Project Report on Project Marketing and System Selling

Description
Selling is offering to exchange an item of value for a different item. The original item of value being offered may be either tangible or intangible. The second item, usually money, is most often seen by the seller as being of equal or greater value than that being offered for sale.

MBA ProMA Project Marketing and System Selling: Interaction/Network Approach
Hossein Dadfar Professor of Industrial Marketing/ International Marketing Linköping University, Sweden April 1, 2009

Network
•An industrial network consists of organizations that carry out productive activities and relationships between these organizations. • A firm has direct and/or indirect relationships to customers, suppliers, distributors, customer's customers, competitors, complimentary suppliers, political bodies, etc
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Network...
•In network approach, marketing environment consists of other organizations • The market is a network of other organizations • An organization has primary network and secondary network • Position in the network, a very important issue, is defined by • relationships between involved organizations (who is related to whom) •function, division of work • power between the organizations • a company can be in many networks, thus has many positions, all integrated in a total position. © Professor Hossein Dadfar

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Network Structure
Network structure: • Tightly structure: the interdependencies and bonds between the units/ actors are strong clear and strong position. Loosely structured network, the position of organizations are more diffuse and unclear. Low degree of dependence.



Tips: More tightly structured a network is more difficult it Will be to enter into it.
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Network Analysis
To analyze your company’s network here are some questions: • How strong are our bonds to the customers? •How dependent are we on specific customers and how dependent are they on us? •Is the network that we are about to enter, tightly or loosely structured? •Is our network changing, from being loosely structured to becoming more tightly structured? •Are our suppliers becoming more strongly committed to competitors than before? •What are the relationships between our customers can we use such relationships fro diffusion of information or learn more5 © Professor Hossein Dadfar about the network.

Network theory
•Social exchange •Resource dependence • Institutional economics(commons) •Graph theory (Harary & Norman 1953) • Cognitive and structural balance - Fritz Heider’s (1958), Cartwright and Harary (1956) • Communication & information diffusion • Social & generalized exchange • Power-dependence
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• Structural embeddedness

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IMP
IMP work is different than North Americans in terms of :
• Different business context (B to B) • Less focus on economics, drew more on behavioural theories from sociology and org theory (e.g. Aiken and Hage, 1968, Burns and stalker, 1961, Emery and Trist, 1965; Thompson, 1967) • Less focus on managerial implications. • Methodology they employed. • The nature of relationship (exchange relations)
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NETWORKING: What does it mean?
The Radar screen model, by Collin Hastings (1994)
People driven

global
fo cu s
Internally driven local regional Externally driven

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Technology driven

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Dimensions of organisational networking
Strategic logic Internally driven Externally driven Technology driven People driven
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Core networking Purpose process Networking Boundary busting within organisations Networking Successful between partnerships organisations Hard networks Connecting computers Soft networking Connecting people
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Time and Networks • Most (social) network research has been static, though there is a growing interest in modeling network dynamics. This is occurring in two related directions: • Two ways of thinking about time: • Movement of things through a network: Diffusion processes, changes in the distribution of an item over the
population, over time (I.e. the adoption of an innovation, the spread of an idea, etc.)

• Change in the network itself: Structural implications of relation change.

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Establishment Process
? Establishment is a process under which the company builds up a critical mass of relations with other actors in the market network. Establishment, therefore, refers to the situation that a company has built up the relations that its position in the network is secured, assumed be maintained. Critical mass means that the firm in the new market has a position that does not need additional recourse, and is self-sufficient.
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?

?

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Critical Mass
Dimensions of critcal mass:

¾ ¾

Number of Relations: there must be enough number of relations. What is enough depends on the structure of the network and product type. The contents of relations: the bonds that were explained before.
Large

Number of relations Critical Mass

Small Weak bonds The contents of relations 12 Strong bonds

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System Selling and Project Marketing
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System Selling
System selling refers to the situation that the seller provides total problem solving by selling both machinery and services (knowledge). Types of system selling companies: 1. The companies that sell machinery and material ( e.g. Tetra Pak) 2. The companies that themselves manufacture the same product. They sell the manufacturing system in developing countries.
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What is a Project?: A Marketing Perspective
A project is a “ complex transaction covering a package of products and services and work, specially designed to create capital assets that produce benefits for a buyer over an extended period of time.” needs.

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Why Project Marketing?
Access Shortage Lack of Easier resources of knowledge: to Association to manage adequate otherwise BOT one Engineering technical/ supplier than difficult knolwedge managerial many Saving time and BOOT cost

Buyer
Motivations

Seller
Strategy growth/ Type text competitive marketing
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Selling knowledge otherwise Type text not commercialised

Using managenet Type text capabilty/ creating value

More control Type text opportunities

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Some Characteristics of Projects and IPB
• Project Uniqueness • Project complexity: from products to systems to projects -“the technical performance of systems is always uncertain and is an inexact science” • Specific time schedules • Dyadic and network involvement • The role of local (recipient country) actors providing local relationship capabilities and other capabilities

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Some Characteristics of Projects and PM
• D-U-C framework: – Discontinuity – Uniqueness • given unique characteristics, each project can be regarded as an isolated market for goods and services, thus marketing research in a traditional sense, to predict or, anticipate opportunities and customer requirements virtually impossible. – Complexity • technological complexity • organisational complexity • financial complexity • multi-actor and multiple organizations involved • complex tender procedure Time and cost strain Dyadic and network involvement
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• •

