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Change Management

Change Management

See Attachment for assignment details. Assignment due Sunday by 7pm EST

Thank you.

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Case Study: Telco Corporation

Case Study: Telco Corporation

Telco Case Study examines the revenue impact of Customer Service. You must provide a two page write-up of the case and use the questions (brief notes in red provided to assist in writing the 2 page case study write-up) on the case study to form your analysis. Outside references or internet sources can also be used to support your paper. Reference/Cite page needs to be included.

CASE 8.1 Telco Corporation

Telco Corporation (Telco) is a $25 billion global manufacturer of industrial products, with its global headquarters located in Bloomington, Indiana. Telco is comprised of six major divisions: (1) electrical generators, (2) turbines, (3) industrial air conditioners, (4) machine tools (e.g., drill presses and lathes), (5) fork trucks and skid loaders, and (6) air compressors. Each division is managed as a separate profit center, and each has its own sales force, manufacturing facilities, and logistics network. Telco has approximately 15,000 customers worldwide, with 40 percent buying from more than one Telco division. At a recent operating council meeting, Jean Beierlein, CFO, was lamenting to the other council members the fact that pretax profits were falling even though revenues were growing. “We ’re in a perplexing situation. The stock market likes us because revenues are growing. However, I don’t see how we are going to make our dividend objectives this year because our operating profits are decreasing from last quarter. Our service levels to customers are at an all-time high and our sales forces are consistently meeting their revenue objectives.” Troy Landry, vice president of supply chain for the compressor division, added his observation on this dilemma. “I ’ll tell you what the problem is. We are constantly exceeding our logistics budget to provide this outstanding service for customers who shouldn’t be getting it. Sales is constantly promising expedited delivery or special production runs for customers who generate very little revenue for us.

One of these customers, Byline Industries, only spends $1 million per year with us and yet our logistics costs as a percent of revenue for them is 25 percent. Compare this with our average logistics costs as a percent of revenue across our customer base of 11 percent and you can see where the problem lies.” Tom Novack, president of the generator division, disagreed with Troy’s observation of Byline. “Wait a minute, Troy. Byline is one of my best customers. They buy 15 percent of my revenue at a logistics cost of 8 percent. We need to make sure they are happy.” Listening to this exchange was the new Telco president, Nick Martin, who recently joined Telco after spending 15 years as COO of a global agricultural products manufacturer. This problem was not new to Nick. His former employer was also structured across business lines with common customers across the globe and found that a similar service strategy for all customers was not a viable alternative. Nick added, “I ’ve seen this before.

The problem is that we are treating all customers alike and we are not taking into consideration those customers who buy from more than one division. Before the meeting, I asked Jean to run some profitability numbers across our customer base. The results are amazing. Thirty-three percent of all of our customers account for 71 percent of our operating profits. Another 27 percent account for approximately $100 million in losses. Obviously, we have some customers who are more profitable than others. We need to develop a strategy to segment our customers and offer each segment the suite of services they are willing to pay for.” “Wait a minute,” exclaimed Chris Sills, vice president of corporate sales. “You ’re asking us to take some services away from our customers. Who is going to break the news? What about the sales commissions for my reps? This is not going to be received well by the customer base.”

CHAPTER CASE 8-1 QUESTIONS & NOTES: Telco Corporation Case Notes:

You have been hired as an expert on customer relationship management. Telco’s current service offerings to its entire customer base include product quality, order fill rates, lead time, delivery time, payment terms, and customer service support. You have been asked to prepare a report outlining how Telco could adopt the CRM approach to its customers. Specifically, this report should address the following:

  1. How should Telco approach segmenting its customers? That is, on what basis (cost to service, profitability, etc.) should the customers be segmented?

Students should understand and define the four steps to segmenting customers. The first step is to segment customers by profitability. This can be done by traditional accounting or ABC (activity based costing). The next step is to identify the product/service package for each customer segment. Next, Telco should develop and execute the best processes. Lastly, a performance metric should be implemented and evaluated on a regular basis.

The post Case Study: Telco Corporation appeared first on superioressaypapers.

How should Telco approach segmenting its customers?

How should Telco approach segmenting its customers?

examines the revenue impact of Customer Service. You must provide a two page write-up of the case and use the questions (brief notes in red provided to assist in writing the 2 page case study write-up) on the case study to form your analysis. Outside references or internet sources can also be used to support your paper. Reference/Cite page needs to be included.

