acknowledgements

Presented at XI International Academic Conference on economic and social development, SU-HSE on 8 April 2010

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Towards a customer oriented network

Olga A. Tretyak, Ekaterina V. Buzulukova, Alexander G. Rozhkov, Nikita I. Popov, Marina Weck

8 April 2010


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Acknowledgements

This study is part of the wider project called STROI-network, implemented jointly by researchers from Finland and Russia


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Introduction: the research project and its scope

This research was one of the perspectives of the STROI-network project

P1: Business sector P2: Vision P3: Learning

and growthP4: Internal development

P5: Customer orientation and Marketing

P6: Finance and Performance

Growth bigger than average

Vision is based on derivative action

Leadership and learning in network.

Growth and strategic dev. of network

Customer oriented network.

Developing ability to contest

Activities on profitable sector

Visions are based on customer needs

Conditions for work are able compete

Agile and learning network

Working CRM and risk management

System for performance measurement

Objectives of network

Results

Partners

Perspective (P1 - P6)

BSC dimensions (P3 - P6)


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This research was focused on interfirm customer orientation, which is a subfield in a continuum of available approaches to managing market relationships

Market orientation

Customer orientation Competitor orientation

Market domination


5


The project included several interrelated questions…

What is a market-oriented interfirm network?

How to cope with the risks involved?

Managing customer relationships (B2B)

Managing supplier relationships (B2B)

How to engineer a customer-oriented network of partners?

1

5

2 3

4

Stage 1Setting the framework

Stage 2Relationship facet

Stage 3Network development

Stage 4Study of risks


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… distributed among researchers

Olga Tretyak

Marina Weck

Alexander Rozhkov Nikita Popov

Ekaterina Buzulukova


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Outline of the research project

A preliminary framework of market-oriented interfirm network was proposed, based on literature review and company interviews

Market knowledge sharing

Network information

systems

Motivation and control for market orientation

Control structures and shared values

Cross-firm planning of CRM,

SCM and NPD

Network collaboration

structures

ROUTINES AND PROCESSES

SYSTEMS AND STRUCTURES


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A simple method to evaluate network’s degree of customer orientation

higher

lower

Reactive approach Proactive approach

cost cutting

uncertainty avoidance

market share growth

cost management

risk management

value creation


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The field research consisted of several interviews with managers and aimed to concentrate on firm triads (focal company, one buyer and one supplier)

Participant supplier

(RU)

Participant buyer (FI)


(FI)


(RU)

Participant buyer (RU)

Focal company

(FI)

Participant buyer (FI)

Existing customer

Existing customer

Loyal customer

External supplier (FI)

External supplier (RU)

New customer

New customer

New customer

Potential customer

Potential customer

Loyal customer

Loyal customer

External supplier (FI)

External buyer (RU)

SuppliersTier 2

SuppliersTier 1

DistributorsTier 1

Finalcustomers


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Findings from the field study

The top ten: main findings (1)

•Investigated companies exhibit relatively low level of customer orientation, and don’t measure customer satisfaction;

•Investigated companies exhibit relatively low level of CRM tools and policies usage;

•When securing customer company’s commitment becomes possible, companies don’t pay due attention to it;

•Customer companies pass through relationship stages individually, and success in reaching commitment stage mainly depends on particular manager’s knowledge and experience;

•Companies have developed systems to evaluate performance of suppliers and the products supplied, but not of supplier relationships;

•Some firms are buying from suppliers which disregard final customers’ needs and have poor purchasing capabilities, and this prevents these firms’ ability to translate its own customer knowledge into tailored value propositions;


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The top ten: main findings (2)

•Successful implementation of three types of market entry strategies can be observed;

•As perceived by firms, trust, honesty, willingness to conduct open dialog, readiness to adapt and great wish to work account for relationship stability (over and above economic returns);

•Main difficulties of companies are macroenvironmental factors (such as bribes, obsolete standards, changing legislation);

•While many firms maintain strong relations with their suppliers (often also Finnish firms), few firms develop strong customer relationships.


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Different entry strategies to Russian market employed by Finnish companies were found

Parent Finnish Company

Subsidiary

Parent Finnish

Company

Russian Company

Finnish (Russian) Company

Finnish Company

Russian Company

RussianCompany


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Finnish companies experienced many difficulties in Russia. Several groups can be outlined

Construction norms, regulations

Construction norms, regulations

Business partnersrelations

Business partnersrelations

AccountingAccounting

State institutionsrelations

State institutionsrelations

Managing personnelManaging personnel

High uncertaintyHigh uncertainty

Russian MarketDifficulties


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While companies maintain strong relationships with suppliers, strong customer relationships are not pursued

Customer

Customer

Customer

Customer

Customer

Customer

Customer

Customer

Company

Customer

Supplier

Supplier

Supplier

Supplier

Supplier

Maintaining relationships with former customers is, generally, not a priority

Customer satisfaction is not monitored

Level of customer orientation if low

CRM tools and policies are almost absent

Extending ‘global’ relationships with suppliers to the Russian market is a must

Market information sharing with trusted suppliers is extensive

Evaluation of supplier performance is in place


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On the customers side, Russian sales staff is the main adaptation instrument at every stage of relationship development

Russian salespeople as a main vehicle for problem solving

Initially very strict requirements for on-time delivery and quality assurance

Coordination challenges when the deal has been secured

Stage 1Initial contact

Stage 2Initial transaction

Stage 3Repeated transactions

Payment delays

Contract fulfillment

Very high entry barriers

Difficult to embed into existing relations

Dealing with complex construction legislation and certification

Customer representatives demanding bribes

Loyal customers

Solutions:

Customer intelligence

Getting straight to the CEOs

Bribery reporting to CEOs of customer companies

Solutions:

Signaling to suppliers

Securing suppliers’ commitment

Solutions:

Getting a sense of customers’ occasion

Reaching compromise


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Several factors appeared to act as drivers of relationship stability

STABILITY

Business relations turnover

Relationshipatmosphere

Economic bonds

Readiness to adapt

Interest in relationships

Technical bonds

Knowledge bonds

Socialbonds

Customer firm turnover


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Thank you for your attention!

Towards a customer oriented network

Olga A. Tretyak, Ekaterina V. Buzulukova, Alexander G. Rozhkov, Nikita I. Popov, Marina Weck

8 April 2010

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