B2B sales of German Small and Medium-sized Enterprises. Challenges in cross-border sales within the context of  German-French business relationships

Scheffler, Yves

Title: B2B sales of German Small and Medium-sized Enterprises. Challenges in cross-border sales within the context of German-French business relationships

B2B sales of German Small and Medium-sized Enterprises. Challenges in cross-border sales within the context of German-French business relationships

Business economics - Offline Marketing and Online Marketing

Summary

For decades Germany and France have been forming the core of the European Union. They generate about 40 per cent of total economic output in the Euro Zone. Nowhere else, there does exist such an intense relationship between neighbouring economies like between these two countries. Those links go far beyond external trade relations and are targeted towards mutual business cooperation. In the light of globalisation, a rising number of competitors, increasing customer demands and short product life cycles, cross-national commerce are of great importance for German Small and Medium-sized Enterprises (SMEs) – particularly in the B2B sector. Sales is often tagged as an enterprise’s figurehead. It is responsible for determining whether a manufacturer effectively conveys its capabilities to the B2B customer.
To date, there exists no single reference book covering all four topics of this paper’s headline: B2B, SMEs, sales and Franco-German business relationships. The ongoing literature is mainly focussed on large firms. The subject of international sales has hardly been investigated, yet. Apart from the sales excellence approach, there are few selling models for corporate practice. The lack of sales expertise both in theory and practise is thus not the ideal prerequisite for succeeding on a cross-border scale.
This study addresses sales challenges of German SMEs with its trading partner France in the B2B sector. It should be stressed that the focus is on SMEs from Germany only. The company size of French business partners does not play a role in this context. The acquisition-related part of sales (selling) is highlighted while the physical component (distribution) is secondary within the framework of this assignment. In consequence, the central question is to figure out what kind of challenges German SMEs must face when exerting B2B sales activities in France.
A related sub-issue is defined as follows: “Which type of challenge has the greatest impact on cross-border sales operations in France?”
The declared purpose of this study is to answer the above-mentioned queries. Following the acquired basic knowledge this is done through an empirical survey. Furthermore, it is targeted to provide recommendations in order to enhance sales efficiency and effectiveness of German SMEs.

Excerpt

Scheffler, Yves: B2B sales of German Small and Medium-sized Enterprises. Challenges

in cross-border sales within the context of German-French business relationships,

Hamburg, Anchor Academic Publishing 2017

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Table of Contents

List of Abbreviations ... V

List of Illustrations... VII

List of Tables ...VIII

Introduction...1

1.1

Initial situation ...1

1.2

Problem and objective ...2

1.3

Methodology...3

1.4

Structure...4

Theoretical part ...5

General definitions of task concept...5

2.1

Sales and international sales ...5

2.2

B2B and B2B sales ...6

2.3

Small and Medium-sized Enterprises ...6

International sales and its particularities...8

3.1

Cross-border distribution ...8

3.1.1

Distribution system ...9

3.1.2

Distribution organisation ...12

3.1.3

Distribution strategy ...12

3.1.4

Distribution process ...13

3.1.5

Distribution management...14

3.2

Particularities within the B2B context ...14

3.3

Particularities within the SMEs context ...17

Challenges of cross-border sales...22

4.1

General challenges...22

4.1.1

Megatrend Globalisation ...22

4.1.2

Megatrend Technology...23

4.1.3

Megatrend Consumer Behaviour ...24

4.1.4

Megatrend Complexity ...25

4.2

Intercultural challenges...27

4.3

Hofstede's cultural dimensions ...28

4.3.1

Germany's score ...32

4.3.2

France's score ...33

III

4.4

Hall's dimensions ...35

4.4.1

Low-context versus high-context culture ...35

4.4.2

Polychromic versus monochromic culture ...36

Identification of hypotheses ...37

II Empirical part...51

Methodology of empirical research ...51

6.1

Research design ...51

6.2

Questionnaire...52

6.3

Interviewees ...53

6.4

Data analysis, documentation and evaluation...54

Results...55

7.1

Results first part general challenges ...55

7.1.1

Global defiances ...55

7.1.2

Competition ...58

7.1.3

Professionalization...59

7.1.4

Employees...60

7.2

Results second part intercultural challenges...63

7.2.1

Working style...63

7.2.2

Relational level ...65

7.2.3

Time perception ...70

7.2.4

Female employees ...72

7.3

Results third part final questions ...73

7.3.1

Influencing factors ...73

7.3.2

Suggestions for improvement ...74

7.4

Summary...75

7.5

Recommendations...76

Conclusion ...82

Appendix...84

Literature...125

List of Abbreviations

AHK Außenhandelskammer

Bfai

Bundesagentur für Außenwirtschaft

bzgl. bezüglich

B2B Business-to-Business

B2C Business-to-Consumer

CCC

Cross Cultural Communication

CeBIT

Centrum für Büroautomation, Informationstechnologie und Tele-

kommunikation

CRM Customer

Relationship

Management

DGM

Deutsche Gesellschaft für Mittelstandsberatung

d.h. das

heißt

DIHK Deutscher

Industrie-

und

Handelskammertag

EDI Electronic

Data

Interchange

e.g. exempli

gratia

ESSEC

École supérieure des sciences économiques et commerciales

et al.

et alia

etc. et

cetera

evtl. eventuell

FAB Features

Advantage

Benefits

GDP Gross Domestic Product

H1 Hypothesis

one

H2 Hypothesis

two

H3 Hypothesis

three

H4 Hypothesis

four

H5 Hypothesis

five

H6 Hypothesis

six

H7 Hypothesis

seven

H8 Hypothesis

eight

H9 Hypothesis

nine

H10 Hypothesis

ten

H11 Hypothesis

eleven

H12 Hypothesis

twelve

H13 Hypothesis

thirteen

H14 Hypothesis

fourteen

IBM

International Business Machines Corporation

i.d.R.

