Agricola is a medium sized company, which specializes in agricultural equipment. It is also active internationally. However, Agricola does not have any knowledge in electronic and electromechanical technologies. When launching its new product, ENSILOR, the R&D department noticed that the new machines should have electronic and electromechanical components. These components can be supplied by Componit. This lack of knowledge in technology can have several bad effects on the transaction between Agricola and Componit. Agricola may not be able to define precisely what it needs because it has never used this kind of technology before. They are liable to make a mistake when they ask something of Componit. Moreover, the transaction could put Agricola in a weaker position than Componit because the latter is the expert in the technology and can sell the products at a higher price, especially because Agricola is not used to purchasing this kind of technology. Finally, even if Agricola manages to buy the products it needs from Componit, it will have difficulty managing the technology needed in producing ENSILOR. Indeed, if nobody in the company is used to using the technology, nobody can fix the problems the machines may develop.
[...] BtoB marketing case study: Agricola DMU Technical Level Purchasing department Project engineer Test & prototype engineers Sales Level Production department Market manager Stock control department 0.5 4/5 SUPPLIERS STATE (Ministry of Agriculture) •Promote innovation •Government policy has a role to play •High price sensitivity •High bargaining power •Oligopoly / ENTRANTS •Relatively high capital requirements •Large economies of scale (high fixed cost) •High brand loyalty INDUSTRY RIVALRY •High product differentiation •Competitors not very diversified BUYERS • low price sensitivity • low bargaining power • loyal SUBSTITUTES • no perfect substitutes • traditional products exist •Customers' propensity to change is doubted 0.5 / No technical knowledge in the technology needed: difficulty in defining its own needs No existing technology: Agricola is not used to purchasing this kind of product No expert in this technology: difficulty in managing it Pretty high level of incurred risk Agricola should educate some managers and technical people to manage and understand the technology Componit could help this process by organizing education sessions Delivery conformity: the product does not conform with your expectations Delivery time Flexibility: higher when you have a seasonal activity Quality: higher when you have a dominant position and a reputation To know the suppliers' market To chose a supplier with a geographic proximity Explain clearly what you are expecting Service risks Level of incurred risks is relatively high Customer might be looking for a fast response and reclamation, reparation of parts Supplier should continue R&D efforts Pricing & Cost control Inadequate evaluation of total cost of purchase Lack of anticipation of the price increase Seasonal activity & Cash flow Payment terms Low bargaining power vs. [...]
[...] COMPONIT Exchange rates Purchasing in € while selling in different currencies (intl.) Transaction fees 9000 suppliers The investment in the relationship between AGRICOLA and COMPONIT the volume of COMPONIT's order does not represent a huge amount (1500 machine), the components don't seem very complex for the supplier to be produced and COMPONIT makes the efforts expected to adapt to AGRICOLA needs but the specificity of the deal is that it represents an important and quite risky innovation for AGRICOLA the investment in the relationship with the customer is thus quite high The atmosphere of the relationship between AGRICOLA and COMPONIT AGRICOLA is a customer that COMPONIT is really willing to acquire Both companies are leaders in their sector COMPONIT cooperates positively in the negotiation process AGRICOLA could use another supplier in Europe which decreases the level of dependence but the level of trust is jeopardised by AGRICOLA's scarse knoledge of the new composits The relationship risks We consider that the perceived risks are not going to geopardize the deal between AGRICOLA and COMPONIT We expect AGRICOLA to buy from COMPONIT after acquiring more information in the field. [...]
[...] We expect COMPONIT to understand the opportunity that AGRICOLA represents for them and not take too much advantage of the lack of AGRICOLA's knoledge on these new components. [...]
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