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FUNCTIONAL COM PLEXITY

POLITICAL COMPLE XITY

S PE CIFICATION COMPLE XITYU

PROJECT SELLING COM PLEXITY

COM M ERCIAL COM PLEXITY
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Project typology
Based upon complexity level • A systematic classification of project type that have characteristics or traits in common: • Level one: an in-house (internal) project involving a single disciplinary team • Level Two: an in-house (internal) projects involving a multidisciplinary team. • Level Three: a multi-company multidisciplinary project. • Level four: a multi-country multidisciplinary
• (Source Association of Project Managers -AMP- UK)
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Project Classification Based up on Technology and Scope: Matrix

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Legal Definitions and Type of Projects
• Turnkey Project:
– after contract signature, the project marketer takes full responsibility for completion and functioning of agreed facilities

• Turnkey-plus:
– seller continues to manage the completed facilities for an agreed period after the turnkey project • An important part of project business is the organizational form for managing the business

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360o Responsibility of a Project Manager

Leadership Team Steering Group Project Director Sponsors Internal Relation External Relation Line Departments Project Trading Partners Manager Other Projects Suppliers Contractors Project Team Participants Deliverables Tasks

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Classification Based Upon Task
E n g in eerin g (o n e fu n ctio n -su b s ystem )

C on s e ta r fu v e c t n t ra in io l g ns

P ro je c t fo rm s
(b ase d u p o m tas k)

M ain co n tra ctin g (to tal ys tem excl.b u ild in g

Tu (t o c o n r n ta tra K e y ls c b u in c o l u t in g il d l . ti o n in g)

M an ag em en t C o n tractin g (JV )

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Financnced by Ow ner or third party

B

ar

te

r

Project forms
(Financing system

BOT

C

B u o n y -b a n tra c a c k d t J V in g

BOOT

Parallel Parallel marketing marketing

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OBS

R

eg

io

na

l

Tender (bidding)

CBS

In

te

rn

at

io

na

Local

l

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Marketing Process for Project Selling
1. Scaning phase
6. The follow-up phaseHigher profit opportunity 2. The approach phase

The process for marketing project

5. The completion phase 4. The negotitation phase

3. The bid phase

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Marketing Practices in Project marketing
• Deterministic: the project will be defined entirely by the customer.therefore, the supplier has a reactive approach (reaction to tender, to bid or not to bid, adaptive) • Constructivist: customer and various stakeholders define optimum solution and that contractor is one of key players in the process (anticipative)
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Project Marketing Process:Three periods of project

Independent of any project

Pre-tender Tender Preparation Offer

Adapted from Cova, Guari and Salle (2002)

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The Project Marketing Process
Strategy Independent
Functional development Relational development

Strategic priority

of any project External offer Core offer Milieu Customer

Project screening Pre-tender Project development Tender preparation Project offer Project negotiation
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Contracting

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Project-supplier’s network position
• Position: the role and power that an organization exerts
– Relational position: more, and stronger the relations, with other actors a company has, stronger the company’s position is. – The functional position represents the capacity to elaborate differentiated solutions for the projects (global and specific/customer level)
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Project-marketing v.s. traditional marketing
• Project marketing is different, it can be characterised by DU-C • In traditional marketing (standard) products are developed by supplier, in PM the project is defined/developed by customer. • Marketing process in PM and traditional marketing is different • Traditional marketing research can not be applied in PM. • Value creation in PM should be by multidimensional solutions, thus marketing mix and merely price is not proper tool.
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• Project network is very complex containing business and non-business networks.

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The selling process

Project of current interest

Inquiry

Tender for the project

Summary of tenders

Contract

Introduction phase

Preinquiry phase

Tender procedure phase

Tender Negotiation examination phase phase

Bengström’s Model

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Project Selling Road Map

P
POST DELIVER

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Identification
There are numerous ways of identifying a project. These are grouped in eight types:

1.
• •

International Financial Institutions (IFI)
World Bank
Project information documents can be found at:http://www.worldbank.org/html/opr/procure/bopage.html)

• • • •

The Inter-American Development Bank (IADB)
The IDB project listing and can be found at:http://www.iadb.org

Asian Development Bank (AsDB) (Can be found at:http://www.asiandevbank.org) The European Bank for Reconstruction and Development (EBRD)
The EBRD has a good listing that can be found at:http://www.ebrd.com

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Identification (cont…)
2. 3. 4. 5. 6. 7. 8. Networking
Networking, here, refers to getting out and meeting the people that can help in identifying a project.

Local Agent or Office United Nations Development Business Journal National and International Agencies
UN, SIDA, USAID, WHO, WTO will help in identifying a project.

Trade Missions Publicity Government Development plan/Budget
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Evaluation
Criteria used for evaluating potential projects by construction companies Project type Size Transparency Ethical Financing Current economical situation Current political situation Current legal system Match the technical strength of the company. Preferably complex. Lower limits between U.S.$ 50 and 100 million. The bid process is preferably open and fair. The project has to fulfill requirements concerning for example its environmental impact. Must be secured and creditable. The client has to be able to pay for the project. The project ought to survive a change of regime. The safety of the workforce has to be guaranteed. The commercial laws have to create adequate protection.

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Project Business as Internationalization Strategy:Market Entry Mode
• Market scanning • Project design and contact taking • Financial engineering • Find network partners • Successful project marketing gives references and relationships for future project sales, improvement of the buyers’ perception
• Comparing project marketing with other market entry methods (Table 1)
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Actors & Factors
• Successful project marketers constantly scan the external environment to determine which actors and factors can affect their their project selling. • Project should provide efficient solution to the customer requirement

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Offering Strategy
• Who dictates the rules of the game: deterministic vs. constructivist (reactive or proactive approach)

Buyer/seller interaction
Weak Strong Strong Weak

Network Position

Influence strategy Creative offering strategy
Aggressive pricing strategy

’Risk’ Strategy
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Source: Cova & Hoskins

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Issue for further research and discussion
– SWOR analysis – Iceberg theory of network – Networking across cultures

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