CASE 8.1 Telco Corporation

Telco Corporation (Telco) is a $25 billion global manufacturer of industrial products, with its global headquarters located in Bloomington, Indiana. Telco is comprised of six major divisions: (1) electrical generators, (2) turbines, (3) industrial air conditioners, (4) machine tools (e.g., drill presses and lathes), (5) fork trucks and skid loaders, and (6) air compressors. Each division is managed as a separate profit center, and each has its own sales force, manufacturing facilities, and logistics network. Telco has approximately 15,000 customers worldwide, with 40 percent buying from more than one Telco division. At a recent operating council meeting, Jean Beierlein, CFO, was lamenting to the other council members the fact that pretax profits were falling even though revenues were growing. “We ’re in a perplexing situation. The stock market likes us because revenues are growing. However, I don’t see how we are going to make our dividend objectives this year because our operating profits are decreasing from last quarter. Our service levels to customers are at an all-time high and our sales forces are consistently meeting their revenue objectives.” Troy Landry, vice president of supply chain for the compressor division, added his observation on this dilemma. “I ’ll tell you what the problem is. We are constantly exceeding our logistics budget to provide this outstanding service for customers who shouldn’t be getting it. Sales is constantly promising expedited delivery or special production runs for customers who generate very little revenue for us.

One of these customers, Byline Industries, only spends $1 million per year with us and yet our logistics costs as a percent of revenue for them is 25 percent. Compare this with our average logistics costs as a percent of revenue across our customer base of 11 percent and you can see where the problem lies.” Tom Novack, president of the generator division, disagreed with Troy’s observation of Byline. “Wait a minute, Troy. Byline is one of my best customers. They buy 15 percent of my revenue at a logistics cost of 8 percent. We need to make sure they are happy.” Listening to this exchange was the new Telco president, Nick Martin, who recently joined Telco after spending 15 years as COO of a global agricultural products manufacturer. This problem was not new to Nick. His former employer was also structured across business lines with common customers across the globe and found that a similar service strategy for all customers was not a viable alternative. Nick added, “I ’ve seen this before.

The problem is that we are treating all customers alike and we are not taking into consideration those customers who buy from more than one division. Before the meeting, I asked Jean to run some profitability numbers across our customer base. The results are amazing. Thirty-three percent of all of our customers account for 71 percent of our operating profits. Another 27 percent account for approximately $100 million in losses. Obviously, we have some customers who are more profitable than others. We need to develop a strategy to segment our customers and offer each segment the suite of services they are willing to pay for.” “Wait a minute,” exclaimed Chris Sills, vice president of corporate sales. “You ’re asking us to take some services away from our customers. Who is going to break the news? What about the sales commissions for my reps? This is not going to be received well by the customer base.”

CHAPTER CASE 8-1 QUESTIONS & NOTES: Telco Corporation Case Notes:

You have been hired as an expert on customer relationship management. Telco’s current service offerings to its entire customer base include product quality, order fill rates, lead time, delivery time, payment terms, and customer service support. You have been asked to prepare a report outlining how Telco could adopt the CRM approach to its customers. Specifically, this report should address the following:

  1. How should Telco approach segmenting its customers? That is, on what basis (cost to service, profitability, etc.) should the customers be segmented?

Students should understand and define the four steps to segmenting customers. The first step is to segment customers by profitability. This can be done by traditional accounting or ABC (activity based costing). The next step is to identify the product/service package for each customer segment. Next, Telco should develop and execute the best processes. Lastly, a performance metric should be implemented and evaluated on a regular basis.

The post How should Telco approach segmenting its customers? appeared first on superioressaypapers.

write-up of the case and use the questions

write-up of the case and use the questions

Study examines the revenue impact of Customer Service. You must provide a two page write-up of the case and use the questions (brief notes in red provided to assist in writing the 2 page case study write-up) on the case study to form your analysis. Outside references or internet sources can also be used to support your paper. Reference/Cite page needs to be included.

CASE 8.1 Telco Corporation

Telco Corporation (Telco) is a $25 billion global manufacturer of industrial products, with its global headquarters located in Bloomington, Indiana. Telco is comprised of six major divisions: (1) electrical generators, (2) turbines, (3) industrial air conditioners, (4) machine tools (e.g., drill presses and lathes), (5) fork trucks and skid loaders, and (6) air compressors. Each division is managed as a separate profit center, and each has its own sales force, manufacturing facilities, and logistics network. Telco has approximately 15,000 customers worldwide, with 40 percent buying from more than one Telco division. At a recent operating council meeting, Jean Beierlein, CFO, was lamenting to the other council members the fact that pretax profits were falling even though revenues were growing. “We ’re in a perplexing situation. The stock market likes us because revenues are growing. However, I don’t see how we are going to make our dividend objectives this year because our operating profits are decreasing from last quarter. Our service levels to customers are at an all-time high and our sales forces are consistently meeting their revenue objectives.” Troy Landry, vice president of supply chain for the compressor division, added his observation on this dilemma. “I ’ll tell you what the problem is. We are constantly exceeding our logistics budget to provide this outstanding service for customers who shouldn’t be getting it. Sales is constantly promising expedited delivery or special production runs for customers who generate very little revenue for us.

