The StrategicIndustrial Marketing
Simulation
Jean-Claude Larréché & David Weinstein
INDUSTRATINDUSTRAT
Presentation OutlinePresentation OutlineObjectives
Features of the INDUSTRAT world
Administrative structure of the INDUSTRAT firm
The simulation process
First period decisions
Objectives of INDUSTRATObjectives of INDUSTRAT
Review of strategic concepts
Application in an industrialmarketing context
Focus on prime industrialmarketing issues
Long term perspective
Marketing as a profit centre
Marketing strategy based on segmentation, positioning and portfolio approach
Marketing mix decisions secondary to strategic decisions
Competitive environment
Strategic Marketing
INDUSTRAT Features
INDUSTRAT Features
INDUSTRATFeatures
INDUSTRATFeatures
Industrial ContextProduct/non product needsChoice of macrosegmentation schemesMicrosegmentation - DMU conceptIndustrial adoption processCorporate communicationSalesforce managementTechnical supportDistinction between research and developmentLicensing and joint venturesMarket segmentation research
Korex ProductsKorex ProductsResistance: Ohms (ΩΩ)Suspension: Micro-seconds (Msc)Frequency: Kilo-hertz (KHz)Density: Micro-grams per cubic (MGC)
millimeter
Liquid Powder Fibre Solid
Strategic Product Attributes
Non Strategic Product Attributes, e.g
Strategic Attributes
Convexity: Degrees (De)
Conductivity: Micro-Seconds (MSc)
Purity: Percent (%)
Maximum Energy: Micro Watts (MW)
Lomex ProductsLomex Products
INDUSTRAT’s CompetitorsINDUSTRAT’s Competitors
Firm 1 Firm 2
Firm 3
Firm 4 Firm 5
KARR
KIRR
KERR
KORR KURR
Korex MarketMacrosegmentationKorex MarketMacrosegmentation
instrumentatio
n
communication
consumer
goods
large
medium
small
west
east
central
The Adoption ProcessThe Adoption ProcessAwareness Testing
Supplementary Supplier
Major Supplier
KARR
Korex Market MicrosegmentationKorex Market MicrosegmentationGeneral Manager
Production Engineering Purchasing
Dynamics of the Purchasing ProcessDynamics of the Purchasing ProcessAwareness Testing Supplementary Major
General
Production
Purchasing
Engineering
0%
100%
Industry DynamicsIndustry DynamicsMarket growth
Competition
Technology
Economicenvironment
No new competitorsIntroduction of LomexCollaboration
No further scientific innovation expectedFour Korex technologiesOne Lomex technology
Growing GNPInflationAntritrust intervention
?Korex
Lomex
Corporate Resource AllocationCorporate Resource AllocationCorporate Resource AllocationInternal Transactions
ProductionDept.
FinanceDept.
R&DDept.
SalesDept.
TechnicalDept.
CorporateMarketingDept.
ManufacturingCosts
InventoryHoldingCosts
R&DExpend-diture
SalesforceExpenditure Technical
Support CorporateCommunicationExpenses
MarketingExpenditureBudget
Marketing = Profit CenterNet MarketingContribution
MarketResearchFirm
SalesRevenues
AdvertisingExpenditure
PromotionalExpenditure
MarketResearch
LicensingFees
LicensingRevenues
ClientCompanies
AdvertisingAgency
PromotionalHouse
Licensors Licencees
External Transactions
Commission
Administrative StructureAdministrative Structure
Corporate Resource AllocationCorporate Resource Allocation
MarketingExpenditureBudget
Net MarketingContribution
Marketing = Profit Center
Administrative StructureAdministrative StructureInternal Transactions
Marketing = Profit Center
ProductionDept.
FinanceDept.
R&DDept.
SalesDept.
TechnicalDept.
CorporateMarketingDept.