in der Regel

i.e. id

est

IFA

Invest in France Agency

IfM

Institut für Mittelstandsforschung

IHK

Industrie- und Handelskammer

KMU

Kleine und mittlere Unternehmen

N population

OEM

Original Equipment Manufacturer

PDG Président-directeur

general

pm Post

Meridian

R&D Research

and

Development

SME

Small and Medium-Sized Enterprise

SMM

Sales Marketing Messe

sog.

genannt

SNCF

Société Nationale des Chemins de fer Fran

çais

SWOT

Strengths Weaknesses Opportunities Threats

TPE

Très Petites Entreprises

USA

United States of America

USP

Unique Selling Proposition

usw.

und so weiter

VAT Value

Added

Tax

VDMA

Verband Deutscher Maschinen- und Anlagenbau

z.B. zum

Beispiel

4 P`s

Product, Price, Place Promotion

List of Illustrations

Figure 1: International sales model... 8

Figure 2: B2B typology and implications on sales ... 17

Figure 3: Task allocation of a sales employee ... 18

Figure 4: Determining factors of international sales ... 26

Figure 5: Hofstede's cultural dimensions for Germany ... 32

Figure 6: Hofstede's cultural dimensions for France ... 33

Figure 7: Ranking of global defiances with respect to international sales ... 55

Figure 8: Strong competition as entry barrier for sales activities ... 58

Figure 9: Lack of capacity to develop German-French sales strategies ... 59

Figure 10: Difficulty of recruiting qualified sales employees ... 60

Figure 11: Attitude of product focus rather than customer orientation ... 61

Figure 12: Prioritization of function skills over intercultural competences ... 62

Figure 13: Importance of networks and French language skills ... 63

Figure 14: German sales meeting behaviour versus the French Système D... 64

Figure 15: Presence of mistrust, cultural misunderstandings and financial losses 65

Figure 16: Influence of hierarchical position upon interpersonal dealings ... 67

Figure 17: French emotionality versus German rationality ... 68

Figure 18: Different handling of time ... 69

Figure 19: Lack of punctuality of French distributors ... 70

Figure 20: French female managers and their tendency to seduce ... 72

Figure 21: Most important effects upon international sales ... 73

Figure 22: Proposals for improving German-French sales cooperation ... 74

Figure 23: Sales Balance Scorecard ... 81

VII

List of Tables

Table 1: Company classification in Germany ... 7

Table 2: Company classification according to EU guidelines ... 7

Table 3: Pros and cons of distribution systems ... 11

Table 4: Hofstede`s cultural dimensions ... 30

Table 5: Hofstede's cultural dimensions with reference to selling ... 31

Table 6: Low-context culture versus high-context culture ... 36

Table 7: Monochronic mentality versus polychronic mentality ... 37

Table 8: Empirical information at a glance ... 51

VIII

Introduction

1.1

Initial situation

"Everyone lives by selling something."

Robert Louis Stevenson

For decades Germany and France have been forming the core of the European

Union. They generate about 40 per cent of total economic output in the Euro

Zone.

Nowhere else, there does exist such an intense relationship between neigh-

bouring economies like between these two countries.

Those links go far beyond

external trade relations and are targeted towards mutual business cooperation.

Scoring about 21 per cent German companies are the largest investor in France.

Likewise, France represents the most important investor in Germany with approx-

imately 16 per cent.

According to the IFA there are more than 1.670 German en-

terprises being active in France while employing 300.000 persons. A German

company decides to expand its business activities to the French market every third

day.

The Hexagon

has been Germany's most important trading partner since

1961.

In 2013 German goods were exported with a value of 100.3 billion euros

to France.

This economic performance is also due to Small and Medium-sized Enterprises,

accounting for 99.6 per cent of all German businesses.

These SMEs accom-

plished about one fifth

of export turnover in 2011.

However, export activities

depend on the company's size. 47 per cent of small businesses sell their goods

Cf. Jobber (2007), p. 352; Stevenson was a Scottish essayist. Among his most famous works is

the book, "The strange case of Dr. Jekyll and Mr. Hyde."

Cf. Uterwedde (URL).

Cf. Barmeyer, Wietersheim (2007), pp. 26-27: Fracoallemand (URL).

Cf. Barmeyer, Wietersheim (2007), p. 77.

Cf. Sirin (URL); Boulogne (2010), pp. 5-6.

Hexagon refers to the geographical hexagonal shape of the French Republic and is often used as

a synonym for France.

Cf. Knupp (URL).

This value is equivalent to 9.2 per cent of total German exports.

Cf. Destatis (URL).

Cf. IfM (URL1).

Cf. Bundesministerium für Wirtschaft und Technologie (2013), p. 9.

This performance corresponds to 345.000 SMEs out of a totality of 3.6 million German Small

and Medium-sized Enterprises.

abroad whereas more than two thirds of medium-sized enterprises execute foreign

commerce.

In the light of globalisation, a rising number of competitors, increasing customer

demands and short product life cycles, cross-national commerce are of great im-

portance for German SMEs particularly in the B2B sector.

Sales described by Porter (1985) as primary activity along the value chain,

plays

a crucial role. Being the interface between corporation and customer,

sales influ-

ences a firm's market position, reputation and success.

Sales is often tagged as an enterprise's figurehead. It is responsible for determin-

ing whether a manufacturer effectively conveys its capabilities to the B2B cus-

tomer.

Detroy (2007) therefore claims the design of sales USPs.

Next to a greater degree of complexity, international sales involves the existence

of cultural disparities. According to a study, German SMEs face almost 20 per

cent drop in orders from their French business partners owing to the fact of lack-

ing intercultural skills.

Successful cross-border sales operations require more

than disposing high-quality products. German SMEs must meet the challenges of

international sales by incorporating them into their strategy and actions.

1.2

Problem and objective

As stated before, efficient sales makes the difference. This aspect is often ignored,

though. In many cases German SMEs predominately invest in production process

optimization or supportive functions such as R&D.

On the contrary, the area of

international sales is often handled deficiently.

This is all the more striking, be-

cause goods that sell themselves are rather the exception than the rule.

Cf. IfM (URL2).

Cf. Godefroid, Pförtsch (2008), p. 401.

Cf. Porter (1999), p. 66.

Cf. Cateora, Graham (2007), p. 502.

