возможность выбора. Женщины, как правило, любят внимание. Им приятно, что консультант работает только с ними, их привлекает сам процесс».
«Любая кастомизация, безусловно, плюс компании в глазах клиента, – соглашается Ирина Сироткина,– и создаёт ей особый имидж – прогрессивной, модной, ориентированной на потребителя. Покупатель перестаёт ощущать себя частью толпы и понимает, что к нему относятся как к личности с особыми запросами и собственным характером. Это, конечно же, тешит самолюбие человека и рождает ответные чувства к компании». Собственно, именно взаимности сегодня и добиваются фирмы, вкладывая бешеные деньги в продвижение.
Нельзя сказать, что производители не реагируют на потребительские настроения и стремление к индивидуальности. Но большинство из них пока делает ставку не на персонализацию, а на расширенный ассортимент, дробят рынок на мелкие сегменты и ниши.
Вместе с тем многие эксперты говорят о том, что в отличие от Запада российский бизнес ещё не созрел для такой клиентоориентированности. «Да, персонализация продуктов – заметный тренд высококонкурентных рынков и категорий в мире, но он мало проявляется у нас. В нашей стране отчётливее тенденция “коробочных” решений. Готовые тарифы, готовые туры, готовые комнаты… В промышленных масштабах, то есть в масс-маркете, где требуется обеспечить быструю проходимость, или поточность, любая персонализация повышает операционные издержки. Да и зачем кастомизироваться, если и так всё покупают?» – задаётся вопросом Наталья Игнатьева, руководитель отдела коммуникаций Nielsen.
У маленьких компаний на кастомизацию подчас не хватает креатива да и банальных маркетинговых знаний, а крупные думают только об оптимизации издержек и в силу своих «габаритов» вообще тяжело меняют курс. Пример: начальник отдела маркетинга крупного хлебобулочного комбината предложила руководству выпускать круассаны-пустышки, а к ним продавать шприцы или тюбики с разными начинками, чтобы потребитель сам решал, какую выбрать. Руководство настоятельно порекомендовало выбрать пару стандартных начинок и самотворчеством не заниматься. Мол, и так купят.
«“И так всё купят” – это, к счастью, уже не про отечественный рынок, – говорит Елена Ефременко, директор по рекламе группы компаний “Бельпостель”. – Тем не менее его насыщенность качественной продукцией пока оставляет желать лучшего. Сейчас мы на этапе, когда предложение по большей части групп товаров можно расширять и расширять. Кастомизация начинается, когда рынок переполнен, а хочется чего-то особенного. Думаю, мы придём к этому лет через пять».
Ирина Сироткина из «Гена Гениальности» считает, что пока максимальная подстройка под клиента в России – всё же игры для премиум-сегмента. В противном случае затея вряд ли будет иметь экономическую выгоду.
“Sales business /Продажи”, № 6 июнь 2008
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LANGUAGE FOCUS |
Find other ways to express the same.
to give all-yours treatment —
stocks of goods —
to set up a company —
to turn around a company —
to attach a dollar value to smth —
direct marketing —
to contract out —
personified —
12. Give the Russian for the following.
to have affordable prices; to have one’s money tied up in the mining industry; the white-goods-producing end of the business; inventories; individually tailored products; to receive the all-yours treatment, to found a consultancy; to be ill founded; to elicit useful information; to elicit the truth; a direct sales force; to customize a car; mass customization; to turn around a company; accounts receivable; to affect customers’ costs and convenience; to outsource production; to have one’s job outsourced; to be in the pipeline; to spur productivity; farsighted managers; chain stores; notions of thrift, industry, and the square deal
13. Give the English for the following words and word combinations.
приемлемые (для потребителя) цены; удерживать цены на низком уровне; испытывать нехватку каких-либо комплектующих; сырье; полу-фабрикаты; готовая продукция; распространение опыта, полученного в сфере услуг, на обрабатывающую промышленность; применять индиви-дуализированные методы маркетинга; индивидуализированный продукт; использовать субподряд; создавать товарные запасы; проводить коррек-цию запасов; использовать финансовый рычаг; квалифицированные рабочие; проводить монтаж (демонтаж); определять (измерять) резуль-таты деятельности компании; гибкость; руководить деятельностью компании в Северной Америке; повышать качество и эффективность; магазины дешевых товаров; крупная сеть супермаркетов; гостиница, принадлежащая гостиничной сети
14. Make up your own crosswords puzzle with the words of this unit. Use a special computer programme available in the Internet (such as EclipseCrosswords).
