XYZ Company
Market Opportunities in China

Final Report
Date

1

Download at:
Gazhoo.com
Download at:
Gazhoo.com
Executive Summary

2
XYZ DI China has engaged ABC to collaborate in developing a demand creation
strategy to grow its business in the PRC. To a...
XYZ’s current position is being affected by a number of critical market forces — fluid
regulatory environment, new emergin...
ABC has estimated that the market will reach US$ 86 million by 2002. To capture
the opportunities and create market demand...
Demand creation is strongly driven by value-based segmentation. XYZ should adopt
distinctive strategies to position itself...
To successfully execute the new demand creation strategy, XYZ needs to build the
China business fundamentals and assign th...
Table of Contents

What Is the
Potential of
China’s DI Market?

How Does and Will
the DI Market
Look?

• Growth Drivers an...
Table of Contents

What Is the
Potential of
China’s DI Market?

How Does and Will
the DI Market
Look?

• Growth Drivers an...
The China DI market will experience huge growth over the next 4 years. To estimate
the likely market size, we have taken i...
The base scenario incorporates all major drivers present under normal conditions,
including selected industry-specific dri...
The comparative “proxy” study shows that in China, IT products with characteristics
similar to those of DI demonstrate a p...
The comparison between China and the world in DI development indicates China’s DI
still is in an embryonic stage — very yo...
We also have produced a set of “favorable” and “setback” scenarios. They have
been developed from the base scenario, takin...
With all four macro-factors playing a positive role on the development of the DI
market, the favorable scenario suggests a...
Should all four macro-factors follow their worst course, the setback scenario derives
a DI market of US$ 69-73 million in ...
Table of Contents

What Is the
Potential of
China’s DI Market?

How Does and Will
the DI Market
Look?

What Should XYZ
Do ...
While the regulatory environment of DI is characterized by the absence of a single
voice, a strong advocate, or a clear ag...
Although there is no single champion so far, the current government structure
indicates that any one or any combination of...
To make sense of the complex government landscape and effectively secure the
appropriate government/association sponsorshi...
As the influence of the government in China is often transmitted through its formal
and informal affiliations, association...
Our buyer value analysis reveals that different market segments have distinct
preferences. High market potential exists am...
In addition, XYZ’s market success depends on further understanding of the buyer
decision-making process as well as specifi...
Furthermore, users are often led by short-term considerations and popular trends,
not always by the pursuit of efficiency ...
The strategic issue of digital versus micrographics also needs to be given adequate
attention. XYZ should ride the “digita...
In the banking industry, DI is now at the important crossroads with competition
intensifying in a sustained fashion. XYZ n...
Meanwhile, as the buyer value analysis strongly indicates, XYZ needs to reach
beyond the banking industry if it is to beco...
Because many potential mid- to large-sized users have different preferences from the
banking industry, XYZ should reinvent...
On the competition front, our research has discovered new rivalry, which indicates
that the competitive landscape is much ...
In the digital domain, XYZ’s leadership in digital is challenged by B&H and Fujitsu —
which offer a better price/performan...
In micrographics, XYZ’s market share is being eroded by strong competition from
Minolta — with a good price/performance ra...
Agfa, XYZ’s biggest competitor, is well-positioned to offer high quality products for
less money and attractive software s...
XYZ’s competitors have adopted different strategies in product, channel
management, and marketing. The key differentiating...
The strong bargaining power of DI channels is derived from their close ties with endusers in target industries. Accordingl...
Since most channel operators view their business from a short-term perspective,
they tend to concentrate on pursuing prima...
Our analysis suggests that China DI is an attractive market (US$86 million in the base
scenario) for XYZ to commit its inv...
Table of Contents

What Is the
Potential of
China’s DI Market?

How Does and Will
the DI Market
Look?

What Should XYZ
Do ...
Designing and implementing an effective demand creation strategy involves
addressing a series of critical challenges. Abov...
Absent a thorough understanding of the evolving market dynamics and execution
capability, XYZ’s current DI operation in Ch...
The China DI market is an emerging one: customers need education in technology,
product qualities, features and operationa...
XYZ’s demand creation strategy must address explicitly evolving buyer values. By
better prioritizing opportunities, harnes...
To drive demand creation and market expansion initiatives, XYZ needs to align
specific strategy components with its overal...
The Value Proposition is a critical message to the market place. XYZ’s Value
Proposition must articulate a set of values —...
However, as the market forms and matures, buyer values will evolve. The key
strategy for XYZ is to shape the market early ...
The core element of XYZ’s government strategy is to take a proactive approach to
shape and influence China’s DI landscape....
Given that the government does not function as a unitary body, XYZ should form a
partnership with selected key players and...
XYZ must be able to shape the direction and thrust of change with respect to future
policy-making by relying on a strategy...
XYZ also must closely monitor and capture business opportunities arising from
inside government entities by adopting a sho...
An effective government strategy is carried out most easily through high-profile
projects in cooperation with government a...
Following our proposal that XYZ should expand its customer base, we believe that
the core of its new product strategy shou...
The relevance of this strategy is further supported by a segmentation of existing and
targeted customers based on their bu...
At the same time, when expanding into low- to mid-end products, XYZ also should
maintain its leadership position in the hi...
More importantly, mid-range and low-end products need to be distinctively
differentiated to avoid cannibalization of XYZ’s...
The implementation of the product strategy should follow a predefined time line and
integrate customers’ preferences and n...
The new product expansion strategy will enable XYZ to achieve a CAGR of 56.3% in
sales revenue. The total sales of US$ 43M...
In the long run, XYZ needs to consider offering XYZ branded local products, either
through OEM or joint venture. This opti...
If it decides to make a strategic move into manufacturing, XYZ should build
progressively from OEM, licensing or simple as...
To carry out the proposed product expansion and create additional demand, it is
imperative to have a lively marketing stra...
Marketing activities should capture opportunities embedded in the dynamic
relationship between customer segments and produ...
XYZ’s new marketing strategy should be based on XYZ’s segment priorities. Using
the four core marketing levers of product,...
Distinctive positioning for each target segment should be in place before making a
tactical plan which outlines the key pr...
To successfully implement the segment-based marketing strategy, XYZ needs to shift
from a “push’ to a “pull” strategy, whi...
To maximize the channels’ contribution to XYZ’s business expansion, XYZ needs to
align better with its channels at both st...
Strategic alignment will enhance the partnership(s) and build synergy between XYZ
and its channels. The KVAD deployment is...
XYZ should apply a more flexible and adjustable incentive system to encourage
channels to focus on long-term business deve...
To develop an effective distribution network, XYZ should pursue a systematic
approach for channel management, from selecti...
On a regular basis, XYZ needs to enforce operational discipline within and among
channel partners. Both KVADs and KAIRs ar...
Over the long term, XYZ should encourage KVADs and KAIRs to adopt an account
management system. A well-developed account p...
Based on the buyer values associated with the target segments, XYZ should apply
different tactics to develop and manage co...
The evolution of the channel structure will be driven by the volume of business and
product offerings. In an emerging mark...
The recently adopted global KVAD-KAIR structure enables XYZ to reach a wider
customer base with the introduction of the MV...
In summary, to enhance revenue performance, XYZ should take two strategic steps:
product introduction and customer expansi...
Our proposed strategy implementation plan is designed to mobilize XYZ’s people and
financial resources in the four critica...
Based on the market development stage and XYZ’s position, we believe that the
centerpiece should be the marketing piece. T...
As part of its overall marketing initiatives, XYZ also should have specific, focused
programs that cater to the different ...
The core element of the government strategy execution is the creation of a strategic
partnership with several relevant gov...
In terms of product strategy, XYZ should target different segments with different
product portfolios. Specifically, Segmen...
The new product launch needs to highly align with XYZ’s strategic plan in expanding
customer base and achieve revenue incr...
Identifying new customers requires deploying various sources and channels. XYZ
needs a systematic multi-level approach tow...
Market entry strategy presentation - gazhoo.com
Market entry strategy presentation - gazhoo.com
Market entry strategy presentation - gazhoo.com
Market entry strategy presentation - gazhoo.com
Market entry strategy presentation - gazhoo.com
Market entry strategy presentation - gazhoo.com
Market entry strategy presentation - gazhoo.com
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Market entry strategy presentation - gazhoo.com

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This deck outlines a market entry strategy and business development model for a technology company which was expanding its business in Asia.

It analyzes the market dynamics of an emerging market in Asia and its development potential. To capture the opportunities and create market demand, the firm should take two strategic steps, new product introduction and customer base expansion. A strategy implementation plan was developed to build brand image, grow the market, build internal infrastructure and retain the firm's market leadership.

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Market entry strategy presentation - gazhoo.com

