“PALACIOS, DANIEL ANIBAL”

Automotive Exchange II Europe including assets from FORD, MESSIER BUGATTI, DELPHI DIESEL, ARVIN MERITOR, DANA AUTOMOTIVE, VALEO

Automotive Equipment, Featuring CNC Machining Centres & Vertical Borers, Gear, Tube, Toolroom, Finishing & Material Handling Equipment

Assets from France, Netherlands, Belgium, Germany & Italy

Auction Type Location Starts Ends

Online* DoveBid.com (Europe) 6/3/03 7:00 AM 6/3/03 4:00 PM

UTC+01 UTC+01

Main Asset Automotive Equipment, Featuring CNC Machining Centres & Vertical Borers, Gear, Tube, Type(s): Toolroom, Finishing & Material Handling Equipment

Commercial Transportation Metalworking & Machine Tools

Plant Support, Material Handling & Facility Equipment

* To participate, bidders must create a DoveBid account and agree to any event-specific terms and conditions. Since bids are accepted and processed by a computer server, your results may differ from traditional auctioneer-led sales. No additional software is required.

Source: www.dovebid.com/default.asp (Accessed 2 June 2003.) Used with permission.

S N A P S H O T 4 . 9

Competitive bidding occurs when buyers ask suppliers to tender to supply particular goods or services. There are two main types of bidding, closed and open. In closed bids only the customer knows the value of all the bids and normally selects the lowest offer, although on occasions the best overall value bid is elected. In open bids suppliers are able to see each other’s offers and make adjustments accordingly. The buyer uses this approach to drive up the value of the offers in order to maximise the potential of the work. The natural progression from closed and open bidding is an auction. New technology has given auctions a new dimension and enabled both buyers and suppliers to reduce their costs. Snapshot 4.9 shows an illustration of an online auction and more information about online auctions can be found in Chapter 5.

The Internet allows for dynamic pricing, which can often be observed through reverse auctions (Smeltzer and Carr, 2002). This means that the market price for an item alters instantaneously when auctioned electronically. An assumption is made by sell-ers that as prices change in real time so prices will continue to decline until the market price is reached, a point at which demand is equal to supply. Sellers can see the actual price levels required to obtain the sell.

Leasing

An important variant to the outright purchase of products is leasing. The use of leas-ing in business markets has grown especially in markets where there are substantial fixed costs or where technology changes quickly. Three types of leases can be identi-fied: sales/leaseback leases, operating leases and capital leases (Wengartner, 1987) (see Table 4.7).

Leasing enables organisations to reduce their exposure to debt and to concentrate their use of debt on areas where it is strategically more imperative. It frees up resources to enter markets or acquire the latest technology or capital equipment.

Unfortunately, leasing can tie an organisation into particular equipment or a specific technology for a long period of time. This can prevent the organisation from making changes when the environment or internal conditions change.

In an attempt to improve the way in which organisations manage the pricing pro-cess, Shipley and Jobber (2001) suggest an integrative pricing technique. This multistage process, or ‘wheel’ seeks to incorporate a range of influences and issues into the pricing process. However, although this is admirable in terms of the process and range of issues covered, it perpetuates a costing orientation. Organisations need to develop a more relational approach to their pricing by understanding the value customers derive from the products and services and then work this information into their pricing procedures.

Finally, although the pricing of services is very similar to that of products, particu-lar issues arise from the perishability characteristic. In an attempt to manage demand pricing must take into account the capacity of the service system and the likely or

Business value – products, services and pricing 107

Table 4.7 Types of leasing arrangements

Type of Lease Explanation

Sales/leaseback Assets are sold to a leasing company and then leased back to the original owners for a fee over a fixed period of time.

The advantage of this approach is the cash receipt resulting from the initial sale.

Operating leases Maintenance of the asset is often included in these financial arrangements. There is no transfer of ownership (of the asset) when the payment schedule is complete.

Capital leases Having agreed a purchase price with the supplier, customers then arrange a capital lease with a leasing company. There is no maintenance facility within these leases nor can they be cancelled.

Source: After Wengartner (1987).

Openmirrors.com

known patterns of demand that occur. Peak-load and off-peak pricing strategies can help smooth demand and in conjunction with a variety of price incentive pro-grammes demand and capacity can be brought into a reasonable balance.

Readers who are interested in pricing issues and wish to know more about the pric-ing process, objectives and more detailed methodologies are referred to Brasspric-ington and Pettitt (2003) and Kotler (2003).

Summary

The value that organisations perceive within their relationships with suppliers, whether they be collaborative partners or price-orientated opportunists, is partly based on the business products and services transacted. Through the development of a consistent stream of new products, by developing appropriate core competences and by recognising the significance of both tangible and intangible attributes to particular customers, business organisations are able to develop market advantages based around the concept of superior value.

If superior value is competitively significant, organisations should ensure that they have suitable product and management strategies and processes. Although no one approach can be highlighted, best performances seem to emerge from the use of a wide range of techniques, some of which have been presented and reviewed in this chapter.

Realising product potential and managing an array of products through lines, mixes, portfolios and life cycles requires flexibility and a realistic understanding of market requirements some of which, especially in high-technology markets, are sub-ject to sudden and rapid change.

Pricing is also a significant factor in the perception of superior value. As market value is determined by customers, it is important that supplying organisations under-stand the total contribution their offering provides their customers. This should be considered in terms of the life-time value to the customer and the associated total costs that a customer experiences. However, it should be recognised that in the major-ity of business-to-business markets and customer relationships, price alone does not create customer value.

Discussion questions

1 Identify and explain the four main product line categories which are based upon the level of customisation, as suggested by Shapiro (1977).

2 Prepare arguments for and against the use of product portfolios.

3 Identify the key characteristics and evaluate the different types of buyer said by Moore (1991) to typify high-technology markets.

Openmirrors.com

4 Discuss some of the key issues associated with the new product development process.

5 Make a list of the various ways in which technology can be used to develop value through products and pricing.

6 Explain three pricing strategies and three pricing methods. Discuss the key characteristics associated with leasing and bidding.

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Chapter 5

Organisational buying