Kapitel 5: Project business Flashcards
When is a product/performance in the project business?
A performance is market in the project business if the product
- consists of a customized hardware or hardware-/software package for the production of additional goods or performances
Project business: What are the different market dimensions ?
- Indivual customer –>made for an individul customer (customized –>not mass market
- Single transaction: no lock-in effects, companies are free to switch supplier after one transaction
What are the 4 marketin relevant characteristics of the Project business?
- Individual production according to order
- Variability of the scope of delivery and the order content
- Know-how gap
- Cooperative bidding consortiums
What are the phases in the project business?
- Pre-request of customer
- Proposal preparation
- Customer negotiations
- Processing
- Operating
What are the two marketing decisions in the phase of pre-request? (possible acquisition approaches)
1.Passive Acquisition approach:
- Only incoming request will be accepted and handled
- Mainly used in the large unit sales business
- only resonable, if activities of the supplier do not lead to additional demand creation
2.Active Acquisition approach:
- Objective: Customers should identify problems, which supplier is able to solve
- Basically, all sales/communcition tools for the stimulation of demand
- Mainly attendance at fairs and publishing in professional journals
What is the reasons of the example of Airbus and the Aircraft demand in context of pre-request phase in project business?
- Aircraft demand depends particularly on the development of the passenger traffic
- Time lage between ordring and delivery of the aircraft is very big
–>Thus the aircraft industry points out the development of passenger traffic to arouse the interest of the airline industry
–>Therefore, Airbus and Boeing, assign departments with the task to develop models about the future trend of the passenger traffic. Their goal is to determine the required number of aircrafts
–>The global market forecast of Airbus is an example for such a project
why is there a Cooperative bidding consortiums in the proposal prepartion phase?
Cooperative bidding consortium:
If supplier decides to prepare an offer, he has to check whether he is able to deliver the product alone or in cooperation with partners –>many cases, a cooperation with partner is necessary
What are reasons for a cooperative bidding consortium?
- Supplier does not have the necessary know-how to deal with construction, mechanical or electronic issues
- Limiting own business risk by working with partners on large projects
- Utilization of financing and credit insurance options
- Customer defines that specific components are mandatory devlivered by a predetermined supplier
- Limited capacities
- Necessity to quote a competitive price (cooperation with suppliers from low-wage countires)
- Reduction of number of competitors
Proposal prepation: What are the problems in formulating an offer price?
( What are the two overall areas?)
- Market prices do not exist because of the individuality of the projects
- Total price of the collective of the supplying partners negotiated among them (individual price vs. prices of supplying partners)
- Supplying partners have to agree on how to cover the price risks resulting through the long-term nature of an project business
- Coordination of prices under current market conditions (Consideration of customer price expectations and prices of competiton)
–>In sum the tasks arising during the proposal preparation are related to price determination and price enforcement
How is the balance of power in the process of pricing formulation in project business? (what doe the individual suppliers do?)
Supplier:
- each supplieer tries to pass exisiting pricing pressure to other supplying party
- A single supplier has also to deal with additional pricing pressure of his partners
How is the balance of power in the process of pricing formulation in project business? (how does the pricing policy move?)
- Pricing policy does not move in the triangle of costs, competition, and demand as usual
- Pricing pressure through customers and competition, does not affect each supplier equally
What are the two methods of price determination in the proposal prepartion phase?
1.Caluclation of project costs:
- Marketing occurs before manufacturing
–>Bottom price
2.Maximum WTP of cusotmer (market prices/competitive prices)
–>Price ceiling
–>Calculation programs:
- Kilo cost method
- Cause variable calcultion
- Material cost method
- Modified price approach
- Value pricing
- Competitive bidding models
Proposal preparation: What are the two forms of price enforcement?
1.Pricing policy of supplying partners: Every supplier has developd a price level for his components and the total price –>then final price has to be debated internally and formally from the individual price suggestions
2.Price hedging: future price challenges (e.g. wages and materials) can determine the success of the deal
What the criteria’s of price enforcement potential –>pricing policy within the bidding consortium?
Criteria of the price enforcement potential within the bidding consortium:
- company-related factors
- project-related factors
- supplier-related facorss
- customer-related factors
- competition-related factors
Price hedging as form of price enforcement: What are the tools for consideration of risks:
Tools for consideration of risks:
- fixed price inclusion
- conditional prices
- open settlement
- mathematics price adjustment clauses