Cf. Evanschitzky, Werdermann (2012), pp. 592-593.

Cf. Belz, Reinhold (2012), p. 12.

Cf. Detroy, Behle, Hofe (2007), p. 7.

Cf. Riegler-Poyet (2008), p. 8.

Cf. Homburg, Schäfer, Schneider (2008), pp. 1-2.

Cf. Detroy, Behle, Hofe (2007), p. 17.

Cf. Schedl, Thöhle, Zegar (2012), p. 412.

To date, there exists no single reference book covering all four topics of this pa-

per's headline: B2B, SMEs, sales and Franco-German business relationships.

Note, that the ongoing literature is mainly focussed on large firms. The subject of

international sales has hardly been investigated, yet.

Apart from the sales excel-

lence approach,

there are few selling models for corporate practice. The lack of

sales expertise both in theory and practise is thus not the ideal prerequisite for

succeeding on a cross-border scale.

The present thesis addresses sales challenges of German SMEs with its trading

partner France in the B2B sector. It should be stressed that the focus is on Small

and Medium-sized Enterprises from Germany only. The company size of French

business partners does not play a role in this context. The acquisition-related part

of sales (selling) is highlighted while the physical component (distribution) is sec-

ondary within the framework of this assignment. In consequence, the central ques-

tion is to figure out what kind of challenges German SMEs must face when exert-

ing B2B sales activities in France. A related sub-issue is defined as follows:

"Which type of challenge has the greatest impact on cross-border sales operations

in France?"

The declared purpose of this thesis is to answer the above-mentioned queries. Fol-

lowing the acquired basic knowledge this is done through an empirical survey.

Furthermore it is targeted to provide recommendations in order to enhance sales

efficiency and effectiveness of German SMEs.

1.3

Methodology

The theoretical part of this paper is attributed to an extensive literature research.

Existing material on the topics of B2B, SMEs, international sales and sales chal-

lenges has been selected and compressed. German and English textbooks, anthol-

ogies and institutional websites served as literature references. In addition, online

journal articles were utilised.

The centrepiece of this thesis is the empirical part guided by a survey. The ques-

tioning was conducted via expert interviews. Each specialist has been consulted

Cf. Belz, Reinhold (2012), p. 8.

Cf. Belz, Binckebanck (2012), p. VII; Binckebanck (2012), p. 532.

This is a textbook offering assistance to systemize sales processes. More professionalism in the

sales area reflects the core theme of the sales excellence approach.

individually. The analysis of the survey's qualitative data was carried out by

means of inductive category formation. In compliance with Mayring (2007) the

presentation of research results has been realized through bar charts. This means

that the qualitative data is embedded in a quantitative analysis visualized in form

of category frequencies.

1.4

Structure

The present assignment comprises eight chapters. The introduction presents a

brief summary about the initial situation of German SMEs' business-to-business

sales activities with France. It also describes the problem and purpose as well as

the methodology and structure. Chapter two until chapter five shape the theoreti-

cal part, compiling academic knowledge. In section two the basics for this paper's

topic are set by defining sales, B2B and SMEs. The reader is briefed about inter-

national sales and its various elements in chapter three. In this context, special

emphasis is given to B2B and SME through examining these terms' particulari-

ties. The theoretical part's core issue being fixed in the fourth chapter illustrates

general and cultural challenges of cross-border sales. It is demonstrated that gen-

eral challenges consist of external factors, e.g. technology. Referring to cultural

challenges, the findings are based upon the scientific studies of Hofstede (2001)

and Hall (1990). In connection to the above-mentioned content, it is dealt with

hypotheses in chapter five. The elaboration of these assumptions is based on dis-

cussed literature from the theoretical part. The hypotheses form the survey's ques-

tions. The empirical part encloses chapter six until eight. It is designed via infor-

mation from the theoretical part. The survey's methodology and its further sub-

headlines are outlined in chapter six. Section seven displays the research results

by confirming or rejecting the hypotheses from chapter five. This also includes a

summary of the most interesting outcomes and a response to the thesis's central

question. Before a conclusion is drawn in the final chapter, the newly gained

knowledge is used to derive recommendations for German SMEs.

I Theoretical part

General definitions of task concept

2.1

Sales and international sales

In the broader sense, the concept of sales encompasses all decisions and actions

making products and services available for customers and end-users. It consists of

two key elements: selling as such, which illustrates the acquisition related part and

logistics that concerns the physical aspect.

Note that the terms distribution and

selling are often used as synonyms.

In a narrow sense, sales is defined as sell-

ing.

Sales represents an important element of the marketing-mix, which is de-

fined as one part of the 4 P's, i.e. distribution policy or selling policy respectively.

The principal objective of sales accounts for selling. Since a key factor of sales is

defined as selling policy one has to take its characteristics into consideration:

x Distribution system: containing the firm's sales organisation, selling

method and sales management.

x Sales policy: targeting customer acquisition, customer retention and cus-

tomer elimination.

x Sales logistics: dealing with the provision of goods and services in the

right amount at the right location at the right time.

x Distributor's policy: taking care of sales partners and determining distribu-

tion channels.

International sales shall be understood as similar to national sales in terms of tasks

and activities.

Nonetheless, its particular function is based on bridging national

boundaries. This is why further obstacles occur, e.g. cultural disparities or the

coordination of cross-frontier sales activities.

In this respect one should take the

differences of external environmental factors into account when implementing

sales strategies. If necessary on has to alter his approach accordingly.

Cf. Rumler (2002), p. 319.

Cf. Frank, Mayer (2012), p. 282.

Cf. Rumler (2002), p. 296.

Cf. Winkelmann (2000), p. 205.

Cf. Weinhold-Stünzi (1994), pp. 2-8.

Cf. Fassnacht, Königsfeld (2012), p. 517.

Cf. Kotler et al. (2007), p. 966.

2.2

B2B and B2B sales

The term B2B describes commercial relationships between enterprises. It is also

known as corporate clients business, embedding units such as industrial distribu-

tors, value added resellers or government entities.

In contrast, B2C focuses on

business relationships with individuals by means of consumers only,

i.e. goods

and services are disposed for personal use.