  1. 1. XYZ Company Market Opportunities in China Final Report Date 1 Download at: Gazhoo.com
  2. 2. Download at: Gazhoo.com Executive Summary 2
  3. 3. XYZ DI China has engaged ABC to collaborate in developing a demand creation strategy to grow its business in the PRC. To accomplish this goal, we have worked together to assist XYZ to better understand China’s market dynamics and formulate a multi-faceted strategy to enable XYZ to secure a sustainable competitive position. Project Scope Download at: Gazhoo.com • Provide an overview of the China DI market, and analyze DI development potential • Estimate the market size based on the key growth drivers as well as the impact of macro-economic and political environment • Identify target industry sectors, assess the respective buyer values, and segment the market • Design XYZ’s value proposition to the Chinese government and primary customers in response to their priorities and business requirements • Identify XYZ’s strategic initiatives to create stronger DI demand • Formulate strategies and establish a corporate infrastructure and system (government relations, market image, product portfolio and channel partnership) to position XYZ for long-term growth • Prioritize the major opportunities, plot a strategic path to capture the market, and identify the keys to operational excellence for XYZ 3
  4. 4. XYZ’s current position is being affected by a number of critical market forces — fluid regulatory environment, new emerging customers, intensifying competition and powerful channels. These forces have created tremendous opportunities for DI players, yet also pose serious competitive threats to XYZ’s long-term growth as well as short-term market standing. China DI Market Dynamics GOVERNMENT Situation Opportunity Download at: Gazhoo.com • Fragmented & • Shape and influence unregulated the policy making • Multiple bureaus and process • Potential “Big Bang” influential industry might erupt associations CUSTOMER Situation • Emerging customer sectors • More sophisticated approach to DI solutions CHANNEL Opportunity Situation • Demand for new products/solutions • Higher requirement for quality product and customer service Opportunity & Threat • Strong bargaining power due to business capabilities • Deal-oriented, shortterm approach XYZ Reinvent its Approach to the Market • Inexperience in DI, coaching and training needed • Control customers • Lack of loyalty COMPETITION Situation Threat • Aggressive players vying for share • Strong low end product offerings & pricing strategy • Addressing customer requirements in solutions & pricing • New product launch attacking XYZ 4
  5. 5. ABC has estimated that the market will reach US$ 86 million by 2002. To capture the opportunities and create market demand, XYZ should take two strategic steps: new product introduction and customer base expansion. Demand Creation Only with such parallel efforts, can XYZ overcome the DI development hurdles and create a sustainable marketplace for itself. Download at: Gazhoo.com Low End 2002 DI market US $86 Mn XYZ share XYZ share Introduce new products 1998 DI market US$ 18 Mn Channel Customer Expand customer base Government Strategic Thrusts Mid Range High End Differentiation • • • • • • Marketing 5 HURDLES No strong market pull Simple product portfolio Low DI awareness Limited customer base Technology limitation (e.g. OCR) Weak channel capabilities
  6. 6. Demand creation is strongly driven by value-based segmentation. XYZ should adopt distinctive strategies to position itself appropriately, and emphasize three areas: brand image, quality, and delivery of customer service. Segmentation Approach Segment A Major banks Download at: Gazhoo.com Segment B Segment C Other users w/ financial capability Other users w/ less financial capability • World class technology Overall • Customized solution strategy • Premium products & brand image • High quality products • Good price/ performance ratio • Scalability & reliability • Retain leadership in high-end Product products strategy • Ride the wave of digital and defend micrographics • Introduce mid- to low-end products • Digital leads the way; micrographics follows • Work with customers to move up • Convey XYZ’s willingness to help Marketing customers in a digital transition strategy • Aggressively push the idea of “Y2K” • XYZ takes the main responsibility Channel • Partnering with channels having strategy industry knowledge and solution capability • Consistent, responsive customer Customer service service • Customer training • XYZ takes the main responsibility Government strategy • Raise DI awareness through market education programs • XYZ and channel share marketing responsibilities • Cost effective • Easy to operate • • • • • Introduce low- to mid-end products Digital takes the priority Enter the market aggressively Work with customers to grow Emphasize XYZ products’ good performance/price ratio • Stress “easy to operate” • Channel takes the main responsibility • Training on XYZ’s new products • Identify channels with expertise in target industries • Increase geographical and industrial coverage of channels • Provide marketing support • Deliver standard and adequate service • XYZ and channel share responsibilities • Guarantee cost effective, basic-level of service • Channel takes the main responsibility • Long-term relationship building • Promote the whole concept of DI • Indoctrinate DI into the government’s program of digital economy 6 • Cultivate specific, project based relationship • Offer concrete benefits • Partnering with MNCs and domestic system integrators
  7. 7. To successfully execute the new demand creation strategy, XYZ needs to build the China business fundamentals and assign the top priorities to overall market image building, segment-focused marketing, mid-volume product launch and channel development. TOP PRIORITY Implementation and Prioritization of the Tasks Segment A Marketing Strategy Strategy Implementation Plan Brand awareness building Segment C Brand awareness building • Conveying XYZ’s value proposition • Project-based initiatives Government Strategy Segment A Product Strategy Segment B • • • • Premium product/service, Solution focused Quality product Meet customer requirement Segment C Segment B 7 • Increase the number of channels • Increase new industry penetration Segment C Channel Strategy • Strengthen relations with channel • Account plan & solution focused • Increase number of channels • Expand geographic coverage   • Cost effectiveness • Standard product Segment A Fulfill Demand (Internal Capabilities) Objectives: • Build internal infrastructure • Retain XYZ’s market leadership   Download at: Gazhoo.com Segment B Create Demand (Market Facing) Objectives: • Build XYZ brand name • Grow the China DI market Overall: corporate image building and market education XYZ’s continuous commitment to banking  
  8. 8. Table of Contents What Is the Potential of China’s DI Market? How Does and Will the DI Market Look? • Growth Drivers and Market Size • Regulatory Environment • Scenarios • Customer Behaviors Download at: Gazhoo.com What Should XYZ Do To Expand Business? • Value Proposition • Government Strategy • Competitive Dynamics • Product Strategy • Channel Insights • Marketing Strategy • Channel Strategy • Strategic Path/ Implementation • Risk Management 8
  9. 9. Table of Contents What Is the Potential of China’s DI Market? How Does and Will the DI Market Look? • Growth Drivers and Market Size • Regulatory Environment • Scenarios • Customer Behaviors Download at: Gazhoo.com What Should XYZ Do To Expand Business? • Value Proposition • Government Strategy • Competitive Dynamics • Product Strategy • Channel Insights • Marketing Strategy • Channel Strategy • Strategic Path/ Implementation • Risk Management 9
  10. 10. The China DI market will experience huge growth over the next 4 years. To estimate the likely market size, we have taken into account multiple market growth drivers and have used a comparative proxy analysis to verify the results. Market Estimate Approach Download at: Gazhoo.com DI Specific Drivers Natural Growth of Demand Macro-Factors GDP/Macroeconomic Normal Conditions (industry drivers & macro-factors) Favorable Scenario Sellers’ Marketing Efforts Technology Maturity & Price Decline Sino-US Relationship Base Scenario WTO Entry Other Natural Growth Drivers Specific to Industries Comparative Study on laser printer and videoconferencing China Digital Economy Development Agenda Verification by comparison between China and world DI growth 10 Setback Scenario
  11. 11. The base scenario incorporates all major drivers present under normal conditions, including selected industry-specific drivers. The result is an estimate of $86M by the end of 2002, with a CAGR of approximately 48%. Natural Growth of Demand Without external forces, the DI demand grows by itself as the market emerges Base Scenario Model Market size ($M) US$86M Sellers’ Marketing Efforts The collective efforts by the whole DI industry will accelerate the expansion of the DI market in terms of volume and number of penetrated industries Other natural growth drivers specific to industries 80 Download at: Gazhoo.com Technology maturity and price decline 70 Technology Maturity & Price Decline The price will drop gradually with maturity of the DI technology. The decline in price will prompt more purchases and thus increase sales Sellers’ marketing efforts 60 Other Natural Growth Drivers Specific to Industries Specific drivers in the following industries can create significant demand to meet more complicated business needs • Banking (credit card & loan growth) • Government (tax reform, medical reform, & social security reform) • Insurance (growth in policy holders) Natural growth of demand 1998 1999 2000 2001 2002 (in US$M) XYZ estimate (HV only) 1998 1999 2000 2001 2002 7.2 14 22 27 32 Natural growth of demand 18 23 30 43 60 + Impact of sellers’ marketing efforts 26 26 35 51 71 + Technology maturity & price decline 18 18 + Other factors* 18 26 35 39 53 59 77 86 8 4 6 11 6 9 17 8 14 26 13 21 37 19 31 High End (43.0%) Mid Range (21.5%) Low End (35.5%) Source: XYZ, Essence, AC analysis 11 100 Market size by product segment (in US$M) 80 31 60 40 19 20 37 0 1998 1999 High End 2000 Mid Range 2001 2002 Low End
  12. 12. The comparative “proxy” study shows that in China, IT products with characteristics similar to those of DI demonstrate a parallel lifecycle, but with an approximate fouryear lag. Emerging Comparable Product (Videoconferencing) Comparative Study Market size/GDP 0.025% DI, videoconferencing and laser printer are comparable IT products because they share the following characteristics: Our Findings 0.020% Download at: Gazhoo.com 0.015% World 0.010% 4 years 0.005% China 0.000% • China’s videoconferencing market is parallel to and 4 years behind the world’s. 1993 1994 1995 1996 1997 1998 1999 2000 • • • • • • • • • Fragmented Unregulated Channel importance High price Low awareness Competition by sector Institutional Mission critical System compatibility Mature Comparable Product (Laser Printer) Market size/GDP 0.050% World 0.040% 0.030% 0.020% 0.010% 4 years China 0.000% 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: Our Conclusion CCID-MIC, Frost & Sullivan Market Intelligence, International Monetary Fund, China Statistical Yearbook, CBI Research Computer Market & Industry Report for China 1996-1997, AC analysis 12 • China’s laser printer market is 4 years behind • The penetration rate of China’s laser printer will reach the level of the world in 2000 Assumption Penetration rate of laser printer in China is parallel to that of the world along time line For the IT products comparable to DI, once the market forms and enters the postintroductory period, the penetration rate in China will be approximately 4 years behind the world
  13. 13. The comparison between China and the world in DI development indicates China’s DI still is in an embryonic stage — very young according to the product lifecycle curve due to the lack of external pushes, such as marketing and user education. DI Development in China Comparison of DI Penetration Rate (PR) Market size/GDP 0.020% The world GDP, rather than that of developed countries, is used because China consists of developed regions along the coast as well as underdeveloped areas in western inland. This composition is more comparable to the globe. If we assume that China’s DI enters the post-introduction period in 2002, its penetration rate should be 4 years behind that of the world. Let’s make a conservative assumption that China can only achieve half of the projected penetration rate, that is, Download at: Gazhoo.com 0.016% World 0.012% 0.008% China 0.004% 0.000% 1993 Why is the gap between China’s DI and that of the world much lower than other comparable IT products? 1994 1995 1996 1997 1998 1999 • Because China’s DI is still in the embryonic stage, partly due to limited external drivers such as education, marketing and awareness • Yet, once DI kicks off in China, its penetration rate will catch up with the world quickly. This conclusion also is supported by the experience of Internet growth in the PRC. Source: AIIM Industry Study, China Statistical Yearbook, International Monetary Fund, AC analysis 13 China’s DI PR in 2002 =1/2* World’s DI PR in 1998 = 0.0085% X China 2002 GDP China’s DI market size in 2002 is US$ 86M Therefore, the market size of US$86M in our base scenario is a reliable estimation.