One of these customers, Byline Industries, only spends $1 million per year with us and yet our logistics costs as a percent of revenue for them is 25 percent. Compare this with our average logistics costs as a percent of revenue across our customer base of 11 percent and you can see where the problem lies.” Tom Novack, president of the generator division, disagreed with Troy’s observation of Byline. “Wait a minute, Troy. Byline is one of my best customers. They buy 15 percent of my revenue at a logistics cost of 8 percent. We need to make sure they are happy.” Listening to this exchange was the new Telco president, Nick Martin, who recently joined Telco after spending 15 years as COO of a global agricultural products manufacturer. This problem was not new to Nick. His former employer was also structured across business lines with common customers across the globe and found that a similar service strategy for all customers was not a viable alternative. Nick added, “I ’ve seen this before.

The problem is that we are treating all customers alike and we are not taking into consideration those customers who buy from more than one division. Before the meeting, I asked Jean to run some profitability numbers across our customer base. The results are amazing. Thirty-three percent of all of our customers account for 71 percent of our operating profits. Another 27 percent account for approximately $100 million in losses. Obviously, we have some customers who are more profitable than others. We need to develop a strategy to segment our customers and offer each segment the suite of services they are willing to pay for.” “Wait a minute,” exclaimed Chris Sills, vice president of corporate sales. “You ’re asking us to take some services away from our customers. Who is going to break the news? What about the sales commissions for my reps? This is not going to be received well by the customer base.”

CHAPTER CASE 8-1 QUESTIONS & NOTES: Telco Corporation Case Notes:

You have been hired as an expert on customer relationship management. Telco’s current service offerings to its entire customer base include product quality, order fill rates, lead time, delivery time, payment terms, and customer service support. You have been asked to prepare a report outlining how Telco could adopt the CRM approach to its customers. Specifically, this report should address the following:

  1. How should Telco approach segmenting its customers? That is, on what basis (cost to service, profitability, etc.) should the customers be segmented?

Students should understand and define the four steps to segmenting customers. The first step is to segment customers by profitability. This can be done by traditional accounting or ABC (activity based costing). The next step is to identify the product/service package for each customer segment. Next, Telco should develop and execute the best processes. Lastly, a performance metric should be implemented and evaluated on a regular basis.

  1. How should Telco tailor its service offerings to each customer segment?

Students should understand the following service components should be considered when determining future offering to the different customer segments:

Product Quality (% defects)

Order fill rate

Lead time

Delivery time

Payment terms

Customer service support

Credit Hold

Return Policy

Ordering Process

  1. Should certain customers be asked to take their business elsewhere?

Students should understand that all customers are not good (profitable) customers. If a customer will not accept terms to make their business (purchases) profitable and there is not future growth potential, then it is acceptable to terminate the relationship.

  1. How should the revised service packages to each segment be introduced to that segment? By the sales force? Should all segments be done at the same time?

These questions will be answered in many different ways. The following is a strong answer that takes the Telco situation into account. Management needs to provide standardized literature to explain the segments. Then each salesperson will have the same information to distribute and from which to speak. The relationship between the buyer and salesperson is typically the strongest, so the salesperson should deliver the message. A date for all revised service package should be set and all customers should be given ample time to determine if they want to continue using Telco. Two months is ample time to deliver all current orders and for the customer to find another vendor if necessary.

  1. Each division has its own sales force, manufacturing facilities, and logistics network. As such, common customers (those who buy from more than one division) place separate orders with each division, receive multiple shipments, and receive multiple invoices. Would it make sense for Telco to organize around customer rather than by product? If so, how would this be done? What would the new organizational metrics look like?

Students will provide various answers for this question. No, there is no need to reorganize the organizational structure. A few reasons why not; customers come and go and you can’t expect one group of employees to be masters of each product line. However, if the customer is large and profitable, there should be a dedicated customer service representative that is the touch point for all product/profit centers. This CSR could contact each division for customer concerns (i.e., product quality, billing issues, etc) and be responsible that the issues are resolved and communicated back to the customer in a timely manner.

The post write-up of the case and use the questions appeared first on superioressaypapers.

provide various answers for this question

provide various answers for this question

revenue impact of Customer Service. You must provide a two page write-up of the case and use the questions (brief notes in red provided to assist in writing the 2 page case study write-up) on the case study to form your analysis. Outside references or internet sources can also be used to support your paper. Reference/Cite page needs to be included.

CASE 8.1 Telco Corporation

Telco Corporation (Telco) is a $25 billion global manufacturer of industrial products, with its global headquarters located in Bloomington, Indiana. Telco is comprised of six major divisions: (1) electrical generators, (2) turbines, (3) industrial air conditioners, (4) machine tools (e.g., drill presses and lathes), (5) fork trucks and skid loaders, and (6) air compressors. Each division is managed as a separate profit center, and each has its own sales force, manufacturing facilities, and logistics network. Telco has approximately 15,000 customers worldwide, with 40 percent buying from more than one Telco division. At a recent operating council meeting, Jean Beierlein, CFO, was lamenting to the other council members the fact that pretax profits were falling even though revenues were growing. “We ’re in a perplexing situation. The stock market likes us because revenues are growing. However, I don’t see how we are going to make our dividend objectives this year because our operating profits are decreasing from last quarter. Our service levels to customers are at an all-time high and our sales forces are consistently meeting their revenue objectives.” Troy Landry, vice president of supply chain for the compressor division, added his observation on this dilemma. “I ’ll tell you what the problem is. We are constantly exceeding our logistics budget to provide this outstanding service for customers who shouldn’t be getting it. Sales is constantly promising expedited delivery or special production runs for customers who generate very little revenue for us.