Share your crosswords with your peers.
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HUNGRY MiNDS
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15. Read the following article, pick out and analyse the information under the subtitles given in the chart below.
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owners |
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business plan |
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marketing |
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performance |
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Make a conclusion: What is the secret of Publix’s success?
The Opposite of Wal-Mart
A thriving grocery chain provides a telling contrast with Wal-Mart
WITH the rise of Wal-Mart, smaller supermarkets across America have struggled to compete. But not Publix Super Markets, which recently opened its 900th store, in Murfreesboro, Tennessee, and is defying Wal-Mart's market-share success in food sales. Publix is America's largest privately owned grocery chain, with revenues in 2006 of $21.7 billion, up 5% from 2005, and net profits of $1.1 billion, up 11%. Publix has a market share of more than 40% in Florida, its home state, and it is taking business from Wal-Mart and others as it expands into Alabama, Georgia, Tennessee and South Carolina. It has a competitive edge over Wal-Mart because it is strong in precisely the areas where Wal-Mart is vulnerable.
Take customer satisfaction, for example. Publix has ranked number one out of supermarkets on the American Consumer Satisfaction Index, published by the University of Michigan, since it began 14 years ago, whereas Wal-Mart ranks last. Publix employees have a reputation for going out of their way to please customers — testimony to the motivational power of employee ownership, perhaps. Publix employees put your shopping into bags, take it to the car and refuse tips — unless you offer more than once. They own 31% of the firm through an employee share-ownership plan, making Publix the largest employee-owned company in America. (The rest of Publix, established in 1930 by George W. Jenkins, is largely owned by the Jenkins family, which still runs the firm.)
Publix has also tailored its products to fast-growing local markets more successfully than Wal-Mart has, boosting sales while carving a niche for itself. The company has opened Publix Sabor stores in south Florida, seeking to attract shoppers from its large Hispanic and Caribbean populations. As well as offering packaged goods aimed at Hispanic customers, as Wal-Mart does in some stores, these shops sell prepared dishes, including red beans with pig's feet and stewed chicken, and perishables such as yucca root.
In addition, Publix has gained a cultlike following amongst Floridians for its Publix-brand goods such as chocolate-chip cookies, sub sandwiches and sweet tea. Publix began selling organic and natural products in 1996 and will open several stores devoted to such products this year. Wal-Mart began selling organic food only last year, and is now thought to be retreating from its initial ambitious plans. And although Wal-Mart has introduced around 120 Neighborhood Markets — supermarket-sized outlets intended to compete with the likes of Publix — they are far less profitable than its traditional, larger stores.
Even these larger stores do not measure up to Publix. John Heinbockel, a food-retail analyst at Goldman Sachs, an investment bank, notes that Wal-Mart's same-store food-sales growth, though in the mid-single digits, has been falling, and total same-store sales growth slipped to 1.9% in 2006. Meanwhile, Publix's same-store sales growth has been steadily increasing: this week the firm said it had reached 5.1% in the first three months of this year. In a market where margins are slim, Publix makes 40% more profit on groceries than Wal-Mart does, says Burt Flickinger III of Strategic Resource Group, a consultancy.
Publix is not the only private, family-owned regional chain holding its own against Wal-Mart. Others such as h-e-b in Texas and Wegmans in the north-east have respectable market shares within their regions. But Publix is 60% bigger by revenue than the next largest private supermarket, Meijer in the Midwest. It is opening 37 new shops this year, both in Florida and farther afield. Judging by its successful expansion into Georgia, where it has the largest number of stores outside Florida, Publix will continue to give the Bentonville behemoth a run for its money as it expands throughout America's south-east.
The Economist, May 5th, 2007
CROSS
CULTURAL
16. Read the text and explain the title.
Trouble at Till
How retailers can avoid foreign adventures ending in disaster
WHEN Wa1-Mart went into Germany in 1997, it assumed that Germans would like to be treated with the same courtesy as Americans. Staff were therefore taught to greet customers bysmiling as brightly asthey do in any suburb from Pittsburgh to Peoria and to help pack their shopping. That was a mistake. Wal-Mart discovered thatmany Germans regard shop-assistants who try to help them with suspicion and flee the premises to avoid buying anything from them.
