money

Just get the money – ok!

Dr. Mike Johnston

Dairy Council for NI

Aims of presentation

• To stimulate thinking about the role of CM within a firm

• To challenge you to think about the role of CM in crisis management

Presentation content

Evolution of the role of CM

Current thinking on the role of CM

Future evolution of the role of CM

• Strategy development process

• Crisis management


1960s

•Moving away from cash markets

•Limited concept of role of credit

•Sellers “give credit”

•Part of finance department

•Limited recognition of CM in marketing(Bartlett, 1964)

•Predicting and determining which customers should receive special attention

•Process customer payments(Bjornsted and Larsen, 2000)

•Customer focus (CRM)

•New business prospecting

•Customer targeting

•Pricing

•Market share

•Differentiation

•Value adding

•Firm competitiveness

•Corporate image(Summers and Wilson, 2000, 2002)

21st century

Customer

Internal


• Context - Value model of a firm

• Understand competition and relationships

• CM within CRM

Why value?

“The function of a business enterprise is the creation of value”

(Drucker, 1998)

Firm’s value chain

VALUE = revenue

VALUE = perceived worth of proposition

VALUE = effort Vs reward

VALUE = TSR

FIRM

CUSTOMER

EMPLOYEE

SHAREHOLDER

YES

RELATIONSHIP

Competition

Strength of relationship

NO CUSTOMER, NO REVENUE, NO BUSINESS

Forces governing competition in an industryThreat of

new entrants

Bargaining power of customers

Bargaining power of suppliers

Threat of substitute

products or services

(Porter, 1979)

The Industry

Jockeying for position among current competitors

Where does CM fit in?

• Barrier to market entry - terms of sale

• Jockeying for position – TC as differentiation

• Power imbalance between supplier and buyer

What constitutes competitive advantage?

• Realising that competitiveness goes beyond price and product

• People

• Understanding customers and markets better and quicker than competitors

Firm’s value chain

VALUE = revenue

VALUE = perceived worth of proposition

VALUE = effort Vs reward

VALUE = TSR

FIRM

CUSTOMER

EMPLOYEE

SHAREHOLDER

YES

RELATIONSHIP

Competition

Strength of relationship

Relationship with a customer - CRMDefinition of CRM (Panda, 2003)

“The establishment, development, maintenance, and optimisation of long term, mutually valuable relationships between a firm and its customers”

• Understanding the customer in terms of - business - markets -

competitors - objectives• Emphasis on partnership - mutuality - long term -

swings and roundabouts - trust • People are important “Customers form relationships with

individuals and with firms rather than with goods.” (Berry, 1995)

Role of CM in CRM

• Knowing and understanding the customer

• Improving effectiveness and efficiency of the firm: - if the customer has a problem they are likely to talk about

it at time of payment. If not, it may be too late at repeat sale.

• Pricing decision - improved competitiveness through setting and enforcing

credit element of price

• Encouraging/rewarding frequent purchase

• Customer targeting

• Contributing to the relationship through contact

Strategy development process

• Making assumptions about the firm’s future external environment – opportunities and threats

• Matching internal competencies with anticipated future external environment to achieve firm’s objectives

Factors influencing the strategy development process

Subjective - perception - interpretationContextualMaking assumptionsMaking decisions under uncertainty

FUTURE CANNOT BE PREDICTEDFUTURE IS CONSTANTLY CHANGINGSTRATEGY IS EVOLUTIONARYSTRATEGY HAS TO ADAPT TO CHANGING EXTERNAL

ENVIRONMENT

Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns - - the ones we don't know we don't know.

Role of CM in strategy development process (SDP)

Elements of SDP

Knowing and understanding the external environment

Identification of internal strengths and weaknesses

Role of CM

Knowledge of

- Customers

- Competitors

- Legislation

Feedback from customers

Ongoing strategic role of CM

• Firm’s external environment is constantly changing

• “Matching” process is ongoing

• CM has a role in identifying and interpreting changes in external environment

Issues and Crisis Management

• Increasing in importance for firms

• Crisis definition:

“low probability, high impact event that has its origin either internal or external to the firm or industry, and that can irreversibly change its culture and business”

(Johnston, 2000)

• What are the implications for CM, and cash flow in particular, of a crisis?

Crisis scenario

• Firm A is involved in manufacturing in NI

• It sources its raw materials from firms in NI, ROI, and Greece

• It supplies customers in England, Germany, and USA

• The bird flu virus mutates to develop the capability of human to human transmission, and a pandemic is triggered. 1% of the population will die, and 30% of the firm’s work force will be affected. Those affected will be unavailable for work for at least 3 weeks.

• The firm’s supply of raw material will be interrupted, it’s manufacturing capacity will be reduced, and its supply of finished goods to its customers will be interrupted.

Interruption of supply

Interruption of raw materials

Absence of key staff

Energy problems

Delivery problems

Interruption of supply of product

Staff problems

Reduced consumer demand

Delivery problems

Raw materials

Customer ConsumerManufacture

payment payment payment

delivery delivery delivery

Issues

Supplier demand for payment

Payment demand by financial institutions

Interruption of agreed payment schedules by customers

How to maintain a level of cash flow to allow the firm to continue to operate during the crisis and rebuild afterwards.

Interruption of supply

Interruption of raw materials

Absence of key staff

Energy problems

Delivery problems

Interruption of supply of product

Staff problems

Reduced consumer demand

Delivery problems

Raw materials

Customer ConsumerManufacture

payment payment payment

delivery delivery delivery

Questions

Is it possible to quantify the level of fluctuation in projected cash flow that a firm can cope with and for how long?

What can be done to minimise the level of fluctuation?

What can be done to prepare for significant fluctuations?

Summary

• The role of CM has evolved

• It should continue to evolve

• Valued contribution to strategy development process

• Role in crisis management

• Stimulated thinking about the role of CM

money

Documents

Transcript of money