One of these customers, Byline Industries, only spends $1 million per year with us and yet our logistics costs as a percent of revenue for them is 25 percent. Compare this with our average logistics costs as a percent of revenue across our customer base of 11 percent and you can see where the problem lies.” Tom Novack, president of the generator division, disagreed with Troy’s observation of Byline. “Wait a minute, Troy. Byline is one of my best customers. They buy 15 percent of my revenue at a logistics cost of 8 percent. We need to make sure they are happy.” Listening to this exchange was the new Telco president, Nick Martin, who recently joined Telco after spending 15 years as COO of a global agricultural products manufacturer. This problem was not new to Nick. His former employer was also structured across business lines with common customers across the globe and found that a similar service strategy for all customers was not a viable alternative. Nick added, “I ’ve seen this before.

The problem is that we are treating all customers alike and we are not taking into consideration those customers who buy from more than one division. Before the meeting, I asked Jean to run some profitability numbers across our customer base. The results are amazing. Thirty-three percent of all of our customers account for 71 percent of our operating profits. Another 27 percent account for approximately $100 million in losses. Obviously, we have some customers who are more profitable than others. We need to develop a strategy to segment our customers and offer each segment the suite of services they are willing to pay for.” “Wait a minute,” exclaimed Chris Sills, vice president of corporate sales. “You ’re asking us to take some services away from our customers. Who is going to break the news? What about the sales commissions for my reps? This is not going to be received well by the customer base.”

CHAPTER CASE 8-1 QUESTIONS & NOTES: Telco Corporation Case Notes:

You have been hired as an expert on customer relationship management. Telco’s current service offerings to its entire customer base include product quality, order fill rates, lead time, delivery time, payment terms, and customer service support. You have been asked to prepare a report outlining how Telco could adopt the CRM approach to its customers. Specifically, this report should address the following:

  1. How should Telco approach segmenting its customers? That is, on what basis (cost to service, profitability, etc.) should the customers be segmented?

Students should understand and define the four steps to segmenting customers. The first step is to segment customers by profitability. This can be done by traditional accounting or ABC (activity based costing). The next step is to identify the product/service package for each customer segment. Next, Telco should develop and execute the best processes. Lastly, a performance metric should be implemented and evaluated on a regular basis.

  1. How should Telco tailor its service offerings to each customer segment?

Students should understand the following service components should be considered when determining future offering to the different customer segments:

Product Quality (% defects)

Order fill rate

Lead time

Delivery time

Payment terms

Customer service support

Credit Hold

Return Policy

Ordering Process

  1. Should certain customers be asked to take their business elsewhere?

Students should understand that all customers are not good (profitable) customers. If a customer will not accept terms to make their business (purchases) profitable and there is not future growth potential, then it is acceptable to terminate the relationship.

  1. How should the revised service packages to each segment be introduced to that segment? By the sales force? Should all segments be done at the same time?

These questions will be answered in many different ways. The following is a strong answer that takes the Telco situation into account. Management needs to provide standardized literature to explain the segments. Then each salesperson will have the same information to distribute and from which to speak. The relationship between the buyer and salesperson is typically the strongest, so the salesperson should deliver the message. A date for all revised service package should be set and all customers should be given ample time to determine if they want to continue using Telco. Two months is ample time to deliver all current orders and for the customer to find another vendor if necessary.

  1. Each division has its own sales force, manufacturing facilities, and logistics network. As such, common customers (those who buy from more than one division) place separate orders with each division, receive multiple shipments, and receive multiple invoices. Would it make sense for Telco to organize around customer rather than by product? If so, how would this be done? What would the new organizational metrics look like?

Students will provide various answers for this question. No, there is no need to reorganize the organizational structure. A few reasons why not; customers come and go and you can’t expect one group of employees to be masters of each product line. However, if the customer is large and profitable, there should be a dedicated customer service representative that is the touch point for all product/profit centers. This CSR could contact each division for customer concerns (i.e., product quality, billing issues, etc) and be responsible that the issues are resolved and communicated back to the customer in a timely manner.

The post provide various answers for this question appeared first on superioressaypapers.

impact of Customer Service.

impact of Customer Service.

examines the revenue impact of Customer Service. You must provide a two page write-up of the case and use the questions (brief notes in red provided to assist in writing the 2 page case study write-up) on the case study to form your analysis. Outside references or internet sources can also be used to support your paper. Reference/Cite page needs to be included.