Globalisation often seems unstoppable; but the determined parochialism of shoppers' tastes has turned out to be one of the strongest forces standing in its way. Never mind travel, which familiarises customers with foreign stores; the spread of brands; which means that familiar products likeLouis Vuitton handbags; Nike trainers and Starbucks coffee can be bought in almost any country; internet shopping; which makes everything available to everybody everywhere. Wal-Mart sold its German stores to Metro, a local rival, earlier this year. The world's most successful retailers still get into trouble when they expand across borders.
Hardly surprising then that many shopkeepers never leave home. Of the world's top 250 retailers; 104 have no international operations at all, according to Deloitte, a consultancy. The most international big retailer is France's Carrefour. It has stores in just 29 countries, whereas multinationals in other industries might operate in 100 or more countries.
But in rich countries retailing is growing slowly; and in their home markets giants such as Wal-Mart and Tesco are attracting the attention of domestic regulators and the hostility of the public. They need to go abroad to grow. The latest country to interest them is India, where foreign shopkeepers are getting their feet in the door.
Retailers who set out on foreign adventures need to remember three basic rules. First; don't forget the local touch. Wall Mart gotoff to a bad start in Germany by appointing a country manager who did not speak German. It also underestimated the local competition: Germany's Aldi and Lidl are champion price cutters. In Brazil it failed to notice that people like to shopen famille: the aisles of its shops were too narrow to accommodate the standard family party. Successful foreign adventure adjust their formats to local needs: S&Q, a British do-it-yourself retailer, discovered that Chinese people look down their noses at doing things themselves. It became a buy-it-yourself and get somebody else to do it for you, retailer.
Second, make sure your timing is right. In 1995 Yaohan, aggressive Japanese retailer, opened one of the world's biggest department stores in Shanghai. It planned to build 1,000 Chinese shops. But a decade ago Chinese people were too poor to support its vision and in 1997 Yaohan filed for bankruptcy. Third, be selective about what you try.Tesco, which has to be pretty successful in foreign markets, is shortly going in America — but with convenience stores only, because it reasons the supermarket business is too crowded.
Aisle be back
Bad experiences don't seem to discourage retailers. This year IKEA, which fled Japan 20 years ago, is trying once more to win over the Japanese to the delights of self-assembly. Marks & Spencer, which quit continental Europe in 2001, is planning another overseas push. No big retailer has yet failedin same overseas market twice. But there's always a first time.
The Economist, 4th November, 2006
17. Comment on the following.
Globalisation often seems unstoppable; but the determined parochialism of shoppers' tastes has turned out to be one of the strongest forces standing in its way.
Hardly surprising then that many shopkeepers never leave home.
They (the giants) need to go abroad to grow.
Don't forget the local touch.
Chinese people look down their noses at doing things themselves.
Sum up the recommendations how to avoid foreign adventures ending in disaster.
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BUSINESS SKILLS |
Customer relationship management
A way of designing structures and systems so that they are focused on providing consumers with what they want, rather than on what a company wants them to want
Customer relationship management, commonly known as CRM, is a way of designing structures and systems so that they are focused on providing consumers with what they want, rather than on what a company wants them to want. It usually involves a restructuring of the company’s IT systems and a reorganisation of its staff.
CRM is heavily dependent on a technique called data warehousing, a way of integrating disparate information about customers from different parts of the organisation and putting it together in one huge IT “warehouse”. Dale Renner, once the boss of a data-mining business, said that CRM is something that encompasses “identifying, attracting and retaining the most valuable customers to sustain profitable growth”.
This is contrary to the product-oriented way in which most firms grew up, when divisions and business units were built around products and product groups. It was not then unusual for each group to have its own accounts department, its own IT unit and its own marketing team. People who worked for these vertically integrated silos were often competing as much against other silos within the same organisation as against outside rivals in the marketplace. Their loyalty to their silo frequently blinded them to the wider interests of the company as a whole.
CRM is about putting structures and systems in place that cut across the vertical lines of the traditional firm and focus on individual customers. Before it was introduced, customers might be approached by the same firm in several different product guises over a short period. No one bit of the firm would know what any other bit was doing at any particular time.
The phrase “the customer is king” was first coined long before it was true. Only towards the end of the 20th century, when advances in technology and widespread market deregulation put enormous new power into the hands of consumers, did it begin to stop sounding hollow.
