International Marketing and Purchasing

International Marketing and Purchasing

International Marketing and Purchasing A Survey among Marketing and Purchasing Executives in Five European Countries Edited by Peter W. Turnbull and Malcolm T. Cunningham in association with I. D. Ford and Elling Homse

Peter W. Turnbull and Malcolm T. Cunningham 1981 Softcover reprint of the hardcover 1 st edition 1981 All rights reserved. No part of this publication may be reproduced or transmitted, in any form or by any means, without permission First published 1981 by THE MACMILLAN PRESS LTD London and Basingstoke Companies and representatives throughout the world ISBN 978-1-349-05477-0 ISBN 978-1-349-05475-6 (ebook) DOI 10.1007/978-1-349-05475-6 1ransferred to digital printing 1999 02/790

To our colleagues in the IMP group who made the research both enjoyable and stimulating

Contents Preface Acknowledgements xi xv 1 A New Approach to Industrial Marketing and Purchasing 1 1. 1 Objectives 1 1.2 Marketing and Purchasing in Perspective 3 1.3 Export Marketing and International Purchasing 5 1.4 The Importance of Individual Attitudes 6 1.5 Research Method 10 1.5.1 Research Assumptions 10 1.5.2 Sample Selection 11 1.5.3 Respondents 13 1. 5.4 Questionnaire Design 14 1.5.5 Data Analysis Process 15 1.5.6 Representativeness of Results 17 2 Marketing in Europe: the Performance of British Companies 19 2.1 The Need for Effective Marketing 19 2.2 Marketing Organisation and Style 20 2.2.1 Marketing Organisation 21 2.2.2 Marketing Style 23 (i) Emphasis on new business 23 (ii) Customer orientation 24 (iii) Price 25 (iv) Product appearance 26 2.3 Reputation and Competence 27 2.3.1 General Reputation 28 2.3.2 Technical Competence 30 (i) Technical innovation 30 (ii) Product adaptation 31 (iii) Consistent quality 33 (iv) Provision of technical information 34 vii

viii Contents 2.3.3 Commercial Competence 34 (i) Delivery performance 35 (ii) Stock holding and after-sales service 38 (iii) Sales and communications 39 2.3.4 Summary 42 2.4 The Quality of Relationships 42 2.4.1 British Suppliers Compared with their Competition 44 2.4.2 Features of Relationships 45 (i) Liking 45 (ii) Trust 47 (iii) Understanding and co-operation 48 (iv) Personal relationships 48 (v) Language barriers 49 2.4.3 Summary 50 2.5 The Marketing Environment 50 2.6 Summary of Main Findings about British Marketing 53 2.6.1 Marketing Organisation and Style 54 2.6.2 Selling in the Home Market 54 2.6.3 Reputation and Competence 54 2.6.4 Relationships with Customers 55 2.6.5 Language Requirements 56 2.6.6 Overall Marketing Performance 56 3 Purchasing in Europe: the Performance of British Companies 58 3. 1 Introduction: the Contribution of Purchasing to Business Performance 58 3.1. 1 Purchasing in Unit Production Industries 60 3.1.2 Purchasing in High Volume Manufacturing Industries 61 3.1.3 Purchasing in Process Industries 62 3. 1.4 Contents of the Chapter 62 3.2 Purchasing Organisation and Style 63 3.2.1 Purchasing Organisation and Decision Making 64 3.2.2 Buying Style 66 3.3 Reputation, Competence and Requirements of British B~~ m 3.3. I General Reputation and Competence 69 3.3.2 Technical Reputation and Requirements of British Buyers 70

Contents (i) Technical innovation (ii) Adaptability (iii) Emphasis on quality (iv) Product appearance 3.3.3 Commercial Reputation and Requirements of British Buyers (i) Communication with suppliers (ii) Delivery requirements (iii) Stock holding and service requirements (iv) Preferences about nationality of salesmen 3.3.4 Summary 3.4 The Quality of Relationships 3.4.1 British buyers Compared with other Europeans 3.4.2 Aspects of Relationships (i) Liking, trust and loyalty (ii) Understanding and co-operation (iii) Personal relationships (iv) Language barriers 3.4.3 Summary 3.5 The Purchasing Environment 3.6 Summary of main findings about British Purchasing 3.6.1 Organisation and Decision-Making Characteristics 3.6.2 Style of Buying 3.6.3 Reputation, Competence and Requirements of British Buyers 3.6.4 Relationships with Suppliers 3.6.5 Language Barriers for British Buyers 3.6.6 Problems Facing Foreign Suppliers 4 Implications for Management 4.1 Marketing Implications 4.1. I Improving Competence and Reputation (i) Selling on technical superiority and not an price (ii) Emphasising technical innovativeness (iii) Increasing understanding and flexibility 4.1.2 Integrated Teamwork 4.1.3 Strategic and Operational Marketing 4.1.4 Organisational Position of Export Marketing 4.1.5 Relationships and their Management ix 70 71 73 74 75 76 78 79 79 80 81 82 83 83 85 86 86 87 89 92 92 93 93 94 95 95 96 97 98 98 99 100 100 102 102 103

x Contents 4.1.6 Resource Investment 104 4. 1. 7 Commitment to Exporting 105 4.1.8 Selection of Export Markets 105 4. 1.9 Learning from Experience 106 4.1.10 Dangers of Institutionalisation 107 4.1.11 Language Skills 108 4.1.12 The Importance of Purchasing 108 4.1.13 Characteristics of European Markets 109 (1) Marketing to Sweden 110 (ii) Marketing to Germany 111 (iii) Marketing to France 111 (iv) Marketing to Italy 112 (v) Marketing to British Customers 113 4.2 Purchasing Implications 114 4.2.1 The 'Total Purchasing Concept' 115 4.2.2 Strategic and Operational Purchasing 116 4.2.3 Managing Supplier Relationships 117 4.2.4 The Exercise of Purchasing Power 118 4.2.5 The Professionalism and Status of Buying 120 4.2.6 Raising Supplier Performance Standards 121 4.2.7 Selectivity and Concentration of Purchasing Resources 121 4.2.8 Buying in Europe: Characteristics of European Supply Markets 122 (i) Buying from Sweden 122 (ii) Buying from Germany 123 (iii) Buying from France 124 (iv) Buying from Italy 124 (v) Buying from Britain 124 4.3 Final Remarks 125 Index 129

