B2B marketing

IBS-Bangalore

ICFAI University Dehradun

Name: Ankur Shukla

IUD No: 08PMP00549

IBS No: 08BS0000428

Course Code: SLMM 603

Course Name: B2B Marketing

Faculty Name: Prof. Shailendra Dasari

Date: 21/08/09

Topic of the Assignment: B2B Marketing Strategy for an Industry

Student Signature Faculty Signature

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Question6. In an industry of your choice (B2B), identify the leader and other prominent players.

Answer. The industry that I would like to take is Earthmoving industry and in that the product
Loader Backhoe (LB). In India the market leader is Joseph Cyril Bamford (JCB), which has
somewhere around 80% of the market share in LB segment, and it has become a generic brand
customers don’t know the product as Loader Backhoe, they call it as JCB machine. The machine
is mainly used by contractors for digging purposes or filling trolleys. The buyers of these
machines are mainly receding in remote places, where the crusher plants are setup. Because of
the generic brand, it becomes difficult for competitors to differentiate & sell their product. The
other prominent players in the market are L&T Case, TATA Telcon, Caterpillar and Terex Vectra.
The no. 2 player in the market is L&T with a market share of 10%, and is coping up fast, but still
its way behind JCB. Other players operate in the remaining 10% market.

A. Carry out the industry analysis using Porter’s five forces model.

Answer. Porter's five forces analysis is a framework for the industry analysis and business
strategy development developed by Michael E. Porter of Harvard Business School in 1979. It
uses concepts developed in Industrial Organization (IO) economics to derive five forces which
determine the competitive intensity and therefore attractiveness of a market. Attractiveness in
this context refers to the overall industry profitability. An "unattractive" industry is one where the
combination of forces acts to drive down overall profitability. A very unattractive industry would
be one approaching "pure competition".

Porter referred to these forces as the micro environment, to contrast it with the more general term
macro environment. They consist of those forces close to a company that affect its ability to
serve its customers and make a profit. A change in any of the forces normally requires a company
to re-assess the marketplace. The overall industry attractiveness does not imply that every firm in
the industry will return the same profitability. Firms are able to apply their core competences,
business model or network to achieve a profit above the industry average. A clear example of this
is the airline industry. As an industry, profitability is low and yet individual companies, by
applying unique business models have been able to make a return in excess of the industry
average.

The five forces analysis of porter for the earthmoving industry is as under:-

Bargaining power of the Supplier:-

Also described as market of inputs. Suppliers of raw materials, components, labor, and services
(such as expertise) to the firm can be a source of power over the firm. Suppliers may refuse to
work with the firm, or e.g. charge excessively high prices for unique resources.

In this industry the power from various suppliers like iron, engines etc., lies with the company
that provides engines to this industry. In India KOEL (Kirlosker Oils & Engines limited) is the

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major supplier of engines to the industry, and therefore enjoys a lot of liberty. Even the engine
service is done by the KOEL engineers. So, the companies has tomaintin good relationship with
KOEL, as they might shift to another engine manufacturer but still for the servicing of KOEL
engines they will require KOEL’s help. Therefore KOEL can enjoy Vito powers here.

Bargaining Power of the Buyer:-

Also described as the market of outputs. The ability of customers to put the firm under pressure
and it also affects the customer's sensitivity to price changes.

In Earthmoving Industry, buyers have good bargaining power as the price differentials are very
less. The cost of shifting from one brand to another is negligible. Customer’s rate companies on
the basis of after sales service & spare parts availability. In the time of recession, when the banks
are somewhat reluctant in providing loans to FTBs/FTUs (First time buyers/First time users), it
has become a necessity to target those customers who go for re-buy. As these customers already
know the product & brand, they posses good bargaining power in terms of, service terms &
conditions & Free of charge (FOC) spare parts.

The threat of substitute products:-

In Earthmoving equipments the threat from substitutes ceases to exist, as the product is one of ts
kind & therefore faces very low substitute threat.

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The threat of new entrants:-

Profitable markets that yield high returns will draw firms. This results in many new entrants,
which will effectively decrease profitability. Unless the entry of new firms can be blocked by
incumbents, the profit rate will fall towards a competitive level (perfect competition).

In Earthmoving industry, the threat from new entrants is high as in last 5 years 7-different brands
has entered the Indian market. As the industry more or less operates in a perfect competitive
environment, the price for the product is almost same across brands, which forces companies to
operate at low margins & with high customer satisfaction. Joint ventures (L&T & Case new
horizons) & entry of international brands like Caterpillar & Volvo, has made it easier to setup
facilities to manufacture these products, but still for local brands it’s difficult to enter this market,
thought the growth rate is very high (as infrastructure sector is booming in India).

The intensity of competitive rivalry:-

For most industries, this is the major determinant of the competitiveness of the industry.
Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions
such as innovation, marketing, etc.

The competitive rivalry is not on the basis of price, but on the basis of after sales service & spare
parts availability. As JCB is the whole sole player in the market with a market share of 80%. The
rivalry faced by it is not so fierce. If we compare the rest 20% of the market where the customers
are indifferent between the brands, a high competitive rivalry exist to eat up others market share.

B. Describe the strategies followed by:-

i. The leader

The leader i.e. JCB (having 80% market share), is following a generic brand strategy where the
customers relates the machines name with the company name. JCB sells it product on the basis
of two fronts, i.e. resell value & service availability. JCB sales engineers’ sell machine on the
basis that the machine will have a high resell value & can be repaired by any local mechanic, so
the customer should not wait for companies engineer to come & repair the machine. And even
the spare parts of JCB are cheaper as compared to competitors.

ii. Follower(s)

Followers play an aggressive strategy, i.e. taking the bull by his horns. They attack the JCB
strategy by promoting that, JCB has a good resell value because the machine is available for
resell in the market, and even after an year the customer gets frustrated with the machine & sells
it, on the other hand machines of brands like L&T & Caterpillar have not been put on resell at all,

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in last 10 years only 2% of the total machines sold by these brands have been on resell & of that
80% is putted by financers who have to recover their money, with such less nos. how one can
decide resell value. Secondly, followers argues that JCB does not has its own sales engineer i.e.
why they advice customers to go for local mechanics. Thirdly, the spare parts of JCB are cheaper
because they are not of good quality, rate of breakdown of JCB is very high because of these low
quality spare parts, which is the main reason why local mechanics repair JCB.

C. What is the recommended strategy for a new entrant?

Answer. A new entrant has to follow the same strategy as followed by followers, because for any
new player the competitors are not those who operate in 20% market share but is the one who
operates in rest 80%. A new entrant should keep in mind to try and come up with a generic name
for its product, though other players like L&T & Caterpillar do came out with product names as
770 & 424 respectively, but were not able make so popular that it can go hand in hand with JCB,
because till some follower comes out with a generic name, it will always be a problem for the
customers to remember it’s name.

Secondly, he should be able to distinguish its product or service on same parameters, as JCB sells
on resell value, L&T emphasize on long lasting spare parts & spare parts availability, Caterpillar
distinguishes itself with its own engine so the customer does not have to call someone for
machine repair & someone else for engine. In this way the entrant has to distinguish its product,
so that he has USP for the product. Lastly the entrant has to take care of service & spare parts
availability, because in this industry word of mouth of communication is the only way to promote
your product, the basic theory to sell your product is to convert your customers into brand
ambassadors of your brand.

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