B2B customers have a distinctive

needs structure which is realised by professional procurement actions.

Another

major distinction towards the B2C sector is that corporate clients purchase for

profit-making purposes and the final buying decision is usually taken by a group

of people.

B2B sales illustrates the distribution of tangible goods, rights and services. Organ-

izational customers procure these capital goods, in order to provide further per-

formance and to achieve an added value, which is finally sold to the end-user.

sum up, the key distinguishing characteristic between B2B and B2C is reflected

by the nature of the customer (rather than the product type).

2.3

Small and Medium-sized Enterprises

In the 1960s Gantzel (1962) already summarised more than two hundred different

descriptions of the SME concept. Despite the economic importance of SMEs, no

universal definition of this term has been established yet.

However, in the pre-

vailing literature there are two widely accepted notions. SMEs can be character-

ised in a qualitative and quantitative way. Qualitative components represent social

and psychological aspects, e.g. the fact that SMEs are mostly family-run compa-

nies. This refers to the unity of ownership, management and control.

Quantita-

tive features are directed towards measurable indicators, e.g. revenues or number

of employees.

Most sources put their focus on quantitative criteria serving as a

Cf. Vitale, Giglierano, Pfoertsch (2011), pp. 31-33.

Cf. Kotler et al. (2011), pp. 318-323.

Cf. Rumler (2002), p. 343.

Cf. Diller, Haas, Ivens (2005), p. 25.

Cf. Backhaus, Voeth (2009), pp. 7-9.

Cf. Kuß, Tomczak (2007), p. 249.

Cf. Brennan, Canning, McDowell (2009), p. 18.

Cf. Kabst (2004), p. 2.

Cf. Renker (2009) p. 62.

Cf. Puchta, Röder (2009), p. 5.

reference point for categorising a corporate position.

Since the current paper

focuses on SMEs in Germany the classification of the IfM is used.

Hence, enter-

prises which exceed an annual revenue of 50 million euros and engage more than

500 employees are regarded as large enterprises.

Table 1: Company classification in Germany

The content of Table 1 refers to IfM (URL1).

For the sake of completeness, another classification of SMEs defined by the

Commission of the European Union is outlined below.

The major indicator is

marked by the number of employees that has to be combined with one further

dimension, i.e. annual revenue or balance sheet total.

Table 2: Company classification according to EU guidelines

The content of Table 2 refers to EU Kommission (URL).

Cf. Kabst (2004), p. 3.

Cf. IfM (URL3).

Cf. EU Kommission (URL).

International sales and its particularities

3.1

Cross-border distribution

To date, the ideas of Belz and Reinhold (2012) account for the state-of-the-art

regarding international sales. This is why the author of this thesis incorporates

their sales model exhibited in Figure 1.

It illustrates major components that have

to be taken into consideration when executing international sales. This design acts

as a basis to portray sales as a logically coordinated process. Thus the intercon-

nections between strategy, implementation and controlling of sales are demon-

strated. It is shown the decisions needed in order to shape international sales ef-

fectively and efficiently.

Figure 1: International sales model

The content of Figure 1 refers to Belz, Reinhold (2012), p. 42.

The focus upon the customer marks the peculiarity of this model, i.e. all actions

are targeted to create customer benefits. In addition, all steps are related to the

overall corporate-and marketing strategy. The approach consists of six elements:

Cf. Belz, Reinhold (2012), p. 42.

Country differentiation: refers to the classification and selection of cross-border

areas, dealing with market analysis, country portfolio evaluation and market entry

measures.

Performance differentiation: concerns the choice of products and services, e.g.

industrial goods.

Distribution strategy: describes a long-term plan for executing cross-country sales

work in order to achieve the corporate targets and to meet the needs of interna-

tional markets.

Distribution systems: define types of distribution channels as well as cooperation

with sales partners.

Distributions management: coordinates the totality of administrative and opera-

tive sales activities while ensuring the implementation of the sales strategy.

Distribution controlling: represents a subarea of corporate controlling and sup-

ports the organisation to achieve qualitative and quantitative sales goals. It pro-

vides subjective measures or objective sales indicators, e.g. relative market share,

export ratio, error rates etc.

In the following chapters, the individual components of the sales model are ex-

plained more detailed.

3.1.1

Distribution system

Sales can be structured in two major systems: direct sales and indirect sales. The

decision for a certain structure depends on complex factors of internal and exter-

nal nature. Internal determinants refer to the company and consist of four aspects:

product, control, capital and costs. External factors which are defined as interna-

tional country-specific context factors cannot be influenced by a firm. The exter-

nal factors comprise market attractiveness, the distance to the home market and a

firm's internationalisation strategy.

Insofar one has to consider the rule of thumb,

stating: the larger the cultural and geographical distance, the better is the utilisa-

Cf. Backhaus, Budt, Lügger (2012), pp. 444-445.

tion of an indirect sales system.

In practise, both approaches are often applied

simultaneously.

Direct sales

The distribution process of direct sales is solely undertaken between the manufac-

turer and the end-consumer, i.e. the company takes care of all sales activities it-

self. The producer is therefore able to control his sales and marketing efforts to

the ultimate customer.

A common method is direct selling or company-owned

sales branches. In-house sales representatives (so-called commercial travellers)

are utilised to have direct contact with the customer by visiting him. The sales

representative acts as "man-in-the-filed", executing acquisition-related tasks. Fur-

ther forms of direct sales are, e.g. sales on commission, direct leasing, telephone

sales or e-commerce via the producer.

Typically, direct sales causes high costs and requires highly qualified personnel.

Besides, the financial losses in the event of a failure should be considered.

Indirect sales

Indirect distribution is characterised by the fact that the vendor company uses ex-

ternal sales organs, typically wholesalers, retailers, or OEM. As all participants

aim to get margins the final selling price increases.

The dealer, who is either an

independent dealer or an authorized one, has the same tasks as a company-owned

sales partner: performing sales pitches, contract negotiations, delivering the end-

customer and after-sales service. Unlike direct sales staff, indirect sales dealers are

mostly performance-based paid. In addition, indirect sales includes types such as

franchising, indirect leasing, remarketing or bartering.