Preface This book identifies important lessons to be learnt by managers of companies selling to and buying from Europe. Recommendations for action by British management are made based on the results of this unique research study of over 300 companies in France, Germany, Italy, Sweden and Britain. The products and industries surveyed represent vital sectors of trade between the five countries and are drawn from a cross-section of industrial goods such as raw materials, components and capital equipment. Although a main focus of the book is the export marketing activities taking place between these five countries, the book is not only concerned with marketing. It also examines the vitally important purchasing function. Thus, the discussion concentrates on the style, reputation and performance of British marketing and purchasing, as seen by their customers and suppliers throughout Europe. The data is presented in such a way as to facilitate a comparison between the activities of British companies and those of their major competitors in Europe. Progressively, companies throughout the world are extending both their marketing and purchasing activities into foreign markets. The industrial markets of Western Europe are particularly attractive and are becoming increasingly international and competitive. The high and growing import penetration of the British market by European competitors bears witness to this trend, which has been stimulated by Britains entry into the EEe. British firms who wish to begin exporting or increase their level of export activity are now more often looking to Western European markets than to the traditional English speaking markets of North America, Australia, etc. Yet they do so at a time when competition is increasing and the growing threat from Japanese manufacturers cannot be ignored. Furthermore, as the results of this research indicate, this is occurring at a time when the reputation of British companies for their product technology, performance and service, is comparatively poor. These problems are exacerbated by the recent strength of sterling, which has considerably reduced the xi

xii Preface previous competitive position of British products. The constant search by companies to achieve superiority in their product offering has led many European manufacturers to buy from foreign suppliers who have established a reputation for technical excellence. This has been complemented by multiple sourcing by buyers to achieve lower costs and security of supply inputs in the face of changing exchange rates and labour disputes in supplier firms. This increase in international purchasing calls for higher standards of professional competence by buyers. The results of this research study point to the need for British companies to improve their performance levels and raise their requirements in order to make better use of their suppliers. Thus, this book provides a timely stimulus to British managers to reappraise and redirect their managerial skills and attention towards improving the performance and thereby the reputation of their marketing and purchasing activities at home and abroad. Although the successful performance of any company is influenced to some degree by Government policies and economic factors, it is the individual manager who gives the stimulus and drive to success, who seizes opportunities and responds to competitive pressures. In many ways, as a company broadens its international operations, the role of its managers becomes even more crucial. International marketing and purchasing usually takes a company into new markets with different and unfamiliar characteristics. Business standards and ways of dealing with customers or suppliers may be in marked contrast to the domestic market. Furthermore, differences in technological innovativeness, political environment, cultural and language, will all have to be taken into account in establishing and maintaining relationships with individuals and companies in a foreign market. New and more complex problems of communication, organisation and control are encountered. The competence and styles of buying of new customers and suppliers in Europe may also be markedly different to those in their established markets. In short, business is more risky. The late entry of Britain to the EEC has placed the British at a competitive disadvantage, because of their comparative lack of experience, knowledge and understanding of these differences. Yet, the lessons have to be learnt quickly if British companies hope to compete effectively in Europe. Perhaps, one of the more disquieting findings to emerge from the research is that so many British companies are held in low regard in their home market. Thus, although the book is largely concerned with

Preface xiii marketing and purchasing in other European countries, the evidence presented highlights the areas where British companies are criticised by their home market customers and suppliers. It is not surprising that many of these findings point to the need for paying greater attention to the organisation structure and skills of co-ordination in British companies rather than to specific management techniques. The book is based upon personal interviews with almost 900 executives throughout Europe, all of whom are relating their current experiences in buying from or marketing to one more of the other countries. After examining the findings relating to marketing and then purchasing, the authors draw out important implications for general management, marketers and buyers in British companies.

Acknowledgements Our most sincere thanks are offered to the many people without whom our research and this book would not have been possible. We are particularly indebted to the company executives throughout Europe who so willingly gave us their valuable time. Our thanks also go to the Social Science Research Council and the British Overseas Trade Board for their financial help. We also thank Elling Homse and Mrs Pat Dudman for their invaluable work on the computerisation of the enormous volume of data. Finally, we are proud to have been associated with our fellow researchers in the International Marketing and Purchasing (IMP) project and are grateful for their unfailing help, advice and encouragement. The authors and publishers wish to thank the controller of Her Majesty's Stationery Office, for permission to quote from theannual Abstract of Statistics, 1977. IMP Group Members France M. Perrin J. P. Valla Germany Dr M. Kutschker Institute of Business Research Lyon Business School University of Munich Italy I. Snehota Seconded from the University of Uppsala, Sweden Sweden L. Hallen Department of Business Administration Dr H. Hakansson University of Uppsala J. Johanson University of Uppsala Dr B. Wootz University of Uppsala UK Dr I. D. Ford School of Management, University of Bath M. T. Cunningham Department of Management Sciences, UMIST P. W. Turnbull Department of Management Sciences, UMIST E. Homse Department of Management Sciences, UMIST xv