Project Marketing: Beyond Competitive Bidding

Overview

Project Marketing: Beyond Competitive Bidding is the first English language book that focuses specifically on this important, emerging subject. Project marketing relates to the various marketing activities that take place prior to winning a contract. It deals with marketing of large and complex projects such as the construction of buildings and power stations.
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Overview

Project Marketing: Beyond Competitive Bidding is the first English language book that focuses specifically on this important, emerging subject. Project marketing relates to the various marketing activities that take place prior to winning a contract. It deals with marketing of large and complex projects such as the construction of buildings and power stations.
FEATURES
* The authors are all leading international figures in the field of project marketing. Bernard Cova is co-founder and leader of The European Network on Project Marketing and System Selling.
* The book provides models and methods that are necessary to develop a constructive approach to project marketing.
* It contains more than 20 short cases drawn from a wide variety of industries e.g. aerospace, construction, engineering, transport and energy. The cases are truly international with examples from Europe, Asia, USA and Africa.
Project Marketing: Beyond Competitive Bidding can be used a textbook for MBA and other masters-level courses in project marketing and project management. It will also be highly relevant for practitioners and participants in executive and in-company training programs.

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Product Details

  • ISBN-13: 9780471486640
  • Publisher: Wiley
  • Publication date: 4/28/2002
  • Edition number: 1
  • Pages: 236
  • Product dimensions: 6.60 (w) x 9.50 (h) x 0.60 (d)

Meet the Author

BERNARD COVA is Professor of Marketing and Director of the Project Marketing Research Institute at ESCP-EAP, Paris.

PERVEZ GHAURI is Professor of International Business at the Manchester School of Management, UMIST.

ROBERT SALLE is Professor of Marketing and Research Director at EM Lyon.

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Read an Excerpt

Project Marketing

Beyond Competitive Bidding
By Bernard Cova Pervez Ghauri Robert Salle

John Wiley & Sons

ISBN: 0-471-48664-7


Chapter One

WHAT IS A PROJECT?

For the purpose of this marketing book, we define a project as a complex transaction covering a package of products, services and work, specifically designed to create capital assets that produce benefits for a buyer over an extended period of time. In this definition, we have chosen a marketing perspective that takes into consideration (Cova and Holstius, 1993):

the idea of transaction-an event limited in time between a supplier and a customer;

the content of the exchange-a group of products, services and work and the degree of adaptation-the specific design;

the other party involved-the buyer.

To characterize project business and to differentiate it from consumer as well as industrial services and goods, numerous dimensions can be used. As project marketing lies closer to industrial goods and services, also called business-to-business marketing, perhaps it is more important to relate projects to industrial goods and services. In this way, a continuum can be drawn up with projects on one side and industrial services and products on the other, taking into account a variable degree of difference:

from unit or very small series production to mass production;

from made-to-measure demand to standard demand;

from discontinuous supplier/ customer business relationsto continuous business relations;

from rare transactions between supplier and customer (sometimes once every 5 years!) to frequent transactions;

from very long-duration transactions (of around 2 years between the first contact and the conclusion of the contract) to short transactions;

from a very high financial commitment for unit purchased to a low financial commitment;

from relatively formal buying procedures (especially in the case of public markets) to more informal quotation requests;

from fragmentation of buying centres and sales centres into two multi-organizational groups (e.g. customer + consultant + development bank on one side, supplier + industrial partners + financial partners on the other) to mono-organizational buying centres and sales centres.

By reading this list of characteristics, we see that project marketing specialists recognize their domain intuitively and do not at the moment rely on a classification of industrial activities that allows them to universally categorize projects on one side and products and services on the other.

Projects in different forms and shapes represent a major proportion of international trade and business activities. These activities range from subcontracting to turnkey projects with management or offset contracts. Companies normally known as consumer product companies, such as Alcatel, IBM, Philips, Ericsson, Siemens or Schneider, quite often sell their products on a project basis. In addition, there are companies, such as ABB, Alfa Laval, Atlas Copco, Alstom, Bouygues, Kvaerner, Thales, etc., that always sell their products and services on a project basis. As these and many other companies are in fact dealing in projects, there is a need to look at the marketing issues/problems related to this type of business.