  14. 14. We also have produced a set of “favorable” and “setback” scenarios. They have been developed from the base scenario, taking into consideration several additional factors that could alter our projections in a positive and/or negative fashion. Macro-Factors in Three Scenarios Base Scenario Favorable Scenario Setback Scenario GDP/ Macroeconomic • China’s GDP grows at an average of 5% per year • Other macro-economic factors are neutral on DI growth, e.g. RMB devaluation • China’s GDP keeps high growth rate (8%), which accelerates DI development • Aggressive SOE reform • Sino-US relationship progresses steadily & US investment in China is highly encouraged & well protected, esp in hi-tech • Chinese economy grows at very low speed (<2%), and results in slow demand growth • RMB devaluates • Sino-US relationship deteriorates • US products are not encouraged by the Chinese government Sino-US Relationship • Sino-US relationship maintains the current level • US trade with and investment in China increase normally WTO Entry • WTO negotiation maintains at the current pace, and brings minimum impact on DI development • China enters WTO which greatly reduces DI tariffs --> price drops--> demand rises substantially • China’s entrance to WTO is delayed and the tariff on DI remains • Government gives medium priority to digital economy in its development agenda • Government continues to push IT as a national economic pillar • Government lowers the priority of IT in economic development Download at: Gazhoo.com China Digital Economy Development Agenda 14
  15. 15. With all four macro-factors playing a positive role on the development of the DI market, the favorable scenario suggests a US$ 100-110 million market in year 2002. Favorable Scenario Favorable Scenario • China’s GDP keeps high growth rate (8%), which accelerates DI development • Aggressive SOE reform • Sino-US relationship progresses steadily & US investment in China is highly encouraged & well protected, esp in hi-tech Download at: Gazhoo.com GDP/ Macroeconomic Sino-US Relationship WTO Entry Individual Impact (on Base Scenario) China Digital Economy Development Agenda 5% 5% Synergistic Impact 30% • China enters WTO which greatly reduces DI tariffs --> price drops--> demand rises substantially 5% • Government continues to push IT as a national economic pillar 5% 20% 15 The China DI market size will be US$100- 110M if macrofactors are all favorable to DI development. Additive Impact
  16. 16. Should all four macro-factors follow their worst course, the setback scenario derives a DI market of US$ 69-73 million in year 2002. Setback Scenario Setback Scenario • Chinese economy grows at very low speed (<2%), and results in slow demand growth • RMB devaluates • Sino-US relationship deteriorates • US products are not encouraged by the Chinese government Download at: Gazhoo.com GDP/ Macroeconomic Sino-US Relationship WTO Entry Individual Impact (on Base Scenario) China Digital Economy Development Agenda 5% 5% Collective Impact 15% • China fails to enter WTO and the tariff on DI remains 5% • Government lowers the priority of IT in economic development 5% The China DI market size will be US$69-73M if macro-factors are all obstructive to DI development. 20% Additive Impact 16 The possibility that all the four factors pose the most negative impact on DI concurrently is low. That is why the collective impact is 15% rather than 20%.
  17. 17. Table of Contents What Is the Potential of China’s DI Market? How Does and Will the DI Market Look? What Should XYZ Do To Expand Business? Download at: Gazhoo.com • Growth Drivers and Market Size • Regulatory Environment • Value Proposition • Scenarios • Customer Behaviors • Government Strategy • Competitive Dynamics • Product Strategy • Channel Insights • Marketing Strategy • Channel Strategy • Strategic Path/ Implementation • Risk Management 17
  18. 18. While the regulatory environment of DI is characterized by the absence of a single voice, a strong advocate, or a clear agenda, the government still holds its influence in developing the DI industry. However, this does not mean that the government plays no role …... Our survey and study found three major characteristics of the regulatory environment  No clear agenda Download at: Gazhoo.com  No single advocate  No single voice No single government body is given the authority of regulating the DI industry or setting standard • The Chinese government works in a fluid way in the sense that its focus often shifts among issues and power floats from department to department • The government favors the adoption of high tech • The rudimentary structure of the government determines that government policies have ultimate importance in issues involving high tech • Fragmentation is characteristic of the operation of the Chinese bureaucracy. It also is true in DI • Promotion of new technology is often carried out through government affiliated bodies No single government body acts as a strong sponsor and promoter of DI While agreeing that DI is important, the government has not constructed a specific plan or time frame for DI adoption Unregulated Decentralize d Fragmented ……it only suggests that XYZ should adjust its approach accordingly in interacting with the government. 18
  19. 19. Although there is no single champion so far, the current government structure indicates that any one or any combination of these government agencies and affiliations can emerge as a significant player in the DI field. Government Power Structure Min of Sci & Tech High Tech Dept. The State Council Download at: Gazhoo.com Ministry of Culture MII Sci & Tech Dept Information Product Dept Government Affiliations National Library/ Library Association SDPC* High Tech. Dept National Center for Optical Memory 19 SETC* State Archive Bureau SBQTS* Bureau of Machine Building Micrographic Association Archive Association * SBQTS - State Bureau of Quality and Technical Supervision SDPC - State Development and Planning Commission SETC - State Economic and Trade Commission
  20. 20. To make sense of the complex government landscape and effectively secure the appropriate government/association sponsorship, XYZ must understand the evolving role of each of the key players — actual and potential. Impact on DI Industry Type of Agencies IT and technology development/ standard setting Cultural affairs Policy making/ regulation Name of Agencies Roles, Responsibilities and Activities Min. of Science • Promotes DI technology • Influences DI standard setting and import & Technology tax; Influences DI procurement process • Lately adopted standard for CAD imaging MII Download at: Gazhoo.com Ministry of Culture • Oversees libraries and other cultural activities • Is involved in national digital library SDPC • High level policy making in DI development • Set up the Center for Optical Memory Project approval/ SETC Enterprise reform Ministry-level bureaus with close ties to the industry Implication to XYZ • Potential partners in technology development • Strategic alliance in shaping the industry State Archive Bureau SBQTS • Potential target for high profile project in preserving China’s cultural heritage • Top down approach • Leverage XYZ’s global expertise • Influences DI procurement process • Influence policy making • Promotes DI in government bodies • Partnership in joint ventures • Devoted 1 million RMB in ‘99 to research on • Partnership in micrographics document preservation and eDocument filing • Partnership in promoting DI • Rallied 100 provincial level bureaus to awareness and adoption convert microfilm to digital for public access • Partnership in standard setting • Issues industry standard • Keep close communication • Influences DI procurement 20
  21. 21. As the influence of the government in China is often transmitted through its formal and informal affiliations, associations are playing a leading role in setting respective industry standards and fostering the DI growth. Roles of Government Affiliations Association Government Sponsor Role and Activities Implication to XYZ Download at: Gazhoo.com Micrographic Association Archives Association State Archive Bureau State Archive Bureau • Enhances technology applications for micrographics and information management • Promotes and commercializes micrographic products and services • Supports and participates in setting micrographics standards • Organizes research activities and develops archiving science • Promotes archiving industry knowledge • Trains and develops archiving professionals National Center for State Development • Develops software and hardware of optical memory industry Optical Memory and Planning • Sets up the optical disk standard Commission • Partnership in raising industry awareness and promoting micrographics adoption • Joint promotion of micrographics applications • Monitor the development of Archives Law • Provide referral for XYZ’s digital products • Provides consulting services National Library • Sets up standard for library industry Ministry of Culture • Created the first national digital library • Promotes the DI concept 21 • Potential influence to XYZ’s digital products
  22. 22. Our buyer value analysis reveals that different market segments have distinct preferences. High market potential exists among large-sized and mid-sized user groups outside the banking industry. Buyer Values by User Unique Product Requirement Users Download at: Gazhoo.com XYZ Opportunity • HV scanners (76ppm and above) • COM • Hybrid scanners • IDW workstations • Network Mid- to large-sized users (3,000-20,000 pages per day) • Government — archive, patent, taxation, customs, law enforcement, statistics, weather bureau, ICAB, land bureau, social security & welfare, state asset admin., personnel dept., real estate management, DMV, PLA • Service — insurance and other financial services, hospitals • Culture — library, newspaper, publishing Small-sized users (individual and minimal usage) • Mid-sized enterprises • Independent departments in large organizations More value Less value 22 Emerging — High potential • Workgroup and low volume scanners (mainly 20ppm and below) • Large quantity of documents to be processed daily (up to 20,000 pages) • Financial capability • Pioneer in DI adoption Existing — High • MV to LV scanners at RMB 150-200k (21-75ppm) • Microfilmers Large-sized users (the banking industry) None — minimal The market is crowded with too many small players, and should NOT be XYZ’s target market Only 15% penetration rate in the banking industry • Efficiency improvement as high priority • Enforcement of regulations • Digitization agenda
  23. 23. In addition, XYZ’s market success depends on further understanding of the buyer decision-making process as well as specific purchasing behaviors and criteria used by actual and potential customers. Buyer Decision-Making Process What Customers Look for When Making Decisions? • Approve purchase plan • Have the final authority • A comprehensive proposal addressing the customer’s questions and concerns Download at: Gazhoo.com CEO/ Head Officer • A good reference from other users Key players with whom XYZ should keep close communication • A solid vendor’s tracking record demonstrating increasing sales and share • Vendor’s price flexibility • A solution-based, enterprise-focused approach IT center/ Functional Dept. • Raise DI requirements; initiate DI project and recommend vendor • Influence the leadership’s decision making • Execute projects – addressing all the required components, with updated software Financial Dept • Allocate fund – providing scalable and reliable support platforms – providing full integration with imaging systems and current operations 23
  24. 24. Furthermore, users are often led by short-term considerations and popular trends, not always by the pursuit of efficiency or optimal performance. Therefore, education is crucial in growing the DI market and promoting demand for higher end products. More on Users Speed Large users do not always use high-speed equipment Users possess very limited knowledge of DI technology Download at: Gazhoo.com Most banks  450 • Not abreast of/or concerned about “Y2K” issue in DI Some banks TARGET USERS • High-speed equipment is costly, yet labor is cheap • Intervals are required between each set of document in processing • Not concerned about the distinction between accessibility and preservation Patent • Machine breaking down won’t interfere with work flow • More focused on present operations, rather than long-term preservation    • Believing digital automatically serves the purposes of accessibility and preservation National Library Quantity to be Processed Examples: • Considerations in digital adoption because it is the trend • Some branches in ICBC use digital cameras provided by Sunyard instead of high speed scanners • National Library uses 40 AV scanners at 20ppm, and plans to purchase up to 100 scanners of the same speed • The Patent Office uses 15 Fujitsu scanners at 30ppm 24