Once the producer has

limited knowledge of foreign market structures and a weak sales expertise, the

implementation of indirect sales systems is advisable.

If the manufacturer picks

the indirect sales structure, further decisions have to be taken, such as the degree

of organisational integration or the intensity of legal involvement.

Cf. Backhaus, Budt, Lügger (2012), p. 451.

Cf. Ammann (2002), p. 32.

Cf. Backhaus, Budt, Lügger (2012), pp. 442-443.

Cf. Detroy, Behle, Hofe (2007), pp. 483-488.

Cf. Theurich (2011), p. 18.

Cf. Detroy, Behle, Hofe (2007), pp. 489-494.

Cf. Schedl, Thöle, Zegar (2012), p. 415.

Cf. Backhaus, Budt, Lügger (2012), p. 444.

Since the following chapters are connected with the current topic, it is necessary

to expose the pros and cons of both sales systems.

Table 3: Pros and cons of distribution systems

The content of Table 3 refers to Rumler (2002), p. 301; Detroy, Behle, Hofe (2007), pp. 481-482.

The length of the distribution channel has to be taken into account, too. The firm's

choice to use a short or a long distribution channel marks a part its strategy.

Con-

trary to long distribution channels for consumer goods, industrial channels in the

B2B sector are short. The reason for this lies in the small number of B2B custom-

ers as well as in the advanced product complexity.

Apart from that, the company

has to decide whether to take a one channel type or multi-channel system.

Now-

adays enterprises make use of multi-channel distribution. Typically, B2B corpora-

tions have two different distributions systems at least.

Cf. Rumler (2002), p. 301; Detroy, Behle, Hofe (2007), pp. 481-482.

Cf. Godefroid, Pfoertsch (2008), p. 416.

Cf. Jobber (2007), p. 448.

Cf. Detroy, Behle, Hofe (2007), pp. 93-94, pp. 447-450.

Cf. Homburg, Schäfer, Schneider (2012), p. 54.

3.1.2

Distribution organisation

To realize the multiple functions of sales, it is vital to organise it effectively and

efficiently. The concept of sales organisation is regarded as set of rules to plan,

execute and control sales. In this context one has to distinguish internal and exter-

nal sales organisation. The internal organisation includes the area of sales force

and internal sales department. Thus all activities that support the external organi-

sation in terms of order acquisition.

The external organisation's objective is to

regulate the relations between the respective enterprise and external corporate

sales organs, e.g. independent distributors. Normally, cross-national companies

arrange their sales activities by geographic regions. One can further distinguish

between product-oriented, distribution channel-oriented or customer-oriented

sales organisation.

A professional distribution organisation can only be devel-

oped on the long run. However, once it is established, competitors are seldom able

to imitate it.

3.1.3

Distribution strategy

It is noteworthy to say, that a professional sales strategy is the basis for profitabil-

ity, revenue growth,

sustainable corporate growth and the presence of a competi-

tive advantage.

It represents the basis for daily business and minimizes the risk

of intuitive sales actions.

There are various approaches in literature, defining the

term sales strategy. Nevertheless, there is a consensus in terms of functionality

and elements. A sales strategy therefore can be denoted as a long-term plan to

design the sales functions within the framework of a marketing plan. One should

notice that the distribution strategy is a part of the enterprise's overall corporate

and marketing strategy.

Within an international context, a major goal of the dis-

tribution strategy is the penetration of new markets and thus the conquest of cross-

border key customers.

According to Hofbauer and Hellwig (2009) the distribu-

Cf. Gabler Wirtschaftslexikon (URL).

Cf. Rumler (2002), p. 319.

Cf. Belz, Reinhold (2012), p. 11.

Cf. Detroy, Behle, Hofe (2007), p. 23.

Cf. Jobber, Lancaster (2012), p. 254.

Cf. Homburg, Schäfer, Schneider (2008), p. 27.

Cf. Hofbauer, Hellwig (2009), p. 62.

Cf. Belz, Reinhold (2012), p. 30.

tion strategy consists of five elements:

sales objectives, customer strategy, mar-

ket cultivation strategy, distribution channels and sales partners.

For internationally active companies the choice for a respective distribution strat-

egy is highly linked to its basic orientation.

The basic orientation has four differ-

ent models: regional-, multinational-, global- and glocal orientation.

These con-

cepts are based upon two dimensions which are defined as globalisation benefits

or localisation gains.

Due to experience curve effects and economies of scale,

globalisation benefits can be realised. In connection with the international sales

area, a company is able to profit from these advantages if the enterprise is able to

standardise products, processes or contract systems. Hence the globalisation con-

cept is focused on efficiency.

Subject of the localisation orientation is the adaption to a local environment, in

order to obtain effectiveness. In its extreme level, this approach leads to a coun-

try-specific implementation of sales being regarded as a differentiation strategy.

Aside from the company specific conditions one should consider the competitive

landscape when choosing a distribution strategy.

Direct sales represents Germa-

ny's traditional distribution form in the B2B area. However, it is not always appli-

cable overseas. Therefore it seems advisable to engage external distributors be-

cause foreign markets are either too big or unknown.

3.1.4

Distribution process

The term distribution process is regarded as systematic sequence of decisions and

activities dealing with different sales stages, i.e. pre-sales phase, sales phase and

after-sales phase.

The idea is to organise all steps for accompanying a product on

its way to the customer. A key issue of the sales process is the selection, acquisi-

tion and maintenance of the customer. In the B2B sector, the focus lies rather on a

Cf Hofbauer, Hellwig (2009), pp. 62-63.

In the scope of this thesis that topic will not be discussed any further, as basic knowledge of

strategic management is assumed.

Cf. Schramm-Klein (2012), p. 379.

The knowledge of these four dimensions is expected from the reader. Therefore it will not be

discussed any further.

Cf. Hill (2009), p. 437.

Cf. Schramm-Klein (2012), p. 380.

Cf. Godefroid, Pförtsch (2008), p. 414.