CASE 8.1 Telco Corporation

Telco Corporation (Telco) is a $25 billion global manufacturer of industrial products, with its global headquarters located in Bloomington, Indiana. Telco is comprised of six major divisions: (1) electrical generators, (2) turbines, (3) industrial air conditioners, (4) machine tools (e.g., drill presses and lathes), (5) fork trucks and skid loaders, and (6) air compressors. Each division is managed as a separate profit center, and each has its own sales force, manufacturing facilities, and logistics network. Telco has approximately 15,000 customers worldwide, with 40 percent buying from more than one Telco division. At a recent operating council meeting, Jean Beierlein, CFO, was lamenting to the other council members the fact that pretax profits were falling even though revenues were growing. “We ’re in a perplexing situation. The stock market likes us because revenues are growing. However, I don’t see how we are going to make our dividend objectives this year because our operating profits are decreasing from last quarter. Our service levels to customers are at an all-time high and our sales forces are consistently meeting their revenue objectives.” Troy Landry, vice president of supply chain for the compressor division, added his observation on this dilemma. “I ’ll tell you what the problem is. We are constantly exceeding our logistics budget to provide this outstanding service for customers who shouldn’t be getting it. Sales is constantly promising expedited delivery or special production runs for customers who generate very little revenue for us.

One of these customers, Byline Industries, only spends $1 million per year with us and yet our logistics costs as a percent of revenue for them is 25 percent. Compare this with our average logistics costs as a percent of revenue across our customer base of 11 percent and you can see where the problem lies.” Tom Novack, president of the generator division, disagreed with Troy’s observation of Byline. “Wait a minute, Troy. Byline is one of my best customers. They buy 15 percent of my revenue at a logistics cost of 8 percent. We need to make sure they are happy.” Listening to this exchange was the new Telco president, Nick Martin, who recently joined Telco after spending 15 years as COO of a global agricultural products manufacturer. This problem was not new to Nick. His former employer was also structured across business lines with common customers across the globe and found that a similar service strategy for all customers was not a viable alternative. Nick added, “I ’ve seen this before.

The problem is that we are treating all customers alike and we are not taking into consideration those customers who buy from more than one division. Before the meeting, I asked Jean to run some profitability numbers across our customer base. The results are amazing. Thirty-three percent of all of our customers account for 71 percent of our operating profits. Another 27 percent account for approximately $100 million in losses. Obviously, we have some customers who are more profitable than others. We need to develop a strategy to segment our customers and offer each segment the suite of services they are willing to pay for.” “Wait a minute,” exclaimed Chris Sills, vice president of corporate sales. “You ’re asking us to take some services away from our customers. Who is going to break the news? What about the sales commissions for my reps? This is not going to be received well by the customer base.”

CHAPTER CASE 8-1 QUESTIONS & NOTES: Telco Corporation Case Notes:

You have been hired as an expert on customer relationship management. Telco’s current service offerings to its entire customer base include product quality, order fill rates, lead time, delivery time, payment terms, and customer service support. You have been asked to prepare a report outlining how Telco could adopt the CRM approach to its customers. Specifically, this report should address the following:

  1. How should Telco approach segmenting its customers? That is, on what basis (cost to service, profitability, etc.) should the customers be segmented?

Students should understand and define the four steps to segmenting customers. The first step is to segment customers by profitability. This can be done by traditional accounting or ABC (activity based costing). The next step is to identify the product/service package for each customer segment. Next, Telco should develop and execute the best processes. Lastly, a performance metric should be implemented and evaluated on a regular basis.

  1. How should Telco tailor its service offerings to each customer segment?

Students should understand the following service components should be considered when determining future offering to the different customer segments:

Product Quality (% defects)

Order fill rate

Lead time

Delivery time

Payment terms

Customer service support

Credit Hold

Return Policy

Ordering Process

  1. Should certain customers be asked to take their business elsewhere?

Students should understand that all customers are not good (profitable) customers. If a customer will not accept terms to make their business (purchases) profitable and there is not future growth potential, then it is acceptable to terminate t

The post impact of Customer Service. appeared first on superioressaypapers.

How should the revised service packages to each segment be introduced to that segment?

How should the revised service packages to each segment be introduced to that segment?

Case Study examines the revenue impact of Customer Service. You must provide a two page write-up of the case and use the questions (brief notes in red provided to assist in writing the 2 page case study write-up) on the case study to form your analysis. Outside references or internet sources can also be used to support your paper. Reference/Cite page needs to be included.