  25. 25. The strategic issue of digital versus micrographics also needs to be given adequate attention. XYZ should ride the “digital” wave, and at the same time defend the growth of the micrographics. Micrographics vs. Digital: A Strategy Based on Customer Buyer Values What To Do? — Strategies and Tactics Be involved in digitization Two important buyer value findings stick out from our study Download at: Gazhoo.com No clear distinction between accessibility and preservation • Understand existing micrographic-based customers’ need for digitization and be actively involved in the course of conversion • Work with customers to retain micrographic as a viable media for document security Digital is the fad Digital leads; micrographic follows • For user without micrographic experience, the best is to sell the idea of hybrid solution; If the customer is not ready, do not push • If users are properly educated, digital may create a space for analogue when issues of preservation emerge • Only when customers feel the need, can promotion be most effective • The lesson is that to promote digital may help micrgraphics eventually. If customers buy digital from XYZ, it is more likely to buy micrographics from XYZ than from competitors Consequences and Implications • Education is the key, but patience is needed • XYZ cannot decide for customers what they need • If customers are not ready for an analogue solution for preservation, pushing them can be counterproductive 25
  26. 26. In the banking industry, DI is now at the important crossroads with competition intensifying in a sustained fashion. XYZ needs to focus more on the concrete characteristics of each of the prevailing opportunities to retain its competitive advantage in the industry. Existing Banking Users Trends Market Potential Implications DI penetration best estimated at around 15% Banking still offers greatest opportunities; XYZ should not take the industry for granted Download at: Gazhoo.com • No set timeframe or immediate plan for digital conversion; yet quick ramp up for HV hybrid once digitization is on the way Industry Dynamics • More sophisticated approach towards DI and more solution focused • Higher demand in customer service • Follow closely digital conversion & network upgrading; network related solution capabilities are critical • Banks are too important to leave to channels. Channels with industry knowledge and solution capability should be sought • Improve service to exceed customer expectations • Avoid sending mixed signals from Components & Media • Decentralized decision making process except for CCB and ICBC (ICBC headquarters currently Customer coordinates and tries to implement a unified DI Dynamics system) • DI integration due to expected network upgrading (e.g., BOC headquarters issued a directive 1998 requiring all branches to suspend micrographic equipment purchase) • Different approach towards different customers • To interact with just Accounting is not enough; talk to IT people and top management • Face-to-face interaction with key accounts is needed Emerging Emerging customers including foreign banks and Customer non-major domestic banks Leverage success in major banks and penetrate emerging customers 26
  27. 27. Meanwhile, as the buyer value analysis strongly indicates, XYZ needs to reach beyond the banking industry if it is to become the leading provider in the China market. Why Should XYZ Expand Customer Base? Because: XYZ’s competitors in the banking industry Download at: Gazhoo.com • Agfa — COM, ADMIS CD51microfilmer, ADMIS SC51 hybrid scanner • Sooner or later, the banking industry will become saturated, and • competition is starting to encroach on XYZ’s share in the banking industry • Canon — COM, 1000 microfilmer, RF550D II/560D II microfilmer In addition: XYZ’s proactive expansion strategy • The entry barrier is high — Customers won’t switch to different vendor’s products easily due to customers’ psychological thinking. XYZ will have difficulty penetrating the non-banking market once it is occupied by competitors Expanding into the low- and mid-volume market is the key • The waiting game is too costly — Successful early entry is the key. Without prompt action, XYZ will face attacks from its competitors in the traditional banking base, yet find the non-banking market entrenched with competition 27
  28. 28. Because many potential mid- to large-sized users have different preferences from the banking industry, XYZ should reinvent its market position to meet the special needs of these additional customers. New Customer Penetration Early entry is the key • Moderate-scale usage can turn into large scale; Low speed can be upgraded to higher speed as the industry matures • As market/product develops, the mid range will experience a faster growth • XYZ can help/educate customers grow into the high end Download at: Gazhoo.com Three basic criteria to identify a customer Importance of document management to business Financial capability Examples of targeted users • Archive • Statistics • Patent • Insurance • Taxation • Library • Customs • Others • Law enforcement IT infrastructure and experience Common customer needs • Immediate processing is not a must; thus high speed is not required even with a large quantity of documents • Easy operations and maintenance are required • Price is an important factor • Tend to use multiple low-speed scanners rather than one or two high-speed scanners • Many users need basic DI education 28 Reinvent customer-based strategies Product Marketing Government Channel
  29. 29. On the competition front, our research has discovered new rivalry, which indicates that the competitive landscape is much more intense than previously believed. Competitive Landscape Competitors Previously Identified New Competitive Landscape Download at: + = Gazhoo.com • Agfa Competitors Identified in the study • B&H • Canon • Minolta • Fujitsu • Avision • Fujitsu • BancTec* • Minolta • Avision • BancTec* • Canon • Panasonic • Agfa • B&H Competition intensifies as the market becomes more attractive and mature. Note: During our research, we have not come across BancTec or its channels. 29 • Panasonic
  30. 30. In the digital domain, XYZ’s leadership in digital is challenged by B&H and Fujitsu — which offer a better price/performance ratio, Avision — with its cost leadership, and Agfa and Canon — with new digital offerings at favorable prices. Competition in Digital Agfa High Volume XYZ Download at: Gazhoo.com Fujitsu 76ppm Mid Volume Fujitsu: • Good quality and service against Taiwanese vendors • Price competitive against high end vendors • Project: Patent Office B&H Canon 41ppm Low Volume AV B&H: • No operational presence, with channel support • Good price/performance ratio, higher channel discount • Office automation • Potential move to HV • Project: Statistics Bureau Avision: • Cost leadership • Channel expertise in library • Relationship sales 21ppm Low High Threats to XYZ Source: XYZ, ABC research & analyses Agfa: • New release of high speed scanner, including hybrid • Special scanner for large sized engineering documents Canon: • New product offering: 50ppm color scanner with software solutions, CD document recorder 30
  31. 31. In micrographics, XYZ’s market share is being eroded by strong competition from Minolta — with a good price/performance ratio; and from Canon — with localized training and services. Competition in Micrographics XYZ High End B&H Mid Range Download at: Gazhoo.com Canon Low End Agfa: • High quality products • Price competitive against XYZ • Solution with customized software: DIM&CAR • Target industry: banking • Weak after-sales service B&H: • High end products for the Banking industry (700 checks/200 ppm for A4) Minolta: • Good price/performance ratio • Easy to operate: MS3000 handles both 16/35mm suitable for the archives • Target industry: non-banking • No system or software support Agfa Minolta Low High Threats to XYZ Source: XYZ, ABC research & analyses Canon: • Localized training and services: national micrographical training center at Beijing Film Machinery Institute • Marketing: jointly publishes Journal of Micrographics with Micrographics Association • Target industry: banking, archive bureaus • Lowering prices to compete with Minolta 31
  32. 32. Agfa, XYZ’s biggest competitor, is well-positioned to offer high quality products for less money and attractive software solutions, aided by a strong push from the channel. Agfa’s Channel Operations Agfa • Agfa’s sole distributor outside of mainland China (HK & Taiwan), yet sells to China through HK office • Changing from rep office to company for better sales and service support • Distributor of 20+ vendors such as B&H, Minolta • Chief rep used to be Director of the Archives Bureau • “Service Bureau” concept in discussion Download at: Gazhoo.com • Sole distributor in China • Strong DI software for banking (DI Management and Computer Aided Retrieval) • Similar market share in ICBC as XYZ • Actively approaching Construction Bank • Sponsor of Micrographics Association meeting Tecwell China System Channel Conflicts Sole distributor in China Sole distributor outside China • Key channel for Canon • Agfa’s digital scanner S51D as one of its product offerings in DI system workflow chart Licose 32 Key Channel Cannon
  33. 33. XYZ’s competitors have adopted different strategies in product, channel management, and marketing. The key differentiating element of importance to XYZ is premium quality, advanced product features, and superior customer service. Overall Strategy Agfa Product • Reasonable price • High quality • Customized software • • • • • • Good price/ performance ratio • Compact products • No presence in China • Price competitive • Value approach to customers • Good quality & service • Scanner (42-45ppm) • Microfilmer (700 checks/200pm for A4) Target Industry (Projects) Channel Rotary camera (160ppm) • Banking(1/2ICBC, • Hybrid (160ppm) • Construction) Scanner (160ppm) • Golden Health (Flatbed) • COM • Processor (best) Marketing China System: 20+ years DIM & CAR from Tecwell Service bureau in discussion Weak after-sales service • Sponsorship for Micrographics Association • DI seminar in Shanghai Download at: Gazhoo.com • Multiple channels • Anxious to develop business with channel with 40-60% discount; no sales quota • Uniscan, the biggest local vendor • Good alliance with SIs/ distributors by discounts • NA Canon • Economical • Document recorder • Banking • Localized training and • Scanner (20-30, 50ppm) • Insurance • Microfilmer (730 checks) • Archives bureau services • Processor, reader,COM • Licose (banking) • JV with BJ Film Machinery Institute, with a national color micrographics training enter • Jointly publish Journal of Micrographics with Micrographics Association Minolta • • • • B&H Fujitsu AV Reasonable price Easy to operate Convenient service No presence in China • Price competitive • Relationship Selling • Scanner (15-85ppm) • Flexible (manual & automatic scanner) • Office automation • Banking • Actively pursuing Census 2000 • Patent office • Co-promo with Archives Bureau • Microfilmer, Microfilm reader and printer (A4) • Microfilm scanner • Scanner • Archives bureau • Beijing Library • PLA • Key distributor: Hanlong • N/A • No system or software support • Scanner (20ppm and flatbed) • Beijing Library • Archive bureau • Essence • SI with expertise in library 33 • Used to advertise on Computer World • Relationship sales
  34. 34. The strong bargaining power of DI channels is derived from their close ties with endusers in target industries. Accordingly, XYZ should increase the number of channel partners to not only minimize its dependence, but also reach out to more target customers. Channel Insights — Expanding Channel Base Is the Key CHANNEL STRENGTH Customer Interface IMPLICATIONS Download at: Gazhoo.com • Extensive knowledge of customer internal dynamics (business process & requirement, budgeting, decision making) • Close connection with customers • System integration, software development, Business or value-added reseller Capabilities • Understanding DI applications & practices • Organizational restructuring to focus on DI Relationship • Relationship selling; industry entrenchment Capabilities • High barriers for the new entrants • Long and exclusive purchasing contracts 34 • Leverage channels’ knowledge to gain industry insights • Receive customer feedback from channel • Develop close business relationship to preempt long-term competitive position • Promote XYZ’s hardware and become the favorable vendor • Difficult to switch channel partners; initial channel selection critical • Determine and select channel capabilities to serve respective purposes
  35. 35. Since most channel operators view their business from a short-term perspective, they tend to concentrate on pursuing primarily immediate projects or opportunities. Therefore, proper operational process and incentive schemes need to be in place to ensure long-term business viability. Channel Insights — Taking Control Is Imperative CHANNEL WEAKNESS Download at: Gazhoo.com Opportunistic Approach Limited Experience Loose Contract IMPLICATIONS • Deal making oriented, rather than business relationship oriented • Not taking customers’ real needs into consideration when pushing sales • Involve channels more in long term relationship building with customers • Incentives to channels for long term behavior • Enhance joint-marketing initiatives • Limited experience in the emerging DI market • Focus on limited industries • Lack of business development capability • Train and coach channels about DI industry evolvement • Provide guidance in target industries and cultivate necessary capabilities • Break exclusive contract with XYZ by carrying competitors’ products • Put their service before XYZ’s products • Expand product portfolio • Enforce contract by close interaction with channels; don’t let channel undermine XYZ • Involve channels in solution provision 35