ManufacturingCosts
InventoryHoldingCosts
R&DExpend-diture
SalesforceExpenditure
TechnicalSupport Corporate
CommunicationExpensesCommissions
Administrative StructureAdministrative StructureExternal Transactions
Marketing = Profit Center
MarketResearchFirm
SalesRevenues
AdvertisingExpenditure
PromotionalExpenditure
MarketResearch
LicensingFees
LicensingRevenues
ClientCompanies
AdvertisingAgency
PromotionalHouse
Licensors Licencees
Administrative StructureAdministrative StructureExternal Transactions
JointFunds
R&D ObsoleteInventorySales
Loans Loans Repayments+ Interest
PartnersExporters The Bank
Marketing = Profit Center
External DocumentsExternal DocumentsCompany report
Financial resultsMarketing resultsSales and technical force MessagesResearch and developmentCumulative resultsnewsletter
Marketing research studiesDecision form
Product managementSales force managementTechnical force managementCorporate marketingResearchDevelopmentLicensing outLicensing inMarket research studies
Internal DocumentsInternal DocumentsSales forecast
Input for budgeting
SegmentsE C W
Budgeting form
Forecast resulting from strategic planningP1 P2 P3 P4 P5 P6 P7
ObjectivesOutcomes
Strategic planning form
Objectives:UnderstandingMarketsMonitoringIdentifying threats& opportunitiesForecasting
Methodology:Analysis of Survey Data
Market Segmentation:None, Specified orStatistical Optimum
MarketResearchMarketResearch
Decisions for your First PeriodDecisions for your First Period
No market research available No R&D allowedNo licensing allowedAvoid radical changes FamiliarizationGather informationOrganize your team (pick a name)
Technology research
Product development
Financial support
Collaboration
Additional Decisions for the Second Period
Additional Decisions for the Second Period
Feasible Ranges of Physical Characteristics
Feasible Ranges of Physical Characteristics
1 Resistance (ΩΩ)2 Suspension (MSc)3 Frequency (KHz)4 Density (MGC)
Min - Max----
KOREX
1 Convexity (DE)2 Conductivity (MSc)3 Purity (%)4 Maximum Energy (MW)
LOMEX----
Technology ResearchTechnology Research
Know How
Infrastructure
Gestation Period
Critical Mass
Minimum number of years
Minimum annual investment
Prototypeof
Related SystemsAdditional Investment
ResearchResearchTechnology
Cumulative investment
Years above minimum investment
Status
Minimum total investment
Proposed total investment
Minimum annual investment
ResearchResearch
0 5500 8000 0 130500 2 2 0 3
NO OK OK NO OK3351 5585 5585 8936 111706702 11170 11170 13404 167551117 1675 1675 2234 2234
TechnologyCumulative investYears above min invStatusMin total investProp total investMin annual invest
1 2 3 4 5
DevelopmentPrototype = First Development
Project
DevelopmentPrototype = First Development
ProjectName PLIA
Technology 5Cum. Expenditure 13050Status OK
Characteristic 1 17Characteristic 2 101Characteristic 3 43Characteristic 4 224Base cost 100
Research and DevelopmentProduct Development
Research and DevelopmentProduct Development
• Project name• Technology• Budget• 4 Physical characteristics• Production base cost
Period T: Project Specification:
Period T+1: Message fromDevelopment:
• Project status• Feasibility of base cost• Additional budget
necessary
Product DevelopmentBudget SpecificationProduct DevelopmentBudget Specification
“Feasibility” study
Fast experience
Technology
Various characteristics = different problems
Uncertainty
Minimum according to industry experts
Production CostsProduction CostsProduction(transfer cost)
Base cost specified to R&D
Cumulative Production
Production CostsProduction CostsProduction(transfer cost)
Cumulative Production
Actual Base Cost
New Base CostSpecified to R&D
Actual ManufacturingMethod
New ManufacturingMethod
ExperienceTransfer
SharedCost
TechnologyExperience
Production CostsProduction CostsProduction(transfer cost)
Cumulative Production
Actual Base Cost
New Base CostSpecified to R&D Actual Manufacturing
Method
New ManufacturingMethod
Development ProjectsDevelopment ProjectsModify existing KIDUIntroduce KIDA
Modify KIDU & introduce KIDA
Retain base cost
Tighten base cost
Relax base cost
Terminate project
Continue PKI33(same techand specs)
Complete
Incomplete
PKI33
Project name
Brand ModificationBrand Modification
Period TProduct KIDD
Period T + 1
Modified KIDD
Automatic payment to production department at transfer cost (exceptional loss)
KIDD
KIDD
KIDD
KIDD
KIDD
Loan Repayment ScheduleLoan Repayment ScheduleLoan 0 1900 4500 0 0 0 0 0 0 0Length 0 5 5 0 0 0 0 0 0 0Interest 0 10 10 0 0 0 0 0 0 0
Total zero one two three four five six seven eight nine
0 0 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0 0 0
570 0 570 0 0 0 0 0 0 0 01882 0 532 1350 0 0 0 0 0 0 01754 0 494 1260 0 0 0 0 0 0 01626 0 456 1170 0 0 0 0 0 0 01498 0 418 1080 0 0 0 0 0 0 0990 0 0 990 0 0 0 0 0 0 0
Total Debt:6020
CollaborationCollaboration
¬ Negotiations
¬Outcome
¬ Terms
¬ Process
¬ Implementation
¬ Risk
Only within approved periods
Licensing and/or joint research
Royalties: historically 3%, but deregulated nowNegotiated annual minimum royaltiesOther fund transfers
Written contract and approval (arbitration in case of violation)
Compatible decisions entered by both parties
Government invalidates contract in case of antitrust action