CASE 8.1 Telco Corporation

Telco Corporation (Telco) is a $25 billion global manufacturer of industrial products, with its global headquarters located in Bloomington, Indiana. Telco is comprised of six major divisions: (1) electrical generators, (2) turbines, (3) industrial air conditioners, (4) machine tools (e.g., drill presses and lathes), (5) fork trucks and skid loaders, and (6) air compressors. Each division is managed as a separate profit center, and each has its own sales force, manufacturing facilities, and logistics network. Telco has approximately 15,000 customers worldwide, with 40 percent buying from more than one Telco division. At a recent operating council meeting, Jean Beierlein, CFO, was lamenting to the other council members the fact that pretax profits were falling even though revenues were growing. “We ’re in a perplexing situation. The stock market likes us because revenues are growing. However, I don’t see how we are going to make our dividend objectives this year because our operating profits are decreasing from last quarter. Our service levels to customers are at an all-time high and our sales forces are consistently meeting their revenue objectives.” Troy Landry, vice president of supply chain for the compressor division, added his observation on this dilemma. “I ’ll tell you what the problem is. We are constantly exceeding our logistics budget to provide this outstanding service for customers who shouldn’t be getting it. Sales is constantly promising expedited delivery or special production runs for customers who generate very little revenue for us.

One of these customers, Byline Industries, only spends $1 million per year with us and yet our logistics costs as a percent of revenue for them is 25 percent. Compare this with our average logistics costs as a percent of revenue across our customer base of 11 percent and you can see where the problem lies.” Tom Novack, president of the generator division, disagreed with Troy’s observation of Byline. “Wait a minute, Troy. Byline is one of my best customers. They buy 15 percent of my revenue at a logistics cost of 8 percent. We need to make sure they are happy.” Listening to this exchange was the new Telco president, Nick Martin, who recently joined Telco after spending 15 years as COO of a global agricultural products manufacturer. This problem was not new to Nick. His former employer was also structured across business lines with common customers across the globe and found that a similar service strategy for all customers was not a viable alternative. Nick added, “I ’ve seen this before.

The problem is that we are treating all customers alike and we are not taking into consideration those customers who buy from more than one division. Before the meeting, I asked Jean to run some profitability numbers across our customer base. The results are amazing. Thirty-three percent of all of our customers account for 71 percent of our operating profits. Another 27 percent account for approximately $100 million in losses. Obviously, we have some customers who are more profitable than others. We need to develop a strategy to segment our customers and offer each segment the suite of services they are willing to pay for.” “Wait a minute,” exclaimed Chris Sills, vice president of corporate sales. “You ’re asking us to take some services away from our customers. Who is going to break the news? What about the sales commissions for my reps? This is not going to be received well by the customer base.”

CHAPTER CASE 8-1 QUESTIONS & NOTES: Telco Corporation Case Notes:

You have been hired as an expert on customer relationship management. Telco’s current service offerings to its entire customer base include product quality, order fill rates, lead time, delivery time, payment terms, and customer service support. You have been asked to prepare a report outlining how Telco could adopt the CRM approach to its customers. Specifically, this report should address the following:

  1. How should Telco approach segmenting its customers? That is, on what basis (cost to service, profitability, etc.) should the customers be segmented?

Students should understand and define the four steps to segmenting customers. The first step is to segment customers by profitability. This can be done by traditional accounting or ABC (activity based costing). The next step is to identify the product/service package for each customer segment. Next, Telco should develop and execute the best processes. Lastly, a performance metric should be implemented and evaluated on a regular basis.

  1. How should Telco tailor its service offerings to each customer segment?

Students should understand the following service components should be considered when determining future offering to the different customer segments:

Product Quality (% defects)

Order fill rate

Lead time

Delivery time

Payment terms

Customer service support

Credit Hold

Return Policy

Ordering Process

  1. Should certain customers be asked to take their business elsewhere?

Students should understand that all customers are not good (profitable) customers. If a customer will not accept terms to make their business (purchases) profitable and there is not future growth potential, then it is acceptable to terminate the relationship.

  1. How should the revised service packages to each segment be introduced to that segment? By the sales force? Should all segments be done at the same time?

These questions will be answered in many different ways. The following is a strong answer that takes the Telco situation into account. Management needs to provide standardized literature to explain the segments. Then each salesperson will have the same information to distribute and from which to speak. The relationship between the buyer and salesperson is typically the strongest, so the salesperson should deliver the message. A date for all revised service package should be set and all customers should be given ample time to determine if they want to continue using Telco. Two months is ample time to deliver all current orders and for the customer to find another vendor if necessary.

  1. Each division has its own sales force, manufacturing facilities, and logistics network. As such, common customers (those who buy from more than one division) place separate orders with each division, receive multiple shipments, and receive multiple invoices. Would it make sense for Telco to organize around customer rather than by product? If so, how would this be done? What would the new organizational metrics look like?

Students will provide various answers for this question. No, there is no need to reorganize the organizational structure. A few reasons why not; customers come and go and you can’t expect one group of employees to be masters of each product line. However, if the customer is large and profitable, there should be a dedicated customer service representative that is the touch point for all product/profit centers. This CSR could contact each division for customer concerns (i.e., product quality, billing issues, etc) and be responsible that the issues are resolved and communicated back to the customer in a timely manner.

