Distribution (Optional B2B/Fleet Market)

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1 Distribution (Optional B2B/Fleet Market) Unlike the consumer market, where automakers are selling to individuals and small organizations through their captive dealership network, the business-to-business (B2B) or fleet market purchases in large quantities directly from the manufacturer. Examples of B2B customers are rental fleets such as Hertz or Avis, parcel carriers such as UPS and FedEx, and other large entities such as the government or large companies with a national presence. In StratSim, these three customer types comprise the three B2B segments and are briefly described below. Segment Rental Fleets (6) Parcel Carriers (7) Other Fleets (8) Description The B2B rental fleet market is composed of rental vehicle companies operating in all regions of the country. Most contracts are nationally recognized rental car companies that provide vehicles to traveling business people or vacationers, typically for less than one week. The Parcel Carrier fleet market is composed of national delivery companies that provide coast-tocoast pickup and delivery of packages, such as UPS and FedEx. Most Parcel Carrier companies service their own vehicles, resulting in lower distribution coverage minimums, but are concerned with the cost of purchasing, owning and maintaining the vehicles. In addition, parcel fleets typically require a custom built vehicle of the delivery class. The Other Fleets segment is composed of other B2B customers such as government agencies and large corporations. Most of these other fleet contracts represent smaller orders and require high levels of dealership support, as they typically are not servicing their own vehicles beyond basics. In some cases, B2B customers may use the same models as individuals, although with a different use and purchase process. This would often be the case for rental car companies, some government agencies, and large companies. In other situations, the customers may have very specific needs that would require a customized platform. In that case, auto companies would have to design a platform uniquely for the customer. For example, this would occur for parcel carriers who require a delivery class vehicle with unique load and configuration specifications. Company fleet buyers also have a significantly different purchase process than individuals. First, these buyers have specific requirements that must be met in order for a manufacturer to qualify for a contract. These include meeting or being less than a maximum price, meeting or exceeding dealer coverage in all regions to provide an adequate service network, being within a particular range for size and performance, and meeting or exceeding particular attributes (interior, styling, safety, and quality). Second, their purchase is direct from a manufacturer rather than through a dealership. Finally, one manufacturer will be selected as a preferred supplier and receive a contract for twice as many vehicles. Preferred supplier status goes to the company who meets the specifications at the lowest price. To compete in the B2B market, the first step is to purchase research on the contracts. If you decide that the market is viable, the next step is to target particular contracts and hire a direct sales force to work with the corporate buyers. Each contract requires five sales people to receive an invitation to bid on a contract and support a contract on an on-going basis (salespeople are hired automatically when a contract is targeted). Targeting the contract needs to be done the period before submitting the actual bid. B2B Guide Page 1

2 Rental Fleets Contracts (6) (Business-to-Business Model Only) The B2B rental fleet market is composed of rental vehicle companies operating in all regions of the country. Most contracts are nationally recognized rental car companies that provide vehicles to traveling business people or vacationers, typically for less than one week. The sales force plays a significant role both in securing the request for quotation and the guaranteed contract. However, the most important element is meeting the contract requirements in order to be considered for the sale. Some of the rental fleet companies are quite concerned with the dealership service support, while others tend to service the vehicles themselves. For those that expect service support from dealerships, there are typically higher coverage requirements for each region. Rental fleets tend to be very cost conscious as a large percentage of their operating costs are the actual purchase of the vehicle as gas and insurance costs are borne by the renter. However all are concerned with the cost of owning and maintaining the vehicles. Important: Dealer coverage minimums in all regions and specification requirements must be met in order to qualify for the contract. Winning bids must be at or below the minimum contract price to qualify. The supplier with the lowest price that meets the requirements receives preferred supplier status resulting in twice the units of the guaranteed contract. Page 2 B2B Guide

3 Parcel Carrier Fleets (7) (Business-to-Business Model Only) The Parcel Carrier fleet market is composed national delivery companies that provide coast-to-coast pickup and delivery of packages such as UPS and FedEx. As is the case with the rental fleet segment, certain requirements must be met to receive the guaranteed contract unit sales. Most Parcel Carrier companies service their own vehicles resulting in lower distribution coverage minimums. Generally, these customers are most concerned with the cost of purchasing, owning and maintaining the vehicles. Important: Dealer coverage minimums in all regions and specification requirements must be met in order to qualify for the contract. Winning bids must be at or below the minimum contract price to qualify. The supplier with the lowest price that meets the requirements receives preferred supplier status resulting in twice the units of the guaranteed contract. Other Fleets (8) (Business-to-Business Model Only) Other Fleets is composed of other B2B customers such as government agencies and large corporations. Most of these other fleet contracts are smaller orders and require high levels of dealership support, as they typically are not servicing their own vehicles beyond basics. These fleet buyers are quite concerned with both the initial outlay and on-going costs of owning the vehicle. Important: Dealer coverage minimums in all regions and specification requirements must be met in order to qualify for the contract. Winning bids must be at or below the minimum contract price to qualify. The supplier with the lowest price that meets the requirements receives preferred supplier status resulting in twice the units of the guaranteed contract. B2B Guide Page 3