  36. 36. Our analysis suggests that China DI is an attractive market (US$86 million in the base scenario) for XYZ to commit its investment. To grow its China business successfully and sustain its leadership position over time, however, XYZ must address the five key issues. XYZ’s Strategic Imperatives 1998 Market Size: $ 18M Download at: Gazhoo.com • Decentralized regulatory environment • Emerging market • Customers buyer value migration • Increasing competition KODAK Share 40% Strategic Intent: What is XYZ’s business objective in China? Marketing: Product: KODAK Share What should be XYZ’s offerings? Channel: 2002 Market Size: $ 86M (base scenario) What message should XYZ deliver to the government and the market? How does XYZ reach out to customers through channel management? Implementation: What is the strategic path to the success? ??% 36
  37. 37. Table of Contents What Is the Potential of China’s DI Market? How Does and Will the DI Market Look? What Should XYZ Do To Expand Business? Download at: Gazhoo.com • Growth Drivers and Market Size • Regulatory Environment • Value Proposition • Scenarios • Customer Behaviors • Government Strategy • Competitive Dynamics • Product Strategy • Channel Insights • Marketing Strategy • Channel Strategy • Strategic Path/ Implementation • Risk Management 37
  38. 38. Designing and implementing an effective demand creation strategy involves addressing a series of critical challenges. Above all, it requires top-to-bottom organizational commitment and leadership as well as fundamental changes in XYZ’s current approach to the market. New Perspectives of Demand Creation • Alignment with Strategy — Demand creation principles need to be aligned with XYZ’s business strategy and direction. To ensure sustainable revenue and profitability, strategic decisions should be made in terms of the right industry focus, with whom to partner, what products/solutions to offer and promote, and how to achieve goals with appropriate resource commitment Download at: Gazhoo.com • Focus on Customers — Understanding buyer values and internal capabilities is the key to prioritize opportunities and generate more revenue growth than an ad-hoc approach. XYZ, therefore, should identify the most valuable industry sectors so that it can direct resources and channel towards those specific customers and hence achieve a higher return on the investment • Alliance with Partners — The dynamics of China’s DI market demands XYZ to be on the leading edge in all fronts to ensure success. XYZ needs to leverage its strong partner network to complement its capabilities: gain support and sponsorship from the government, and provide customized solutions with channels • Commitment to Investment — Demand creation is an investment process rather than opportunistic selling. The XYZ senior management has to be prepared to commit people and appropriate financial resources to capture the long-term advantages of this approach 38
  39. 39. Absent a thorough understanding of the evolving market dynamics and execution capability, XYZ’s current DI operation in China lacks a focused business strategy, a systematic operational approach, and a well-articulated marketing message. XYZ Assessment Download at: Gazhoo.com Where XYZ Stands — Key Issues What The Market Wants • Not market and customer focused • World-class brand awareness and proven technology • Lack of market awareness and image recognition • Technical support and strategic advice to government-related projects • Weak product offering: a fine product division with marginal performance improvement • High-quality performance at competitive price • Lack of solution and language capabilities • Solution focused and localization • Limited customer coverage (industry vs. geographic) and resources (marketing, sales) • Provision of Chinese software • Lack of channel management system • Superior customer service • Lack of functional distinction • Strong technical and marketing support to channel partners • Lack of internal communication channels • Media and Components SBU division — potential conflicts in the marketplace 39
  40. 40. The China DI market is an emerging one: customers need education in technology, product qualities, features and operational benefits. Therefore, XYZ should reinvent current operations to be more customer requirements- driven rather than simply product focused. XYZ Strategy Transformation XYZ’s Today Product-Focused XYZ’s Tomorrow Customer-Centric Download at: Gazhoo.com • Primitive stage of sales model • Traditional sales method; transaction driven; opportunistic approach • Seller’s market • Customer dealing with several sales reps from vendor and channel Transformation Drivers • Increasing competition • Market evolution • Growth need and management requirement • Increasing IT sophistication and network requirement • Opportunity to leverage limited resource and valuable relationship • Advanced sales model • Focus on long-term business opportunity • Customer solution oriented • Customer relationship building and cultivation • Account planning and management • Channel effectiveness 40
  41. 41. XYZ’s demand creation strategy must address explicitly evolving buyer values. By better prioritizing opportunities, harnessing partners’ networks, addressing specific customer needs, and engaging in creative, pro-active marketing campaigns, XYZ can leverage its strong technological position for maximum advantage. Demand Creation Framework Design XYZ’s Conceptual Strategy INPUTS Develop Detailed Strategies for Market Creation Plot Strategic Path Download at: Gazhoo.com Profile of Market & Buyer Value Strategic Intent & Value Proposition • Unevenly distributed & yet to be exploited • Unregulated market & growth impact from the regulations • Very primitive usage of DI products • Distinctive buyer value among different industry sectors • Increasing competition vying for the market share across product groups • XYZ’s desired market image • Value proposition to address target customer needs • Quick & sustainable success through opportunity prioritization • Support and capability development to integrate into broader XYZ community Government Strategy • Short-term PR & marketing to drive sales • Long-term strategic alliance and strong network relations with key players • • • • • • Implementation Plan • Marketing and PR program (objective, Product Strategy timelines, Leadership enhancement in HV & investment and micrographics; aggressive expansion into MV expected results) sector; entry to LV to create future market • Key process maps Marketing Strategy (e.g., Account Transition from “Push” to “Pull” identification, Consistent message and desired image via product aggressive education & marketing programs introduction) Coordinated efforts and multi-level towards • Resource gov’t, channel, & customer; track results requirement • Organizational Channel Strategy structure (out-ofRobust channel operational model in scope) customer identification, marketing, selling Strict selection & performance measure Risk Management Competitive reactions; Investment commitment; Coordination with XYZ China 41
  42. 42. To drive demand creation and market expansion initiatives, XYZ needs to align specific strategy components with its overall objective — to grow its DI business and ensure sustainable revenue increases. XYZ’s Strategic Intent Government • Actively involved in shaping and influencing DI landscape • ST concrete opportunities and LT strategic relationship building Download at: Gazhoo.com Channel • Strategic alignment • Strict operational model (selection criteria, performance measure) • Effective co-marketing efforts OBJECTIVE Grow DI Business & Ensure Sustainable Revenue Increases Marketing • Brand equity & technology leader • Buyer-value segmentation • Generate demand by aligning customer needs 42 Product • Enhance successful product sectors (HV & Mircrographics) • Aggressively attack at MV; and enter LV
  43. 43. The Value Proposition is a critical message to the market place. XYZ’s Value Proposition must articulate a set of values — operationally and conceptually — that reflects the needs and priorities of the Chinese government at the macro level as well as XYZ’s key customers at the micro level. Value Proposition FOR THE CHINESE GOVERNMENT XYZ will become an active contributor to • Assist Chinese government’s IT development agenda • Promote and protect China’s historical and cultural traditions • Respond to Chinese government’s desire to attract FDI • Demonstrate XYZ’s commitment as a devoted corporate citizen Download at: Gazhoo.com China’s digital economy development and cultural heritage preservation through its long-term investment in the Chinese document imaging industry. FOR CUSTOMERS AND PARTNERS • Provide advanced and proven technologies • Create strong brand name and support channel sales • Address solution and localization capabilities by partnering with channel XYZ will provide world-class technologies by leveraging its global experience, and deliver customized solutions by forming dynamic local strategic partnerships. 43
  44. 44. However, as the market forms and matures, buyer values will evolve. The key strategy for XYZ is to shape the market early and influence the value migration to benefit its desired positioning in the marketplace. Buyer Value Migration Perceived Value by Customers XYZ must secure customer base early and capture opportunities at the DI introduction stage Product Customer Indifference Curve Download at: Gazhoo.com • High value to customers • Stable value • Limited • Stable competition competition • High growth & profitability for • Stable margins vendors Cost Small-Size Users • Highly price sensitive • Low product requirements Life Cycle Mid-Large Users • Less price sensitive • Some requirement for quality & solution Large Users (Banks) • High product/solution requirement • High quality/service • Higher value to customers • Intense competition • Low(er) profits Introduction Growth XYZ must stimulate target customers’ desire for premium products and induce buyer value migration to its advantage Mature 44 Benefits
  45. 45. The core element of XYZ’s government strategy is to take a proactive approach to shape and influence China’s DI landscape. Government Strategy Rationale What are XYZ’s opportunities in this environment? Activities • Constant contact at different levels • Effective marketing efforts • Systematic message to the market • Commercial diplomacy Consequently, not only can XYZ have a significant voice in China’s DI development, but it also may capture “big bang” opportunities along the way Benefits • Help raise DI awareness level • Indoctrinate the necessity of DI into the government structure • Help establish a national-level DI management system as part of the digital economy “BIG BANG” Download at: Gazhoo.com Form strategic alliances with key government players as government involvement is vital in DI development Fluid, decentralized, fragmented and unregulated environment makes interaction with the government a difficult task, but at the same time, it creates the possibility for XYZ to be involved in forming the rules of game 45 • Specific project related • Not yet on the horizon • Can erupt any time
  46. 46. Given that the government does not function as a unitary body, XYZ should form a partnership with selected key players and adopt a multidimensional strategy in dealing with the complexity and fluidity of the regulatory environment. Government Strategy XYZ should closely monitor the following key players’ role development Government strategy cannot be …. Accordingly, XYZ should adopt a strategy that is both: Download at: Gazhoo.com Government bodies • Ministry of Science and Technology Dept. of High and New Technology • Ministry of Information Industry Dept. of Science and Technology Dept. of Electronic Information Products Management • Ministry of Culture Dept. of Library • State Development and Planning Commission Dept. of High and New Technology Development • State Economic and Trade Commission Bureau of Machine Building • The State Archive Bureau • The State Bureau of Quality and Technological Supervision Government affiliated organizations • National library/Library Association • National Engineering Research Center for Optical Memory • Micrographic Association • Archive Association • One dimension • Uni-level • Focused on one target • Once for all Government strategy should be …. • Multi-dimensional — conceptual, practical, educational, relational, etc. • Multi-level — from DI specific personnel to ministers • Focused on multiple targets — no particular body plays a decisive role • Continuous — both short-term and long-term 46 Long-term and conceptual/ Relationbased AND Short-term and specific/ Project-based