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Calculating the expected utility

Calculating the expected utility

week’s resources, maximization of expected utility involves the following five steps of decision making:

Identifying future conditions, along with the likelihood of the condition being realized
Listing possible alternatives
Estimating the payoff or utility for each alternative under each future condition
Calculating the expected utility
Selecting the best alternative
Decision trees can be used to illustrate all of this information in a graphic manner.

In this Assignment, apply the information from this week’s resources to solve decision problems and complete a Decision Analysis for those problems. Solve problems 5, 10, and 11 on pp. 231–234 of the Stevenson text by creating decision trees, determining expected utilities of the decision alternatives, and offering recommended decisions based on the decision tree analysis.

Approximate length: 4–5 pages

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How successful do you expect eBay to be going forward?

How successful do you expect eBay to be going forward?

Online CEO was unhappy with the joint venture, subsequently resigning:

Rumor: Tom Online’s CEO Will Resign

In 2009 there were rumors that PayPal might be “contemplating a Chinese acquisition. Chinese independent third-party online payment company 99bill.com has signed an agreement with PayPal to jointly improve its international payment efficiency and promote international trade settlement.”

China’s 99bill.com Teams With PayPal To Explore International Payments

In Korea, the acquisition of Gmarket was completed in June 2009. Gmarket is said to operate “a bit differently from eBay. For one thing, Gmarket places less emphasis on an open-auction format, instead focusing on selling goods at fixed prices, with an option to negotiate with a seller on an exclusive basis. This allows buyers to conclude deals instantly instead of having to wait until an auction deadline.” See more of the story at:

http://www.businessweek.com/globalbiz/content/apr2009/gb20090416_364057.htm

The Asia-Pacific environment is still volatile and the differences between this region’s consumer shopping culture and the rest of eBay’s customer experience seem to have required significant retooling. Do you think eBay will eventually be able to gain any significant share of the Asian consumer-to-consumer market?

What source of competitive advantage does eBay have, and is that position supported by its resources and assets? Does eBay deal effectively with its external environment in Asia?

In order to fully appreciate eBay’s difficulties with its growth strategies in Asia, it may help if students can step back and consider eBay’s need for a strategic analysis and formulation. eBay had already been a success in North America before it ventured abroad. That success was based on a specific competitive strategy.

Referencing Chapter 5: Formulating Business-Level Strategies

In order to achieve a sustainable competitive advantage, eBay had to assess its ability to contend with other online auctioneers. The question of how to compete in a given business to attain competitive advantage requires an assessment of the types of competitive strategies, including the three generic strategies that are used to overcome the five forces and achieve a competitive advantage:

Overall cost leadership
Low-cost-position relative to a firm’s peers
Manage relationships throughout the entire value chain
Differentiation
Create products and/or services that are unique and valued
Non-price attributes for which customers will pay a premium
Focus strategy
Narrow product lines, buyer segments, or targeted geographic markets
Attain advantages either through differentiation or cost leadership
Ask the students which strategy they think eBay pursued, and why. Their answers may include some of the following points:

eBay competed by creating customer options that were uniquely different from those of its competitors. It also targeted distinct market niches. Because of its reputation and longevity in providing value to its customer segments, eBay was in a unique position to continue to capture a significant share of the growing online market. Therefore, eBay pursued a combination strategy of focused differentiation.

Regarding its competitive strategy in Asia, in order to maintain control over costs, eBay had kept central management control in the U.S. Although this centralized decision structure allowed eBay to keep to a consistent global platform, it made it more difficult to be responsive to local needs. Therefore, the value of eBay’s service in Asia did not yet convince users to either seek out the service or pay a premium.

Referencing Chapter 3: Analyzing the Internal Environment

To answer the question of how to support a competitive strategy, it’s important to consider the concept of the resource-based view of the firm, and the three key types of resources: tangible resources, intangible resources, and organizational capabilities. Determining whether the internal resources are valuable, rare, difficult to imitate, or difficult to substitute (VRIN) can help a firm sustain a competitive advantage. See Chapter 3, Exhibit 3.6. eBay’s profile might look like this:

Tangible Resources:

Financial – strong financial growth

Physical – unknown, but not that essential a resource in a service business

Technological – assumed very strong, given the nature of eBay’s business model, and its success

Intangible Resources:

Organizational – centralized decision-making worked well except in Asia

Human – based on the commitment and loyalty of Whitman & Donahoe, very capable and dedicated human resources

Innovation – major strength

Reputation – another major strength – essential in this service business

Organizational Capabilities:

Competencies – eBay had the critical strengths in its human, technological, innovative and reputational resources that should allow it to sustain a competitive advantage with its chosen business model

Referencing Chapter 4: Assessing Intellectual Capital

See the concepts of intellectual capital, human capital and social capital, all of which are intangible assets that a company such as eBay needs to have in order to compete successfully. Intellectual capital is a measure of the value of a firm’s intangible assets, its reputation, employee loyalty and commitment, customer relationships, company values, brand names, and the experience and skills of employees. Human capital involves the individual capabilities, knowledge, skills, and experience of the company’s employees and managers. Social capital is a function of the network of relationships that individuals have throughout the organization. If employees are working effectively in teams, across business divisions, and sharing their knowledge and learning from each other, not only will they be more likely to add value to the firm, but they also will be less likely to leave the organization. This applies to strategic alliance partners as well.