Two things in particular brought home to companies the need to take better care of their customers. First, some terrible mistakes were made because of the blinkers imposed by the old product-silo approach. For example, market share was the main goal and yardstick of such structures. Yet when IBM was king of the mainframe computer market, it came to understand just in time that 100% of a market that was rapidly shrinking would soon be 100% of nothing. What its customers really wanted was not mainframe computers as such, but rather the power to process information electronically. Academics have described this different concept of a market as “a market space”. Children’s playtime is a market space. A doll is a product.
The second thing that drove companies to focus more closely on their customers was a growing awareness that building up profits by aggregating narrow margins from the sale of individual products might not be the best way of ensuring the long-term health of the organisation. Companies that did this would always be vulnerable either to cherry-pickers or to nimble newcomers that were built on a different cost base, made possible by deregulation or by changing distribution channels.
More companies want to regard their customers as customers for life and not just as the one-off purchasers of a product —it is far less expensive to retain an existing customer than it is to acquire a new one. It then becomes important to measure a customer’s lifetime value, and to think about cross-subsidising different periods in their lives. Banks make little or no money out of their student customers, for example, in the hope that they will become more valuable in later years.
This strategy was questioned by Werner Reinartz and V. Kumar, professors at INSEAD, a leading European business school in Fontainebleau, France, in an article in Harvard Business Review. Their research found no relationship between customer loyalty and profits. Not all loyal customers, it seems, are profitable, and not all profitable customers are loyal.
Sep 18th 2009 From Economist.com
19. Read the following article and speak about product bundling and cherry-picking. Consider advantages and disadvantages of each tactics for product/service providers and for customers.
Cherry-picking
The idea of cherry-picking applies in a number of business contexts. It refers, for example, to customers who ignore products that are bundled together by a manufacturer (who in the process may disguise cross-subsidies between high-margin and low-margin components of the bundle). Such customers prefer to bundle their products together for themselves, selecting the best value (that is, cherry-picking) from each category of component.
An obvious example is the purchase of music systems. Manufacturers sell music sets, made up of an amplifier, a tuner, an iPod docking station, a CD player and speakers. But many music enthusiasts choose to assemble their own sets, buying their amplifier, CD player, speakers and so on, each from a different producer. Manufacturers try to discourage this by making the price of the complete set competitive. But earnest cherry-pickers can usually find discounted components that enable them to assemble something cheaper.
The term cherry-picking is also applied to the behaviour of new entrants into old industries, firms which try to choose their customers carefully. By calculating which consumers are profitable (and appealing to them while ignoring those who are not) such a firm can sometimes rapidly gain market share. In some cases, cherry-pickers are successful only because traditional firms in the industry do not actually know who their profitable customers are.
Service industries are particularly vulnerable. It is more difficult for them to measure the profitability of individual customers and customer segments. So they are never quite sure which they want to keep and which they want to get rid of. Successful cherry-pickers leave an industry’s incumbents with the least profitable customers. They also push up the price to those consumers who are not attractive to them. In car insurance, for example, cherry-picking in the UK pushed up the price prohibitively for young male drivers, the highest-risk group.
A bunch of new airlines set about cherry-picking when deregulation of the skies in Europe and the United States allowed them into the market. Within limits, they were able to choose which routes to operate on. They were unencumbered with the obligations that the traditional national carriers had had to bear in the interests of government policies on transport and/or regional development.
In banking and insurance, cherry-picking newcomers were able to undermine the business of old-timers in just a few years at the end of the 20th century. Firms such as Direct Line, a British telesales insurance business, rapidly won market share by focusing on a narrow (profitable) segment of the market and avoiding costly traditional distribution channels.
The success of cherry-picking emphasises something known as the survivorship bias: the tendency of business analysts to judge the past by the record of relatively long-term survivors, ignoring those who drowned or came and went in the meantime.
July 21st 2008 From Economist.com
20. Do your own research of the issue of mass customization using the following questions as guidelines.
What are the building blocks of a mass customisation strategy?
What are the elements of a successful product configuration system?
What are the risks associated with mass customization? How can you avoid such risks?
What is personalization and in what way is it different from mass customization? Give examples.
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GROUP WORK |
20. In groups of three or four prepare a report on customer-related management. Make a presentation in Windows Power Point. (Portfolio entry).
R
EFLECTION
SPOT
Do you think this Unit was useful for your future work? What competencies did the Unit help you develop?