Cf. Godefroid, Pförtsch (2008), p. 415.

Cf. Hofbauer, Hellwig (2009), p. 20.

relationship-oriented perspective than on a product-oriented sales perspective.

Before the distribution process can be released the distribution strategy must be

clarified.

3.1.5

Distribution management

The idea of distribution management applies to the analysis, planning, implemen-

tation and control of all occurring activities in the area of sales.

The objective is

to ensure a smooth work flow, because the best corporate strategies are ineffective

without a professional sales management. Except from the regulation of sales ac-

tivities, sales management covers the following themes:

x Realisation of sales organisation

x Guidance and control of field staff and internal sales employees

x Definition of a sales culture

In literature the focus is mostly put on personnel management of sales representa-

tives and in-house sales staff. Thus relevant tasks for the sales force management

are the determination of objectives, sales strategy and structure. Further tasks are

recruiting, training, rewarding, compensating and rating the field workforce. The

international distribution management requires high-skilled executive personnel.

In addition to daily business, managers have to cope with different time zones as

well as with geographical and cultural disparities.

Apart from that, sales execu-

tives have to be well-informed about the conditions at cross-border markets and

configure their decisions accordingly.

Insofar the sales executive's efficiency

and effectiveness is decisive for a company's success or failure.

3.2

Particularities within the B2B context

Purchase decisions are made to satisfy needs, both on consumer goods markets

and on industrial goods markets. In general, B2B features three principal charac-

teristics differing from the B2C domain: market structure, buyer status and mar-

Cf. Storbacka et al. (2009), p. 890.

Cf. Belz, Reinhold (2012), p. 42.

Cf. Kotler et al. (2007), p. 948.

Cf. Homburg, Schäfer; Schneider (2008), p. 11, p. 97.

Cf. Belz, Reinhold (2012), p. 37.

Cf. Belz, Reinhold (2012), p. 6.

keting policy.

These specifications outline several sub-items that are examined

below.

Market structure

There is a segmented market structure, i.e. the number of customers is limited.

Buyer power may be much stronger than in the B2C field. Often, these customers

are exclusively located in certain geographical areas, e.g. German steel industry in

the Ruhr Valley. Additionally, companies are confronted with reduced market

anonymity, since sellers as well as competitors are known. For certain products

there are only few providers. That is why one frequently finds an oligopolistic

competition.

Products

The purchase of products is triggered by a derived demand, i.e. the commercial

buyer acts alongside the demand of the end-user. Products sold on the B2B market

are labelled by technical complexity as well as knowledge intenseness. Hence,

need of explanation is required. Customizations in accordance with the buyer's

preference are often realised. The purchase of the product may also include a ser-

vice package: consisting of consulting, installation and maintenance. This reflects

the modern approach of customer relationship management. The overall aim is not

to sell a product but to create customer value.

Buyer status

As already mentioned in chapter 2.2 purchases are usually performed by several

trained persons and technical departments. This makes the selling process much

more demanding and time-consuming. Even if the product as such is not in need

of explanation, complexity might arise by reason of the marketer's total offering.

Note that attributes like volume discounts or delivery schedules have to be speci-

fied.

When it comes to purchases with high volume of order, engineers are in-

volved next to the management personnel and buying agents. The buying process

is highly formalised, e.g. there are certain purchasing rules of procedure.

Cf. Brennan, Canning, McDowell (2009), p. 18.

Cf. Vitale, Giglierano, Pförtsch (2011), p. 9.

Cf. Vitale, Giglierano, Pförtsch (2011), p. 12.

Cf. Rumler (2002), p. 51.

Buyer-seller relationship

Basically, the business partner relationship is defined as close and long term-

oriented. Despite the rational procurement process every party targets a stable,

trustful and supporting cooperation. Ideally, there is an interpersonal relationship.

Technical expertise, customer consultancy and customer support represent the

most pronounced success factors for an enduring business relationship. Another

fact is that the selling organisation has to think about the client of their customer,

since demand is derived from it.

To strengthen purchasing decisions, there must

be generated more value for the SME's direct customers.

Distribution system

In B2B environment the direct sales system dominates. Therefore distribution

channels are much shorter than in the B2C sector.

On the one hand this is due to

complex products, on the other hand the importance of customer relations and

personal selling plays a crucial role. However, in recent years there has been a

shift to multi-channel distribution as a reaction to the increasing globalisation.

Price

In the short run, demand is inelastic. Prices are rarely fixed since there is always

scope for negotiations. Nevertheless, one has to face a demanding purchasing pro-

cess or competitive bidding, depending on the purchase type.

Promotion

Personal selling, occurring as a dialogue between the marketer and the buyer re-

flects the dominant promotional tool. In contrast to consumer goods markets using

a pull strategy to attract customers, B2B uses a push strategy. Tools of the push

strategy are phone calls, direct mails or customer visits.

Types of business

A familiar model to categorize the B2B market is the business typology estab-

lished by Backhaus (2003).

There are four different areas, shown in Figure 2.

Cf. Vitale, Giglierano, Pfoertsch (2011), p. 12.

Cf Rumler (2002), p. 319.

Cf. Backhaus (2003), p. 324.

The figure serves to provide a general overview. Further details will not be discussed within the

scope of this thesis.

Since every business type has different characteristics the sales has to be adapted

accordingly. For instance, the supply business, featured by buying centres needs

personal selling whereas the product business, applying single transactions needs

only standardised sales operations

Figure 2: B2B typology and implications on sales

The content of Figure 2 refers to Backhaus (2003), p. 324.

3.3

Particularities within the SMEs context

The framework of international sales is equally valid for both large enterprises

and SMEs. However, when taking a closer look at literature there are some specif-

ics of small-and medium sized businesses. It is basically agreed upon the fact

that almost all features of SME sales activities can be derived from the organisa-

tion's size. Principal limitations are viewed in its insufficient personnel-and finan-

cial resources,

resulting in a low degree of professionalism.

These aspects have

mutual reinforcing effects and give rise to other facts. Those issues will be dis-

cussed below.

Cf. Keuper, Schunk, Luu (2009), pp. 186-187.