  47. 47. XYZ must be able to shape the direction and thrust of change with respect to future policy-making by relying on a strategy of consistent and constant engagement. The goal is to get Chinese leaders to share XYZ’s DI vision for China. Long-Term Government Strategies Concepts and Relations Focused Illustration Download at: Gazhoo.com Guiding Principles • Conceptual, educational, relation-based Objectives • Communicate XYZ’s Value Proposition: technological leadership, partnership, investment commitment, and corporate citizenship • Promote the whole DI concept • Educate the government about the benefits of DI • State Council, minister level Level of Contact Activities • Seminars (on digital technology development, DI technology evolution), training classes, displays • Advisory Board • Marketing communications (brochures on DI technology, not product focused) • PR (high-level official visits and banquets) 47 Lay foundation for future sustainable business opportunities A concept, rather than specific project proposals, can attract the attention of high government officials. For example, IBM promoted the concept of “digital library” and attracted a lot of attention XYZ global senior executives meeting with Zhu Rongji or ministers Cooperate with the Department of Training in the State Economic and Trade Commission to promote DI technology and XYZ’s expertise
  48. 48. XYZ also must closely monitor and capture business opportunities arising from inside government entities by adopting a short-term strategy which is concrete and action-based. The goal here is to demonstrate the value that XYZ can bring to China through its technology and business approach. Short-Term Government Strategies Issues and Businesses Focused Download at: Gazhoo.com Guiding Principles • Practical, concrete, actionable, project-based Objectives Level of Contact Activities Illustration • Raise government’s awareness of XYZ’s expertise in providing DI solutions • Increase XYZ’s visibility and opportunity to get government contracts • Identify potential critical entry/access point • Mid-ranking officials, IT personnel • Free, showcase installation • Leverage XYZ’s expertise in the global DI market, e.g. XYZ’s involvement in the US 2000 and the UK 2001census projects — “XYZ is counting the world” • Watch closely the government’s particular needs and propose adequate solutions 48 Pursue immediate business opportunities Prepare some case study materials on its successful DI implementation in the government sector in other nations or regions in Asia so that the Chinese government can recognize XYZ’s capability XYZ regional officials keeping ties with department heads • Invite key officials responsible for the census 2000 to visit U.S. or U.K. census site • Monitor government sponsored projects. For example, a “Golden Library” project is now in formation
  49. 49. An effective government strategy is carried out most easily through high-profile projects in cooperation with government affiliated bodies, large multinational IT companies and strong domestic system integrators. Good examples would be the Goldens Projects and the National Census. Strategy Imbedded in Projects Multinational IT Companies • • • • Credibility Strong solution capability Advanced technology Example — IBM (its digital library solution with CNPC, Qinghua, and Fudan may need scanning facilities) Alliance with the government is more viable when related to high-profile projects. Download at: Gazhoo.com XYZ’s Strategic Partner Government Related Project • Brings concrete benefits to the government and China • Attracts media attention • Demonstrates XYZ’s capability • Creates credentials that can be translated into future opportunities Domestic System Integrators • New application • Advantage of getting government contracts • Industry knowledge • Examples — Beijing Orient Founder Science and Technology Development Co., Ltd. Shenzhen SEG Co., Ltd. Software Branch, Xian FutureFortress Electronics Co., Ltd., Qinghua Tongfang Optical Disc Company (See Appendix) XYZ’s Strategic Partner Government Affiliated Association • Policy influence • Standard setting • Business opportunities • Examples — National Center of Optical Memory, Archive Association, Micrographic Association, etc. 49
  50. 50. Following our proposal that XYZ should expand its customer base, we believe that the core of its new product strategy should be to strengthen high end product offerings, but also rapidly expand into the low-end to mid-range products. Product Expansion Rationale Key customer findings revisited Customer base expansion can be achieved by introducing low-end to mid-range products, because when we look beyond the banking industry we find that large users do not necessarily use high-speed products: Benefits of entering the lowend to mid-range products Download at: Gazhoo.com • High market potentials exist in large- and middle-sized user groups outside the banking industry • These potential users are more price sensitive than the banking industry and do not put a high value on fast speed • Banks only can’t offer sustainable LT growth for XYZ • XYZ can’t afford to wait and let the opportunities outside the banking industry slip Expanding customer base is critical Products to be introduced immediately should be in the range of : 21-75ppm scanners 50 • Catch users that otherwise would not become XYZ’s customers • Increase XYZ’s market share • Raise awareness of XYZ brand • Make customers difficult to switch vendors; build switching barrier • Have the opportunity to help the customer to upgrade and grow Possibilities for future product introduction Our study also found an increasing demand for large-sized scanners used in engineering, architecture, and CAD application. This sector does not offer a significant market yet, but it is expected to grow to such a stage in the next two to three years
  51. 51. The relevance of this strategy is further supported by a segmentation of existing and targeted customers based on their buyer values related to different products. Product Attractiveness Big Banks High End Mid Range Segment C Big Usage with Limited Financial Capability Download at: Gazhoo.com Segment A PRODUCT Segment B Big Usage with High Financial Capability Non-major Banks Statistics, Archives Bureau, libraries, law enforcement, Customs, Taxation, ICAB, Patent, real estate management, Weather Bureau, Land Bureau, social security and welfare, State Asset Administration, personnel depts. DMV, insurance companies PLA, newspapers, publishing companies, hospitals Low End No Demand Low Demand Medium Demand 51 High Demand
  52. 52. At the same time, when expanding into low- to mid-end products, XYZ also should maintain its leadership position in the high end and micrographics segments by realigning its products with specific customer needs. Product Portfolio Strategy High Leverage and Develop MICROGRAPHICS: Digital penetration into the low-to mid-volume segments may create a foothold for micrographics later on. However, XYZ is likely to face competition from Minolta and other vendors. It needs to leverage its expertise in the banking industry to capture opportunities in the non-banking segments High Volume Offerings Download at: Gazhoo.com XYZ’s Capability Micrograghics Maintain and Enhance HIGH VOLUME: XYZ should closely monitor competitors’ encroachment on the banking industry, adjust its product strategies according to the buyer value migration in the banking industry, and enhance customer service and solution capabilities Mid Volume Offerings Low Volume Offerings Low Low Industry Growth High Reach and Expand MID VOLUME: With moderate effort, XYZ can enter this segment early, watching for opportunities in the non-major banks and large users with financial capabilities Enter and Grow LOW VOLUME: This segment represents the most rapidly growing sector with the greatest potential. XYZ’s product strategy should be to enter aggressively and help customers grow to a higher level 52
  53. 53. More importantly, mid-range and low-end products need to be distinctively differentiated to avoid cannibalization of XYZ’s existing high-volume products and to gain advantage over competitors’ similar products. This can be achieved through XYZ-branded product features, quality and customer service. Differentiation Strategy External Differentiation Internal Differentiation Processing Capacity Feature Solution Enhancement Requirement Customer Service Quality Features Price/ Performance Download at: Gazhoo.com Significantly lower than high-volume Mid- (e.g., at 40-50 Range ppm) LowEnd Significantly lower than mid-range (e.g., at 20-30 ppm) Moderately easy to operate without losing functions Simple functionality and thus simple operation Medium level customization Prepackaged or standard solutions XYZchannel jointly provided; different component of service Superior Channel provided basic service; different component of service 53 quality/ quality leader Color scanning and XYZ solution “package” Customer Service Super delivery of Cost service effectiveness (response high time, quality performance of services, skillful technicians)
  54. 54. The implementation of the product strategy should follow a predefined time line and integrate customers’ preferences and needs with XYZ’s strategic plan. Integration of Product Strategy with Customers’ Requirements Media strategy • Work closely with the accounting departments in the banking industry to keep micrographics as the principal means of document storage • Most of the new users in the non-banking segment probably will not opt for micrographics in the first place. Media can approach them when their front end needs are met and a back end storage problem emerges Realigning products with customer needs requires XYZ to consider the following issues: Download at: Gazhoo.com  2000 • Introducing MV  2001 Reconfiguration — reconfiguring products based on Chinese customers’ needs (e.g. jukeboxes with one reader and one writer instead of two readers, and scanners with preinstalled SCSI card Paper handling — improving high-speed scanners’ paper handling capability (e.g. the national library once test-used XYZ’s high-volume scanner and found that the scanner did not handle papers of irregular sizes and uneven edges well, and the machine was sensitive to dust from disassembled old books) 2002 Introducing LV Retain competitiveness in HV all the way Digital strategy Localization — introducing Chinese software • 1999 Product-line simplification — offering 1500, 2500, 3500 and 9500 scanners to cover wider range of customers • Micrographic Takeoff • • Take advantage of the digital “fad”/go with the trend • Meet with customers’ needs of solving the problem of front end operation • Create space for Media 54
  55. 55. The new product expansion strategy will enable XYZ to achieve a CAGR of 56.3% in sales revenue. The total sales of US$ 43M sales in 2002 will be composed of approximately US$ 30M from high end products and about US$ 13M from new products. XYZ Revenue vs. Market Size 1998 1999 2000 2001 2002 CAGR 18.0 25.9 39.3 59.3 86.0 47.9% XYZ Share 40% 40% 40% 45% 50% XYZ Sales 7.2 10.4 15.7 26.7 43.0 44% 52% 70% 61% 11.1 16.9 25.5 37.0 XYZ Share 85% 80% 80% 80% XYZ Sales 9.5 13.5 20.4 29.6 46.3% XYZ Sales 0.9 2.2 6.3 13.4 146.8% Download at: Gazhoo.com Overall: Market Size XYZ Annual GR 56.3% High End: Market Size 49.3% New Products: 55
  56. 56. In the long run, XYZ needs to consider offering XYZ branded local products, either through OEM or joint venture. This option can enable XYZ to achieve cost competitiveness and product localization capabilities. This option, however, also is embedded with many potential risks. Evaluation of Local Manufacturing Virtues Risks Download at: Gazhoo.com • Raise profile of XYZ’s DI efforts in China • High risk if the Chinese DI market does not grow rapidly • Raise XYZ’s corporate image by making its products “Chinese” • The deterioration of Sino-US relations • Strengthen XYZ’s relationship with the Chinese government; Gain government support in winning projects • China’s entry into the WTO which makes import duty a less significant factor • Utilize partner’s network; take advantage of local talent • Danger of intellectual property infringement • Reduce cost (transportation, import duty, labor) in the long run • Reliance on domestic partner and loss of control • Hedge against currency devaluation on the condition of high local contents • Danger of products being perceived as “second class” because manufactured in China • Gain advantage over competitors • Possibility of compromising quality • Be able to use the Chinese manufacturing facility as a component of XYZ’s global production strategy 56
  57. 57. If it decides to make a strategic move into manufacturing, XYZ should build progressively from OEM, licensing or simple assembly to full-scale manufacturing facilities, so that it can gain experience and knowledge of its partners to carry out a successful business venture. A Strategic Option to Explore OEM, Licensing or Simple Assembly Parts/ Full Product Joint Venture Download at: Gazhoo.com Feasibility Study • Macro-economic environment (WTO, Sino-US relations, Chinese economic development) • Market study and competitive analysis • Business case development Capabilities & Capacity Assessment “Discovery Phase” Final Selection & Negotiation Example of a Possible Partner Qinghua Tongfang Optical Disc Co., Ltd. • Government affiliation • Strong software development capability • Products include CD-ROM Drive, CD-R/CD-RW, CD tower, jukebox • Manufacturing facility in Jiujiang, Jiangxi, with 800 employees 57 Set up & Operations