Both Meg Whitman and John Donahoe were examples of the dedication, experience and skills of eBay’s intellectual capital. Since eBay was in the knowledge business, the capabilities of its employees and managers were essential assets. However, especially in Asia, social capital was critical. Think of social networks like marketing by word-of-mouth. As eBay founder Omidyar said, eBay was envisioned as a community built on commerce, but sustained by trust, and inspired by opportunity. The social network of buyers, sellers, browsers, technical support gurus, managers, corporate employees, local partners, all had to see the same opportunity, and trust that commerce would happen.

It appeared possible that eBay had not yet understood how to leverage social capital in Asia. A telling comment was rival Alibaba.com’s CEO Jack Ma’s observation that eBay moved too quickly to replace local management with foreigners, and tried to create a market through spending rather than through a ground up process of networked local involvement.

Contrasting eBay with Yahoo, when Yahoo chose to partner with Taobao and Gmarket, both Taobao and GMarket had an in-depth understanding of the Asian culture and local market needs. They allowed users to conveniently interact with each other by offering alternate communication channels such as instant messaging and voice-over-IP (VOP). This enabled sellers to respond to buyer questions more quickly, completing the transaction in a timelier manner. Both companies also offered fixed pricing at an early stage which allowed buyers to purchase items without having to spend time on negotiations. Despite Yahoo’s involvement with both companies, local management control was retained allowing Taobao and GMarket to meet local market needs.

Referencing Chapter 2: Analyzing the External Environment

Regarding the general external environment, eBay must consider the political/legal, economic and global, sociocultural and demographic, and technological forces that might affect the ability of the firm to deliver its services and sustain its business. See which factors in the general environment students might pick that have a significant impact on the online auction industry. Students might respond as follows:

Political-Legal – trade and tariff issues, local and national regulations

Economic – currency fluctuations

Demographic – population growth outside of North America; Asia & Africa had the most population, least Internet penetration

Sociocultural – people worldwide paying increasing attention to social issues, global poverty, the environment; on the Internet, increasing move away from auctions to quicker transactions based on fixed price arrangements

Technological – Internet users had increasingconcerns with online privacy, fraud

The above analysis indicates that eBay should have been well positioned with both resources and a competitive strategy to deal effectively with its external environment, including its competition. However, eBay’s insistence on a single global platform may not be appropriate for all markets. This is why eBay might want to consider developing a more adaptive transnational strategy. Giving up some corporate control in Asia to rely on more local expertise might be critical for success in this market.

Also see the CASE DVD, which has a clip of an interview with Meg Whitman.

NOTE – ADDITIONAL READING, WEB LINKS, EMBEDDED VIDEO:

Use the tools available at this link to examine the performance of eBay’s stock over the last five years: http://finance.yahoo.com/q?s=ebay

Jim Cramer’s The Street believes eBay is a good stock pick in July 2009 based on what new CEO John Donahoe has done over the year he’s been in charge. See the video report here:

http://www.thestreet.com/_yahoo/video/10540172/online-stock-to-love.html?cm_ven=YAHOOV&cm_cat=FREE&cm_ite=NA&s=1#29241765001

What do you believe explains the stock’s performance? Would you expect the current trend to continue? Why or why not?

Here is a video reportedly produced for eBay’s employees in 2005 on the occasion of its tenth anniversary. It interviews eBay users from different perspectives, one of whom is a Chinese seller using Eachnet.

Watch the video interview of eBay outgoing CEO Meg Whitman and incoming CEO John Donahoe dated January 2008 on the transition in leadership and projected changes:

http://video.nytimes.com/video/2008/01/24/technology/1194817093417/ebay-after-whitman.html

Focus is on making eBay “easier and safer to shop”. Changes were announced regarding product and pricing. Some eBay patrons have been getting increasingly upset with eBay policies. See, for instance, the following series of blogs from Australia starting in 2008. Sellers are upset that they have to use PayPal exclusively:

http://www.bloggernews.net/115079 and sellers are upset that eBay has prevented them from leaving bad feedback about buyers. The implication is that buyers are more important than sellers, at least in eBay Australia:

http://www.bloggernews.net/121382

U.S. eBay patrons have been complaining also. See this article and the comments from August 2008:

http://blogs.wsj.com/independentstreet/2008/08/12/four-big-gripes-of-ebay-sellers/

and http://www.ebaystrategies.blogs.com/

In the attempt to make it safer for buyers to shop, has eBay alienated the sellers?

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