In project sales, buyers and sellers are normally unfamiliar with each other and come from different environments. Yet, they have to agree on a transaction, negotiate and share responsibilities for a specific project. A couple of decades ago, the existence of this type of business was brought to the fore by scholars as well as consultants and managers, as illustrated in the following quotations:

While direct investment and international trade in goods and services are rather well documented on a continuing basis and certainly have been subject for much theoretical and empirical research, the other vehicles for technology transfer ... turn-key projects, production sharing, service contracts etc., are much less known (Mattsson, 1979, p. 1).

More and more frequently, machinery equipment and technology are purchased together as a package in the form, or as a complete industrial plant. This type of business is particularly becoming common in international business transactions (Boston Consulting Group, 1970, p. 17).

Although these quotes are more than two decades old, they still hold true. There are, for example, hardly any publications on project marketing. There are several books and articles on project management, but these publications deal with organizational and management issues and not with sales and marketing issues.

Types of Project

In a project, a seller supplies a complete system that may include components, equipment and even some services. They range from subcontracts to turnkey plus contracts.

Subcontracting Projects

In the case of big projects, domestic or international, one main contractor is selling a project to a buyer. However, in most cases the main contractor is not in a position to supply/ manufacture all of the project or parts of the project himself and buys them from other companies. These companies are then subcontractors to the main contractor. In international projects, this is very common. In one case, where a Swedish company supplied a complete power plant to Nigeria, it had to find a local subcontractor for the civil works. In this case, the Swedish company was working, on the one hand, as a marketer and, on the other hand, as a buyer purchasing civil works from a local construction company for the project. The local construction company, the subcontractor, despite supplying the project (the subproject) locally, had to market itself to the Swedish company which, in fact, is the buyer for the subcontractor. Sub-contractors may also have subcontracts of their own for part of the project. This type of project and its relation to the whole project is illustrated in Figure 1.1.

Partial Projects

In this type of project, different suppliers independently market and supply different parts of the main project directly to the buyer. The buyer will then put together all the partial projects. The sellers of the partial projects, however, need to have some information on other partial suppliers. Quite often, they may need to adapt their products /services so that they can fit/match with the rest of the project. In most cases, partial suppliers come from different countries and industries. The partial supplier supplies only a part of the total project and the know-how and services needed to assemble the particular part supplied by him. This can, for example, be a communication system for a container ship or a sewage system for a skyscraper or a hospital. Normally, the buyer takes on the responsibility of coordination and integration of the total project. It can be a partial project of an already existing project, such as a building or a hospital. This type of project business is illustrated in Figure 1.2.

As illustrated in Figure 1.2, different suppliers to one main project, a hospital in this case, supply different parts of the project. However, the marketing activities are directed towards one buyer, as represented by the broken lines.

Package Deals

A package deal is considered to include a solution to a buyer's problem, a complete system, components, equipment plus the know-how to handle the same (Ghauri, 1983). In some cases, it may also include a service contract for a number of years. Service firms, such as insurance, accounting or medical firms, quite often supply package deals. A number of advertising companies offer package deals to their customers that include idea generation, production, media selection, budgeting and implementation of an advertising campaign, for example, to launch a new product or service. The supplying companies have some services in-house, such as idea generation and production, while other services, such as media, bill boards, etc., have long-term contractual or non-contractual relationships with suppliers who work with them on a regular basis. The suppliers may come from the domestic market of either the main contractor or the buyer. In advertising, it is quite common for an idea generated in France or Italy to be produced in England and the package sold to a customer in Germany. In this case, the seller has quoted the total price and has a contract responsibility for all parts of the package towards the buyer in Germany. This is illustrated in Figure 1.3.

Turnkey projects

Turnkey projects involve delivery of a complete plant, factory or institution. In this case, the main contractor is responsible for marketing, negotiations and setting up of the project-such as a dairy, a hospital, an underground train system-while he may have subcontractors for some parts of the project. The seller has to get the project operational and hand it over to the buyer. In fact, quite literally the seller has to get it ready and hand the key over to the buyer who can simply open the door and start operating the project. The responsibilities of the seller normally include (Luostarinen and Welch, 1990 and United Nations, 1983, p. 6):

basic design and engineering;

supply of technology and know-how;

supply of complete machinery and equipment;

design and construction of civil works;

supply and setting up of infrastructure needs;

commissioning all plant facilities up to the start-up stage.