  58. 58. To carry out the proposed product expansion and create additional demand, it is imperative to have a lively marketing strategy conveying XYZ’s value proposition and messages to the different segments. Customer-valued based positioning and a “pull” strategy transformation need to be stressed and deployed. Marketing Strategy Alignment • Market segmentation and prioritization is derived from distinctive buyer values and XYZ’s internal capabilities Download at: Gazhoo.com • The value-based customer segmentation should be reflected in the marketing strategy • In penetrating the emerging China DI market, the focus of the marketing strategy should be on generating demand through XYZ’s value proposition, strong brand image, clear product positioning, market education, and aggressive PR • This approach requires that XYZ shift from a “push” to a “pull” strategy, which consists of: – A multi-level approach that targets the government, customers and channels – A concerted marketing approach between XYZ and channels in interacting with the industries, key account headquarters, and specific accounts 58
  59. 59. Marketing activities should capture opportunities embedded in the dynamic relationship between customer segments and product groups. This can be accomplished by offering tailored packaged solutions to the target segments. Transferring Buyer Values To Product Segments Buyer values Products • Turn-key solution • Customer training • After sale service • Fast speed • Brand conscious • High quality needs Customers Download at: Gazhoo.com • Price/performance ratio • Easy to operate • Product reliability • Less brand conscious • Price sensitive • No speed requirement • Easy to operate • Not brand conscious High Volume (+76ppm) Marketing links buyer values to products Segment A (Major banks) Segment B Mid Volume (41-75ppm) (Users with financial capability) Segment C Low Volume (21-40ppm) (Users with limited financial capability) 59 User Migration XYZ helps customers grow to a higher level
  60. 60. XYZ’s new marketing strategy should be based on XYZ’s segment priorities. Using the four core marketing levers of product, price, promotion and distribution, XYZ can further strengthen its overall market position. Segment Prioritization Product Attractiveness (size, growth) LOW Price • Product offerings • Solution focus • Service offering HIGH • Pricing strategies • Discounts to Channel Download at: Gazhoo.com Segment C Segment A Segment B Segment C Segment A Segment B XYZ’s Ability To Capture Market First priority Second priority HIGH Third priority Promotion • Advertising • Seminar • Selling (New account development, direct mailing) • Corporate image 60 Distribution • Channel partnership • System integration & software development • Training and incentive
  61. 61. Distinctive positioning for each target segment should be in place before making a tactical plan which outlines the key programs and allocates segment specific resources to each marketing lever as identified below. Segment Marketing Strategies and Tactics Positioning Marketing Strategy Tactics Download at: Gazhoo.com Product Price Promotion • Company wide brand advertising through IT print and trade journals • Loyalty programs • Emphasis on HQs Distribution • World class technology • Customized solution Segment • Entrenched A leadership • Premium products and brand image • High quality products Segment • Good service B • Good price/ performance ratio • Scalability & reliability • Skimming strategy • Establish close XYZ-channelcustomer relation • Account plan • Penetrating strategy • Brand extension: leverage XYZ’s brand image in Segment A • Improved service • Premium quality pricing • Provide strong strategy solution capability • Customer training • Highest level of customer service • Introduction of • Moderate 2500 pricing • Provide some quality (e.g., solution capability 10-20% • Emphasize higher than reliability competitors) • Moderate customer service level • Strategic partnership with selected channels • For key accounts, XYZ leads and channels follow • Easy to operate Segment • Cost effective C • Penetrating strategy • Establish awareness • Introduction of 1500 • Low pricing • Product advertising • Grow number of • Standard product/ strategy (e.g., through mass print channels 5-10% higher • Road shows • Partnership with simplification/ than • Creative product names popular vendors stripped-down competitors) such as Uniscan version • Advertising in trade • Penetrate new journals channels • Direct mail with case • Delegate account studies specific marketing • Seminars • Publicize XYZ’s activities to overseas expertise in DI channels • Creative product names
  62. 62. To successfully implement the segment-based marketing strategy, XYZ needs to shift from a “push’ to a “pull” strategy, which is composed of a multilevel and concerted approach. The key element here is simultaneity, that is, making certain activities are well synchronized and coordinated. A Multilevel Marketing Approach Government Channel Partnership/image building XYZ facing the market directly Customer Market education Partnership Download at: Gazhoo.com • Seminars and training classes (on DI concept/ benefit), displays • Brochures on DI technology development • PR (high-level official visits and banquets) • Advisory Board • Publicize XYZ’s global expertise in DI • Displays/discussions • Free installation • Adopt different ad media to different target industries • Special report and educational articles • Direct mailing (case studies, success stories) • Demo centers • Technical training • Marketing training • Publicize XYZ’s strong DI capabilities • Incentives • Offer co-marketing opportunities • XYZ brand name enhancement to attract channels A Concerted Approach ILLUSTRATIVE XYZ and channel joint marketing Important Overall Marketing Initiatives Industry — 70:30 • XYZ leads and channel follows • If XYZ does not participate, channel would only promote itself Key account headquarters — 50:50 Individual accounts — 20:80 XYZ has face-to-face interaction with headquarters of key accounts XYZ delegates account specific marketing activities to channels 62 • Aggressive marketing — Increase % of marketing spending • Long-term investment • Consider lowering channels margin to make fund available for marketing • Avoid sending conflicting messages to the market • Promote the concept of DI rather than standalone digital or media • Combine component and media marketing activities by establishing single point of contact
  63. 63. To maximize the channels’ contribution to XYZ’s business expansion, XYZ needs to align better with its channels at both strategic as well as operational levels. Channel Strategy Channel Management Objectives Download at: Gazhoo.com • Help XYZ reach the target market • Complement XYZ’s solution & SI capabilities Channel Structure Strategic Alignment Operational Alignment • How to make channels strategic partners with XYZ? • What’s the best channel management approach? • How to optimize the operational process with channels? 63
  64. 64. Strategic alignment will enhance the partnership(s) and build synergy between XYZ and its channels. The KVAD deployment is critical, and KVAD should be recognized as an extended part of XYZ’s sales organization. Strategic Alignment Share Business Objectives • • • • Channels’ commitments to DI business Long-term business perspectives vs. opportunistic approach Channels’ experience and connections in XYZ’s target industries Channels’ solution/integration capability to support XYZ’s objective • • • • • Technological and marketing support to channels Continuous communications Retain optimal number of channels Healthy competition Contract enforcement Download at: Gazhoo.com Cultivate Loyalty & Restrain Bargaining Power Strategic Alignment Stimulate Business Development Instill Common Technological Understanding Develop Channel Capability for New Products • Incentives to encourage new account acquisition and new industry penetration (increase discount rate) • Co-develop new applications by cost-sharing • Regular training and workshops • Exchange and share industry knowledge and customer information • • • • Resolve conflicts with competitive products carried by existing channels Develop solution and service capability for new products Select and partner with new channels, if necessary Cultivate channels’ capability of customer service 64
  65. 65. XYZ should apply a more flexible and adjustable incentive system to encourage channels to focus on long-term business development and strategic customer selling, rather than adopt an opportunistic approach. The illustrated discount schedule and rewards ensure the desired channel behaviors are being promoted. Incentive Schemes — Motivation for Business Development Performance-Based Discount Schedule (Example) Download at: Gazhoo.com Discount schedule should vary by industry (new or existing, banking or government, etc) Discount Rate 40% Specific Rewards (Examples) KVAD (with quota requirement) 30% 25% PRman • Additional discount the next year when channel exceeding the quota by 10% • 10% more discount on project wins in a new industry • 5% more discount in penetrating a new account • Additional discount for project in developing a new application KAIR (without quota requirement) $0.8M $2M • KAIR upgrade to KVAD after 3 consecutive years of performance improvement (e.g., exceeding quota, new industry penetration) Realized Sales • Extra marketing budget from XYZ with channels’ active participation in marketing (e.g., co-marketing, % marketing spending) XYZ should develop a set of criteria to evaluate channel performance, and determine the discount schedule case by case and based on their last year’s performance. 65
  66. 66. To develop an effective distribution network, XYZ should pursue a systematic approach for channel management, from selection to measurement. The essence of this approach is to ensure XYZ’s objectives and priorities to be carried out relentlessly through channels. Channel Selection Criteria and Process Determine Target Industry & Geographical Focus • • • • Select & Recruit KVADs Channel Performance Tracking/Measure Select & Recruit KAIRs with KVADs Illustrative Examples • Number of new customers per year Download at: Gazhoo.com Buyer value DI requirements Growth prospect XYZ capabilities Trade-offs • Sales and growth per year • New industries penetrated into • Shared business objectives • Channel management experience • Financial strength • Industry intelligence • Industry relationship • Geographical coverage • Resource commitment • Close tie with target customers • Account management capabilities • Experience and relationship in industry • Geographical coverage • SI & solution capabilities • Resource commitment • Relationship vs business capability (SI, solution) • Business scale vs dedication to DI 66 • Participation in marketing – Spending – # of seminars, road shows, etc – Co-marketing • Organizational dedication to DI • Management of KAIRs (applicable to KVADs) – Overall support to KAIRs – Recruiting – Marketing – Conflict resolution
  67. 67. On a regular basis, XYZ needs to enforce operational discipline within and among channel partners. Both KVADs and KAIRs are urged to take greater responsibilities at each stage of the sales and marketing process; XYZ managers need to monitor their performance frequently in this regard. Operational Alignment Training & Communications IndustryLevel Marketing Identify Key Account-Level Accounts Promotion Sales Execution Customer Service Download at: Gazhoo.com Key Tasks • Share business • Joint seminar to • Target customer • Identify decision • Organize sales • Post-sales objectives • Provide technical and market knowledge • Develop industry • specific skills XYZ Role • Ensure consistent message conveyed to the market demonstrate list global industry • Understand experience and buyer values and business needs • capabilities Provide industry • Potential solutions and revenue streams • best practice maker and decision-making • process Account-focused • solution Proposal and presentation force training Track selling • Regular contract progress maintenance Implementation • Customer feedback • Tracking usage and upgrade Input of XYZ global successful cases + technical & industry skills + support + XYZ plan and directions + conflict resolution Participants XYZ KVAD KAIR Participation Level High  Low 67 • Technical support • Feedback to product manager
  68. 68. Over the long term, XYZ should encourage KVADs and KAIRs to adopt an account management system. A well-developed account plan can help XYZ and channels focus on key opportunities and retain key customers (especially in the banking industry), thus guaranteeing steady revenue inflows. Account Planning Provide accurate information concerning revenue, market position, strategy and growth plan, IT budget and plan, buyer values, etc. ACCOUNT PLAN Bank of China Section I Account Description Channel Team Info Design channel team; match sales to customer reps to cover sales activities and relationship building; assign responsibilities Section IV Channel Team Information Section VI Action Plan & Review Appendix 68 Appendix Based on market position, lay out a realistic, qualified opportunity map, indicating time, revenue, product, and competitors Section III Opportunities Section VI Opportunities Goals (XYZ/KVAD) Section IV State objectives with the account; assess XYZ/KVAD capabilities and develop strategies in achieving sales relationship goals Section II Section III XYZ & KVAD Goals Account Description Section II Download at: Gazhoo.com Section I Action Plan & Review Design activities and proposed high-level meetings; provide templates for each activity record; quarterly review account performance Appendix Record information source (account and industry specific); provide other useful information such as customer installed base, etc.