Cf. Renker (2009), pp. 61-62.

Human Resources and professionalism

Sales employees must deal with a lot of non-sales related duties that are often not

lying in their sphere of competence. The task allocation analysis in Figure 3

shows the percentage distribution of activities in relation to working hours. It be-

comes clear, that the main tasks (acquisition and active selling) represent merely

one-fifth of total workload, whereas unproductive administrative jobs correspond

to 31 per cent of working hours.

Since sales staff in SMEs acts more as general-

ists rather than specialists, much valuable time is lost. A superficially conducted

market cultivation or inadequate support of sales partners, illustrate only some

consequences. In the worst case this leads to sales losses or to a weakened com-

petitive position. Studies have proven, that top-sales representative are not only

characterized by attaining high sales rates, but primarily act as problem solvers for

their customers. An excellent sales person cultivates his customer relationships,

shows authentic interest for his client and behaves customer-oriented instead of

product focussed.

Figure 3: Task allocation of a sales employee

The content of Figure 3 refers to Detroy, Behle, Hofe (2007), p. 394.

Cf. Detroy, Behle, Hofe (2007), p. 394.

Cf. Detroy, Behle, Hofe (2007), p. 19, pp. 249-250.

Markets

Typically, SMEs are active on other markets than large enterprises.

The reason

for this lies in their niche occupation, because a niche market penetration is not

profitable for large companies. If they nonetheless act on the same markets as

global players, most SMEs have limited market power.

Another issue is linked to

brand awareness. Small and Medium-sized Enterprises face the problem of being

rarely known. Often direct competitors enjoy a higher level of market recogni-

tion.

The good image of incorporated companies is inter alia a reason why high-

skilled sales people favour to choose this type of organisation as an employer ra-

ther than a medium-sized company.

100

Sales partners

In cross-country sales transactions, SMEs usually cooperate with external distri-

bution organs.

101

These distributors also market products from competitors. If the

sale of the own products does not make a large part of the distribution partner's

total turnover SMEs have little negotiation power. There is an one-sided depend-

ence on the part of the SME, hindering the demand for additional services.

102

also happens that SMEs' access for certain distribution channels is denied, de-

pending on the industry or geographic location.

103

This can threaten a company's

existence, if one considers that is not uncommon that 80 per cent of total turnover

is generated by 20 per cent of internal or external sales partners.

104

Financial structure

In general, the equity ratio of SMEs falls below the equity capital of large compa-

nies. In 2005, German SMEs had an equity ratio of 15 per cent whereas big enter-

prises could realise 23 per cent.

105

Hence, external financing is severely limited for

SMEs. In the case of a liquidity crisis it is difficult to organise short-term capital.

This lack of funding has various consequences upon the whole company organisa-

Cf. Rumler (2002), p. 28.

Cf. Keuper, Schunk, Luu (2009), p. 186.

Cf. Belz, Reinhold (2012), p. 203.

100

Cf. Renker (2009), p. 64.

101

Cf. Schedl, Thöle, Zegar (2012), p. 415.

102

Cf. Belz, Reinhold (2012), p. 204.

103

Cf. Belz, Reinhold (2012), pp. 21-22.

104

Cf. Theurich (2011), p. 28.

105

Cf. Renker (2009), p. 61.

tion. A common phenomenon is the scarce professionalism. In particular, small

businesses cannot afford a marketing- and sales department at all.

106

Sometimes it

does even not exist a proper sales strategy. That is why sales employees perform

their work actionistically and intuitive.

107

This problem is particularly obvious in

the selling process. Across all industries, customers complain about the lack of

sales expertise. Sales conversations are rarely conducted on a factual, problem-

solving and satisfying basis.

108

Over and above, the weakened financial situation

of SMEs makes them reluctant when it comes to potential networks and partner-

ships with other companies.

109

Sales controlling

Qualitative methods are mainly used to supervise sales activities instead of quanti-

tative sales indicators.

110

A reason for this is the family-run management structure.

Typically, the company founder is still involved in daily business. He is thus high-

ly interested not to lose control. Therefore most actions of sales managers are

checked. The focus on qualitative controlling measures always means an in-

creased effort, which can be time consuming. Large organisations minimize this

qualitative approach and favour an objective sales indicator control.

Internationalisation

As already stated earlier, SMEs are equipped with limited financial means. Either

the possibility of debt financing is restricted or the company owners negate this

option due to fear of losing their entrepreneurial independence. It has to be said

that the average residence time of a German executive director in a family-run

business holds for 20 years.

111

Thereby external financing decisions are taken con-

servatively. According to a survey, 94 per cent of SMEs refuse offshoring.

112

These restrictions hamper a fast cross-frontier market entry.

113

In Germany inter-

national sales activities are exclusively realised through export. A study found that

the export mode is the most popular form of internationalization, scoring 87 per

106

Cf. Theurich (2011), p. 88.

107

Cf. Renker (2009), p. 329; Belz, Reinhold (2012), pp. 53-54.

108

Cf. Renker (2009), p. 44.

109

Cf. Renker (2009), p. 61.

110

Cf. Ahlert et al. (2005), p. 31.

111

Cf. Venohr (2010), p. 18.

112

Cf Renker (2009), p. 74.

113

Cf. Ahlert et al. (2005), pp. 27-30.

cent.

114

In many cases products are manufactured nationally and are sent to their

foreign customers. Although more than one in ten SME is conducting export op-

erations, the export rate of total revenues accounts only for 10 per cent consider-

ing the totality SMEs.

115

On the contrary large organisations generate export quo-

tas of nearly 25 per cent. Therefore it is clear, that German SMEs obtain their val-

ue added almost solely domestically.

Owing to the already mentioned lack of personnel, there is an insufficient plan-

ning of cross- border activities. This concerns especially the methodology for

country selection. Instead of proceeding in a systematic manner, many SMEs in-

ternationalize project-related and inefficient or do simply follow their key cus-

tomers' internationalisation.

116

With reference to the already expressed deficit of

capacities, there is also shortage at the management board in such a way as the

strategic planning, information seeking and information gathering are performed

superficially.