In these projects, the seller is often the supplier of a major part of the plant/project; for example, Enron for power generation equipment in the power generation project in India and Alfa Laval for milk plant equipment for a dairy project in Saudi Arabia. In some cases however, a major international engineering and construction company can act as the main supplier or the seller; for example, the American company Fluor and Bechtel or Swedish construction company Skanska for supply of a turnkey hospital or a hotel. The main contractor puts the complete project together although he may be supplying only 20-30 % of the project value himself. The rest of the project he buys from other suppliers/subcontractors. The main contractor is also responsible, and gives guarantees, for the whole project. In many cases, companies in the same ownership group supply different parts of the project (Ghauri, 1988).

The project, when handed over to the buyer, is complete in every respect-equipment, services and infrastructure (e.g. the road leading to the plant or the hospital). Completeness is thus the main characteristic that distinguishes turnkey projects from all other types of project. This is in contrast to partial projects, where the buyer takes on the responsibility of coordination and integration. This type of project is illustrated in Figure 1.4.

Turnkey 'Plus' Projects

More and more turnkey projects are being combined with other activities and conditions. These activities range from the project's inception (e.g. developing the idea behind the project together with the buyer, doing a feasibility study and looking for financiers) to its completion (e.g. assembling parts of the project in the buyer's country or using the seller's staff under management contract for the initial years). Sellers are increasingly asked to assist buyers in their search for financiers and in convincing financial organizations-such as the World Bank, IMF or EBRD-that the project is sound. Internationally, this is very important. Sometimes, the seller is asked to assist in financing the project by means of long-term loans or equity participation.

Different types of buy-back and offset agreement are quite common in these projects. The bigger the project, the greater the demands from the buyer in this respect. This is no longer a developing country phenomenon, most Western countries also demand some 'plus' in bigger projects. There are several benefits from these extra activities for both parties.

Benefits for Buyers

From the buyer's point of view, getting more than just the project they paid for is definitely more attractive. The most common demand is for the seller to help them in arranging feasibility and finances. Another motive for buyers centres around their concern that the plant will work efficiently and without problems after it is handed over to the them. They are thus concerned about the training of their staff who will handle the project. To achieve this, they often involve the seller in a management contract for the initial (3-5) years, so that their staff can learn in that period. In other cases, a training package is often included in a turnkey project.

Generation of foreign exchange has also been a major concern for many buyers. They may therefore want to bind the seller beyond the project, either by asking them to take equity or give some type of guarantee for export of goods produced in the project; for example, that 30% of the products manufactured in the plant would be bought back by the seller. The seller then has to find a market for these products either in his home market or internationally. When a government is involved as a buyer, it is often concerned about job opportunities and demands that part of the work-assembly, production, etc.-should be done in its own country. Depending on the size of the project, buyers may demand different facilities that go beyond the particular project. This type of project is explained in Figure 1.5.

Benefits for the Supplier

The biggest advantage for the supplier is, by means of these additional arrangements, to stay in touch with the buyer beyond the specific project. Discontinuity, as discussed in the next chapter, is a major problem for companies working with project marketing. By this continued involvement-be it a training programme, management contract, buy-back or offset agreement-the seller can stay in touch with the supplier and, thereby, can have better insight into future projects. Moreover, there is an opportunity for the seller to make extra profits by such arrangements. If the seller is asked to do the feasibility study or assist the buyer in finding financiers, it is in fact in his interest, because he will get an 'insider' position as compared with his competitors. From the marketing point of view, he will gain a competitive advantage, even if he has to participate in a closed or open tender later on.

Through the feasibility study, the seller can also influence the design, capacity and specifications in favour of his own machinery and equipment and offer. One of the most important benefits of being involved in project 'plus' activities, especially prior to project stage, are the contracts and relationships a seller can establish with the key actors/people in the buying organization.

Continues...


Excerpted from Project Marketing by Bernard Cova Pervez Ghauri Robert Salle Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

Part I The Project Business

What is a Project?

Characteristics of Project Business

Project Marketing;
Special Features

Project Marketing Practices

The Project Marketing Logic

Part II Marketing Strategy

From Corporate Strategy to Marketing Strategy

Market Approach: Sociograms and Portfolios

Analysing Milieus

Managing Customer Relationships

Part III Implementation

Screening Projects

Proactive Co-Development

Formulating the Offer

Negotiating Projects

Practical Guidelines

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