  69. 69. Based on the buyer values associated with the target segments, XYZ should apply different tactics to develop and manage corresponding channels. This may create some implementation challenges, but it is critical for business success. Segment-Based Channel Management Required Channel Capabilities Performance Measure & Rewards • Very strong solution capability • Strong industry relationship and knowledge • New banks or new applications, account planning • Customer satisfaction in terms of training and service improvement by channels • Discount, co-marketing/coresearch support • Established relationship in target sectors • Strong solution capability • Service capability • Organizational dedications and marketing/education • New penetrated sectors • Account planning skills • Training, support in infrastructure and bonus Managing Channel Download at: Gazhoo.com Segment A Existing Banking Users Segment B Other Users with Financial Capability • Extensive customer networkSegment C industry or geography Other Users with Limited • Standardized service capability Financial Capabilities • Selling skills • Growth of revenue and # of customers/industries • Customer satisfaction in service • Discount, status upgrade 69 • Contract enforcement by increasing # of channels • Offer new products • Close communication • Take major role in marketing • Strategic partnership to develop solutions • Acquire shares of channels • Timely and regular communications • Involve in channel marketing activities • Encourage healthy competition among channels • Standardized marketing materials and procedures by XYZ with channel taking the main responsibility
  70. 70. The evolution of the channel structure will be driven by the volume of business and product offerings. In an emerging market, a one-tier structure presents its merits in simple operational management and market knowledge development. Channel Structure Debate: One-Tier Pros Cons Download at: Gazhoo.com • Effective operational model in an emerging market • More XYZ sales and channel resource required • Closer to the market and end customers; development of market and industry knowledge • Strong internal capabilities required (channel management might not be the core competency) • Easy to develop channel relationship and understand its capabilities; foundation for the two-tier migration • Requirement for in-depth industry knowledge specific to the market • More direct and simple communication chain • Possible excessive competition among channels • Limited reach of customer base • More cost effective (reduced discount) and higher margin • Contract enforcement • Less dependent on any single channel, thus lower overall risk 70
  71. 71. The recently adopted global KVAD-KAIR structure enables XYZ to reach a wider customer base with the introduction of the MV and LV products; yet XYZ should further examine and experiment with the two-tier structure in the Chinese setting, especially in the major banks segment. Channel Structure Debate: Two-Tier Pros Cons Download at: Gazhoo.com • Resource concentration on KVAD development • Focus on core capability development (product, solutions, marketing, etc) • Viable model for low-volume product penetration (less technical support needed) • Fewer conflicts among KAIRs due to KVAD’s management • Lack of loyalty at KAIR level • Customer confusion caused by mismanagement (KVAD, KAIR approaching the same customer) • Indirect communication with KAIR, who is the interface of the customer • Margin erosion from two-tier discount • Tendency for inconsistency in marketing message • Extensive customer reach • Minimized XYZ’s control in KAIR and customers • Sales quota commitment from KVAD • Loose contract enforcement • Incentive for KAIR striving to be KVAD • Highly dependent on KVAD 71
  72. 72. In summary, to enhance revenue performance, XYZ should take two strategic steps: product introduction and customer expansion. Only with such parallel efforts, can XYZ overcome current DI development hurdles and create a sustainable lead position in the marketplace. Achieving Demand Creation Differentiation Low-end XYZ share Introduce new products 1998 DI market US$ 18 Mn Channel Customer Expand customer base Government Strategic Thrusts Medium-range High-end Download at: Gazhoo.com 2002 DI market US $86 Mn XYZ share Marketing 72 HURDLES TO OVERCOME • No strong market pull • Simple product portfolio • Low DI awareness • Limited customer base • Technology limitation (e.g. OCR) • Weak channel capabilities
  73. 73. Our proposed strategy implementation plan is designed to mobilize XYZ’s people and financial resources in the four critical areas identified in our assessment of the market and XYZ’s current position. Overall: corporate image and market education Implementation Master Plan Segment A Marketing Strategy Download at: Gazhoo.com Objectives: • Build XYZ brand name • Grow the China DI market Brand awareness building Brand awareness building • Conveying XYZ’s value proposition • Project-based initiatives Government Strategy Segment A 73 • Quality product • Meet customer requirement • Cost effectiveness • Standard product • Strengthen relations with channels • Account management Segment B • Increase number of channel • Training of channels Segment C Channel Strategy Segment B Segment A Fulfill Demand (Internal capabilities) • Premium product/service, • Solution focused Segment C Product Strategy Objectives: • Build internal infrastructure • Retain XYZ’s market leadership Segment B Segment C Create Demand (Market facing) Strategy Implementation Plan XYZ’s continuous commitment to banking • Increase number of channels • Expand geographic coverage
  74. 74. Based on the market development stage and XYZ’s position, we believe that the centerpiece should be the marketing piece. The major purpose of the overall marketing program is to demonstrably strengthen XYZ’s corporate image and enhance market awareness of its major offerings. Marketing Strategy Implementation: Corporate Image and Market Awareness Program Type Brochures (DI technologyfocused and functionfocused respectively) and Newsletters Seminars to Customer Journal Articles Objective Responsibility Resource Requirement Measurement Download at: Gazhoo.com • Develop high level brochure on DI applications including flow chart to educate the senior decision makers • Produce XYZ product brochures for technical people • Develop newsletters with updates on products and case studies to different segments • Marketing team with assistance from BIS corporate MarCom group • Marketing Team • Global experience • Ad agency • Increased brand awareness • Follow-on Sales • Educate customers on XYZ’s offerings • Marketing Team • Marketing Team • KVAD support • Increased brand awareness • A series of journal articles to educate the potential customers on DI technology • Increase visibility of XYZ DI technology • Marketing team with assistance from BIS corporate MarCom group • Global experience • Newspaper/IT journals • Ad agency • Increased brand awareness 74 Priority High High- Medium Medium
  75. 75. As part of its overall marketing initiatives, XYZ also should have specific, focused programs that cater to the different segments of the evolving market. In particular, XYZ needs to demonstrate its continuous commitment to the banking sector and to build awareness in the mid-range and low-end segments. Marketing Strategy Implementation: Segment Focused Program Type Segment A: • Ad on Finance/ Banking Journals Objective Responsibility Resource Requirement Measurement Download at: Gazhoo.com Priority • Ad on finance journals to reinforce its brand image • Marketing team • Ad agency • Channel inputs • Increased brand awareness • Customer satisfaction survey High Segment B: • Develop Product Brand Name • Pricing • Ad on IT/Trade Journals • Prepare for the new product launch of 2500 (media briefing, news release)) • Ad on both IT and trade journals to build awareness • Marketing team • Product management support from HQ or Asia/Pac • Ad agency • KAIR/KVAD • Product brand name recognition and adoption • # of new customers High Segment C: • Develop Product Brand Name • Pricing • Ad on IT Journals • Prepare for the launch of 1500 (media briefing, news release) • Ad on popular IT journals to expand reach • Marketing team • Product management support from HQ or Asia/Pac • Ad agency KAIR/KVAD • Product brand name recognition and adoption • # of new customers Medium 75
  76. 76. The core element of the government strategy execution is the creation of a strategic partnership with several relevant government entities. Operationally, while this effort is aimed at long term positioning, it requires identifying several specific projectbased initiatives in the short term to build ample momentum. Government Strategy Implementation Short Term Program Type Responsibility Resource Requirement Measurement Download at: Gazhoo.com Free Installation Identify Gov’t Sponsored Projects Commercial Diplomacy Long Term Objective Advisory Board Seminar to Government Priority • Act as gov’t/ industry critical access point • Marketing team • A/P gov’t relations team • Big PR effort • BIS Senior Management Greater China • Follow-on Sales from gov’t bureaus • XYZ recognition Medium • Leverage gov’t to drive sales • • • • • • XYZ‘s corp. marketing research • Follow-on Sales • XYZ recognition High • Regular highlevel meetings (e.g. President of XYZ, BIS executives) • Partnership with high-level gov’t officials • Increased brand awareness High • Serves as • XYZ China Senior advocates for XYZ’s Management team products • Marketing team • Standard influence • Regular meetings & exchange to update China DI • Marketing team • Increased brand awareness • XYZ product as recognized std High • Educate about DI • Technology focused • Marketing team • Support from Advisory Board • Increased brand awareness • Relations with gov‘t High- Medium • Deliver value proposition to demonstrate its commitment to DI in China Marketing team Channel New application Gov’t relations XYZ China Senior Management team • Marketing • Marketing team 76
  77. 77. In terms of product strategy, XYZ should target different segments with different product portfolios. Specifically, Segment A should have a premium product/service & solution focus, Segment B should focus on quality products & exact customer needs, and Segment C should concentrate on cost effectiveness with a standard product. Product Strategy Implementation Program Type Objective Responsibility Resource Requirement Measurement Download at: Gazhoo.com Segment A: • Build strong solution capabilities • Provide premium service • Simplify product models Segment B: • Provide good customer service • Meeting customer requirement/ solutions Segment C: • Develop standard product • Build strong solution • Marketing team capabilities to ensure • New applications leadership position • Premium service level to avoid cannibalization • Simplified product models for clear differentiation • Product management support from HQ or A/P • Channel support • Grow customer base • Enhance XYZ’s overall market position • Prepare for the new product launch of 2500 • Marketing team • New application • Product • Build customer management support satisfaction from HQ or A/P • Increase in # of • Channel support customer • Market awareness High • Capture the market, grow with customers • Prepare for the launch of 1500 • Marketing team • New application • Product management • Build customer from HQ or A/P satisfaction • Channel support • Increase in # of customer • Market awareness Medium 77 • Improved customer satisfaction Priority High
  78. 78. The new product launch needs to highly align with XYZ’s strategic plan in expanding customer base and achieve revenue increase. The process should involve Marketing, New Application and Channels. It should ensure that customer feedback and channel inputs are consistently taken into consideration. New Product Launch Process MarCom Strategy Approval from Corporate Product Group Download at: Gazhoo.com Marketing Preparation Channel Inputs Customer Insights New Product Launch? YES Channel Preparation Product Literature Product Launch Media Briefing KVAD, KAIR Recruitment Channel Training Design of Quota & Performance New Application Development Customer Identification Sales Plan & Prioritization 78 Co-Marketing/ Marketing End Customer Business Development
  79. 79. Identifying new customers requires deploying various sources and channels. XYZ needs a systematic multi-level approach toward business development. For example, it needs to further leverage the proposed Advisory Board as a center of influence in generating leads. In addition, it also should use the media to enhance visibility in the market. New Customer Development Process XYZ Initiates Screening Process Target Customer? DI Initiatives? Opportunity for XYZ? Download at: Gazhoo.com Center of Influence (e.g. Advisory Board) Potential Customer Secondary Research NO Personal Contact DROP Customer Referral Select KVAD, KAIR; Solution Development Marketing Efforts (Channel & XYZ) Sales Associates Monitoring & Review Customer Performance Channel Initiates Customer Initiates (Response to the Media) YES Identify More Opportunities 79 Customer Selling & Management

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