117

In consequence, opportunities of foreign markets are not seen or

risk of international activities is underestimated,

118

e.g. the SME disregards legal

specifications. Overall, the predominant problem is represented by the little quali-

fied executive staff.

Another issue is the so-called experience-gap.

119

This subject refers to little expe-

rience on international markets which makes cross-border activities more compli-

cated. Additionally, there is the problem with recruiting highly trained sales ex-

perts who have intercultural competences and are able to build up expertise for the

financing or handling of export deals.

120

In summary, Mäder and Hirsch (2009)

reason that there exist four variables influencing SMEs' internationalisation: scar-

city of resources, low degree of systemised processes, deficiency of labour divi-

sion and deficient managerial processes (strategically and operative).

121

114

Cf. Puchta, Röder (2009), p. 11.

115

Cf Renker (2009), p. 67.

116

Cf. Belz, Reinhold (2012), p. 54.

117

Cf. Bockholt et al. (2009), p. 106.

118

Cf. Keuper, Schunk, Luu (2009), p. 186.

119

Cf. Puchta, Röder (2009), p. 9.

120

Cf. Weber (1997), p. 24.

121

Cf. Mäder, Hirsch (2009), pp. 117-118.

Challenges of cross-border sales

4.1

General challenges

In an ever-integrating world characterised by increasing interdependencies of

global economy, price collapses or new information technologies, B2B sales of

SMEs must adapt to these external conditions in order to remain competitive.

122

As expressed earlier, the sales expertise of an enterprise is decisive for success.

Highly-qualified sales people possess not only business knowledge but also psy-

chological, diplomatic, juridical and sociological skills.

123

Literature stresses four

principal drivers as challenges, the so-called megatrends: globalisation, technolo-

gy, consumer behaviour and complexity.

4.1.1

Megatrend Globalisation

Fourteen years ago, 20 per cent of all existing commodity transactions took place

on a global scale. According to McKinsey, this rate will increase to estimated 80

per cent in 2030.

124

The article "The globalisation of markets"

125

by Levitt (1983) brought up the sub-

ject of globalisation already 31 years ago.

126

The economic environment has

changed. Increasing competitive pressure, the elimination of trade barriers or do-

mestically saturated markets

127

force SMEs of all industries that never intended to

internationalize into cross-country activities.

128

So it is not only vital to improve

one's products steadily but also to verify one's sales strategy continuously.

129

This

raises the question how international sales shall be designed effectively and effi-

ciently. The maxim is to improve sales processes and to reduce costs while main-

taining competitive shares.

130

The traditional distribution channel,

131

which is do-

mestically oriented, is often outdated.

132

Not astonishingly that two thirds of Ger-

122

Cf. Belz, Reinhold (2012), p. 29.

123

Cf. Cateora, Graham (2007), p. 23.

124

Cf. Godefroid, Pförtsch (2008), p. 401.

125

Cf. Levitt (URL).

126

Cf. Rumler (2002), p. 25.

127

Cf. Jobber, Lancaster (2012), p. 128.

128

Cf. Kotler et al. (2007), p. 264.

129

Cf. Kotler et.al (2007), p. 264.

130

Cf. Niehaus, Emrich (2012), p. 299.

131

In Germany, a traditional distribution channel corresponds to sales forces.

132

Cf. Niehaus, Emrich (2012), p. 298.

many's largest family-run enterprises being internationally active possess their

own foreign sales branches.

133

The elaboration of a market- and customer needs

oriented sales strategy represents a crucial turnout for successful cross-border ex-

pansion. This means that organisational processes and employees shall be adjust-

ed to local needs. As a result many SMEs orient themselves on "glocalisation"

following the slogan: "Think global upon local roots". The home country is there-

by the reference point where comparative cost advantages are created and interna-

tional sales strategies are developed.

134

Anyway, temporary sales representatives

and freelancers are an excellent possibility to attain flexibility in the international

sales sector, e.g. when it comes to product releases or economic crises.

135

If an

organisation expands through mergers and acquisitions the overall challenge lies

in the unification of sales organisation, sales processes and sales personnel. Con-

cerning the latter "change-management" has to be undertaken since the global

sales teams have to adapt to different cultures while building cross-country rela-

tionships in foreign countries.

136

Another topic is related to the rising exigencies

for international sales personnel. They must respond to customers' individual de-

mands, specific sales terms, product adaption, pricing customisation or technical

support.

137

4.1.2

Megatrend Technology

The introduction of new technologies entails new sales opportunities. These com-

panies, that have missed technological changes, typically could not keep up with

international competition.

138

The so-called basic innovations, the Internet in par-

ticular, provoke radical revolutions in commercial organisations.

139

The World

Wide Web concerns not only the emergence of previously never existing market-

ers but also affects the issue of digital distribution channel exploitation, digital

strategic orientation or online sales partnerships.

140

Regarding customers the exist-

133

Cf. Niehaus, Emrich (2012), p. 300.

134

Cf. Renker (2009), pp. 73-74.

135

Cf. Niehaus, Emrich (2012), p. 300.

136

Cf. Niehaus, Emrich (2012), p. 300.

137

Cf. Jobber, Lancaster (2012), p. 128.

138

Cf. Kotler et al. (2007), p. 162.

139

Cf. Rumler (2002), pp. 26-27.

140

Cf. Niehaus, Emrich (2012), p. 301.

Details

Pages
Type of Edition: Erstausgabe
Publication Year: 2017
ISBN (PDF): 9783960677147
ISBN (Softcover): 9783960672142
File size: 5.1 MB
Language: English
Institution / College: Pforzheim University
Publication date: 2017 (December)
Grade: 1,3
Keywords: SMEs Germany France KMU Kleine und Mittlere Unternehmen Business to Business Selling Distribution Sales operation Cross-border distribution EU Globalization Empirical research European Union Deutschland Frankreich
Product Safety: Anchor Academic Publishing

Author

Yves Scheffler (Author)

B2B sales of German Small and Medium-sized Enterprises. Challenges in cross-border sales within the context of German-French business relationships

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Author

Yves Scheffler (Author)