IMD-5-0751 © 2009
Kashani, Kamran; DuBrule, Aimee
Faced with growing commoditization and competition of its core aftermarket company for industrial bearings, SKF develops a sales tool to record, measure and ensure its customers monetary advantages from the use of its replacement products and services that are associated. The strategy is based on warranting premium unit prices that lead to a lower total price and an attractive return on investment for the customer. Yet this strategy isn't likely to impress an important end user of bearings purchasing upwards of $12 million per annum, Steelcorp. A new procurement VP is asking suppliers of bearings, including SKF, to submit to on line reverse auction where the lowest unit price is likely to win huge orders.
SKF senior management is contemplating a reply to Steelcorp’s invitation that is supported by the company’s provider but opposed by those inside the company who perpetrated to overall price pricing and value selling. The students are to resolve the dilemma and make a decision whether to participate in the auction or refuse risk losing potentially large orders during recessionary market conditions and to do so. Learning objectives: The case and its video accessory can be used for the subsequent learning objectives: –Demonstrate the machinists of value (total cost) pricing and the strategic reasoning of it, –Show the limitations of value pricing(e.g. in face of procurement strategies targeting reduction in per unit cost of goods bought), Illustrate how commoditization can be fought back under specific conditions; – Supply insights on how industrial purchasing-selling and the distribution work and the trends redesigning both the Practice role play and dialogue with a key customer; –Introduce the concept of reverse auction in industrial procurement.
Value Selling At SKF Service (A) Tough Buyer Confronts Strategy Case Study Solution
Subjects: Value pricing; Industrial selling; Industrial distribution; Channel conflict; Commoditization; Negotiation; Reverse auction; After sales service; Industrial marketing; Key account management
Settings: Global; US; Industrial bearings; US$8.2 billion
Related Case Solutions & Analyses:
Students Helping Honduras
OSG Corporation: Risk Hedging Against Transaction Exposures
Project Finance Acronyms
Matt Coffin
RBC Financial Group–The Equator Principles in Qatargas II LNG Project
Mall of America (A)
Canada Wide Savings, Loan and Trust Company
Equity Valuation: The Walt Disney Company
Cittá di Forenna
Merced College