4 Market B2B Segments (Instructor Selected Option) The B2B SEGMENTS report provides the overall number of contracts for each B2B segment and the number of contracts awarded to each firm. This is a helpful overview of the B2B market but more detailed information about individual contracts can be found by purchasing B2B contract research or by targeting contracts in your B2B decisions. There are also links to a description of each segment (Rental Fleets through Other Fleets) as shown below. Please refer to the appendix for more information on each segment. Page 4 B2B Guide

5 Market B2B Contracts (Instructor Selected Option) The B2B Contracts report displays a list of all B2B contracts currently available in the market and provides an estimate of the units awarded to each firm and overall. The report provides a helpful overview of the potential contract size and competitive activity in the B2B market. Clicking on a contract will purchase the contract detail report ($25,000 per contract) that will provide your firm with the contract requirements that must be achieved in order to qualify for the contract as well as the current preferred supplier and any secondary suppliers. In order to qualify for the contract your vehicle must be the correct class, less than the maximum price, within the size and engine ranges and meet or exceed the interior, styling, safety, and quality specifications as well as meet or exceed the dealer coverage in ALL regions. The preferred supplier will be the vehicle that meets all the qualification criteria at the lowest price. B2B Guide Page 5

6 Decisions B2B Marketing (Optional) Unlike the consumer market, where automakers are selling to individuals and small organizations through their captive dealership network, the business-to-business (B2B) or fleet market purchases in large quantities directly from the manufacturer. Examples of B2B customers are rental fleets, such as Hertz or Avis, parcel carriers such as UPS and FedEx, and other large entities such as the government or large companies with a national presence. In StratSim, these three customer types comprise the three B2B segments (numbered 6, 7, 8). In some cases, though their use and purchase process may be different, B2B customers may use the same models that individuals purchase. This would often be the case for rental car companies, some government agencies, and large companies. In other situations, the customers may have very specific needs that would require a customized platform. In that case, auto companies would have to design a platform uniquely for the customer. For example, this would apply to delivery vehicles that have unique load and configuration requirements and which comprise a completely new vehicle class. In addition to having potentially different needs than individuals, company fleet buyers also have a significantly different purchase process. First, these buyers have specific requirements that must be met in order for a manufacturer to qualify for a contract. These include meeting or being below a maximum price, meeting or exceeding dealer coverage in all regions to provide an adequate service network, being within a particular range for size and performance, and meeting or exceeding particular attributes (interior, styling, safety, and quality). Second, their purchase is direct from the vehicle manufacturer rather than through a dealership, so the price that the customer pays also reflects revenues to the manufacturer since there is no entity in the middle. All firms start out not competing in the B2B market, and one of your strategic decisions (if your instructor has selected the option) is whether or not you want to explore this market and ultimately serve it. You can learn more about the market in two ways: 1) by targeting contracts and hiring a sales force to learn more about the requirements of particular contracts, or 2) by purchasing market research on the B2B market under the MARKET - B2B CONTRACTS report. Below is a sample screen showing the initial status of the B2B marketing decisions. Important: Unless your firm targets contracts by clicking on the segment and selecting specific contracts, you will not receive any requests for quotation after the simulation is advanced. Page 6 B2B Guide

7 Obtaining an Invitation to Bid on a Contract / Request for Quotation If you decide that you want to explore B2B opportunities and obtain an invitation to bid on a contract, the first step is to target specific contracts from the B2B decision screen as shown below. Target the contracts by clicking on the box. This will automatically hire (or reallocate if you are changing targets from last period) sales people to establish a relationship and support the sales process with the B2B customer. You can either choose to purchase market research ahead of time to find out more about the contract requirements using the detail on the B2B CONTRACTS report or allow the sales force to do this for you. Either way, next period you will receive an invitation to bid on any contracts selected on this screen whether you qualify or not. Bidding on Contracts In the period following the establishment of your sales force in the B2B marketplace, you will receive an invitation to bid on one or more contracts under the Contracts to Bid On section of this screen as shown below. You may qualify for some of these contracts based on your current vehicles, but in many cases you will have to make modifications to your vehicle or distribution structure to qualify. The detail of the contracts shows the guaranteed number of units, the required class, the maximum price acceptable, and B2B Guide Page 7

8 the required dealership coverage in all regions. If you click on one of the contract names it will bring up more detailed information about the requirements, as shown below. On the detailed requirements for a particular contract, you will see the required size range, engine range, minimum interior, styling, safety, quality, and dealer coverage. In addition, you can see your actual dealership coverage and, once a vehicle had been selected for a bid, the actual characteristics of the vehicle versus the requirements. Clicking on the [Products] button will provide a list of your current product specifications and costs to aid in your bid evaluation as shown above. Clicking on the [Enter Bid] button allows you to bid on a contract by choosing a vehicle and price as shown below: After entering your bid, you will see your vehicle specifications lined up against the contract requirements, and the main page will show if you qualify. If you don t qualify for the contract, you will not sell any units. Page 8 B2B Guide

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