Question

“Can Selling Be Globalized? The Pitfalls of Global Account Management”, Arnold, David, Julian Birkinshaw, and Omar Toulan

This article is now 20 years old. Which of the authors’ findings do you feel are still relevant? Justify your response. Which are outdated? Justify your response.

Answer 1

Q- “Can Selling Be Globalized? The Pitfalls of Global Account Management”, Arnold, David, Julian Birkinshaw, and Omar Toulan?This article is now 20 years old. Which of the authors’ findings do you feel are still relevant? Justify your response. Which are outdated? Justify your response.?

Answer- Conducting business globally has become an essential part of the overall strategy for many businesses. U.S. businesses sold $1.1 trillion in goods to customers overseas in 2007, nearly double the total export volume of 2002. But, sadly, less than 1 percent of the nation's 26 million small businesses are exporters, according to a Congressional committee on small business and entrepreneurship. Small businesses account for only 29 percent of all U.S. exporting volume -- a number lower today than it was 10 years ago.

The statistics are surprising because the ease of connectivity, transportation, and global product demand has reduced the barriers to entering markets overseas. With a few mouse clicks, you can buy a product today and never know it's coming from half way around the world. The opportunities to expand internationally are better than they ever have been before. International sales especially have never been easier, as the Internet and telecommunications have fostered quick and cheap global communications, more markets are open for trade, and more transportation options exist for delivering your goods abroad.

Two international companies, there is something both inevitable anddesirable about the trend towards globalization of the sales function,usually referred to as global account management. It is inevitablebecause major business customers are generally well down the roadto globalization in supply chain management, and from their major suppliersworldwide they increasingly demand contracts with standardized terms in areassuch as product specification, price, and service standards. It is desirable becausethe institution of global customer management is in line with trends like cus-tomer relationship management and building customer-centric organizations,ideas which currently hold much sway with top executives in many multina-tional corporations.However, vendor companies should think carefully before jumping on theglobal customer bandwagon. Such relationships can turn out to be quite differ-ent from expectations. In many cases, vendors find that the unanticipated costsoutweigh the benefits. Over the last two years, we have conducted field researchinto global account management from the vendor's perspective in Europe andNorth America. In over half the corporations, we found management strugglingto figure out how to make this system work. In many cases, the major changethat resulted from classifying a customer as a global account was increaseddownward pressure on prices. This was because consolidated sales triggeredrequests for greater volume discounts and because the reliance of the vendoron the account became more salient. In addition, many vendor companies werepaying increased sales commissions, since now both global account teams andlocal sales teams were involved in sales. Furthermore, top sales executives hadto accept lower standards of account management than they previously hadfrom their national accounts.

Implementing Global Account Management:

Two Cautionary Tales• Whitegoods Corporation is a European manufacturing company that designated a num-ber of global account managers in response to the centralized purchasing demands ofmajor retail customers.These individuals negotiated the whole package with their cus-tomers—product specifications, prices, and even local installation and service agreements.Unfortunately, Whftegoods Corp.'s sales organization was still managed on a country-by-country basis. Local sales people prioritized the higher-margin business they got throughlocal customers. Some disregarded the frame agreement altogether; with the result thatglobal account managers found themselves "policing" the deal. In a few countries, localsales managers were not even informed about the global accounts and only found outabout them via their customers.The result was delays and disagreements on local installa-tion and a soured relationship between national sales managers and global account man-agers. Prices were squeezed down as a result of the global agreement, but the projectedsales volume increases did not materialize.• Computer Corporation, a U.S.-based manufacturer; had negotiated a similar agr^eementwith a major global account in the financial services sectonThe German subsidiary of thatcustomer approached Computer Corp.'s German subsidiary for quotes on a major orderfor 500 workstations that the firm required as it switched its European headquarters fromLondon to Frankfurt. It wanted a price below the minimum specified in the global agree-ment, arguing that extra volume discounts were appropriate since the order was large,non-recurring, and all intended for local German offices. Computer Corp.'s German sub-sidiary, a profit center with much to gain from accepting the order in what was proving tobe a difficult recessionary year in Germany, eventually succumbed to the temptation andaccepted the order It proved to be less substantive than promised, with only 100 unitsbeing purchased, a good number of which it suspected were ne-exported to EasternEurope.The global agreement, meanwhile, had fallen apart when other subsidiaries ofthe customer got word of the lower price obtained in Germany

Strategy—Selecting and DesigningGlobal Account Relationships

The key strategic questions facing the vendor company are whetherto create global accounts at all and, if the decision is made to do so, which cus-tomer relationships should be selected. While these decisions are to some degreedictated by the preferences of customers, vendor companies should take a highlyselective approach to the introduction of global account structures, since suchrelationships are inherently dangerous. In selecting the right customers to desig-nate as global accounts, the two most important criteria are the balance ofpower in the relationship and the potential for strategic synergies.

Assess the Balance of Power

A professional buyer looking for standard worldwide pricing is, of course,looking for the lowest price to be applied everywhere. Beyond this, a customerconsolidating purchases from several countries will, reasonably, expect volumediscounts against previously prevailing prices. In most companies, the purchas-ing function is considerably more globally coordinated than the sales function,since it shows greater return to scale than the more execution-sensitive function